Why won't TurboTax business let me show depreciation on rental house as a trust expense. It allocates to the beneficiaries on K-1.

[tagteam · Accepted solution]

"It allocates to the beneficiaries on K-1."

The allowable deduction is apportioned between the beneficiaries and the trust on the basis of income allocable to each. An exception to the foregoing rule would be where the trust instrument requires or permits the trustee to maintain a reserve for depreciation. See Treas. Reg. § 1.167(h)-1(b).

As a result, and for example, if you allocated 100% of the income to the beneficiaries, the program will allocate 100% of the depreciation deduction to the beneficiaries. You can make a different allocation in TurboTax, but you will have to do an override on the Depreciation Smart Worksheet of Schedule E using Forms Mode. [see screenshot]