If the income to trust is only taxable annuity payment and the only deductible expenses are paid administrative expenses and a deductible casualty loss due to national emergency (this is allowable trust deduction) and all cash is distributed to beneficiaries before year end, can the non cash casualty loss be used to reduce the DNI? For instance would this be allowable:
Annuity income. $100
Administrative expenses $10
Casualty loss $20
DNI. $70
Net 1041 Gain/loss. $0
This would result in no 1041 taxes and K1 income to beneficiaries of $70
