Solved: For an estate tax return, can i deduct expenses of administering the estate on line 15a of form 1041?
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bill-howard4
New Member

For an estate tax return, can i deduct expenses of administering the estate on line 15a of form 1041?

 
1 Best answer

Accepted Solutions
tagteam
Level 15

For an estate tax return, can i deduct expenses of administering the estate on line 15a of form 1041?

Yes, but only the expenses for administering the estate that would not have been incurred if the property were not held in the estate or trust.

 

See http://www.irs.gov/instructions/i1041/ch02.html#d0e3734

 

In other words, expenses of the estate that are incurred commonly or customarily by individuals, would be subject to the 2% floor and reported on Line 15c.

 

See http://www.nysscpa.org/taxstringer/2014/sept/matz.htm

 

One example of the foregoing involves appraisal fees. If the estate incurs appraisal fees in order to determine the fair market value of assets as of the decedent’s date of death, that would be an expense that would not be incurred commonly or customarily by an individual. Accordingly, the fee would not be subject to the 2% floor and would be reported on Line 15a. On the other hand, the cost of appraisals for other purposes, such as for insurance, would commonly or customarily be incurred by individuals and, thus, subject to the 2% floor and reported on Line 15c.

 

Another example involves rental of safe deposit boxes. Rental fees for safe deposit boxes is an expense that is commonly or customarily incurred by individuals in order to safeguard valuable papers and/or property and would be subject to the 2% floor and reported on Line 15c.

 

You might want to read through this Internal Revenue Bulletin --> http://www.irs.gov/irb/2014-22_IRB/ar05.html

 

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29 Replies
tagteam
Level 15

For an estate tax return, can i deduct expenses of administering the estate on line 15a of form 1041?

Yes, but only the expenses for administering the estate that would not have been incurred if the property were not held in the estate or trust.

 

See http://www.irs.gov/instructions/i1041/ch02.html#d0e3734

 

In other words, expenses of the estate that are incurred commonly or customarily by individuals, would be subject to the 2% floor and reported on Line 15c.

 

See http://www.nysscpa.org/taxstringer/2014/sept/matz.htm

 

One example of the foregoing involves appraisal fees. If the estate incurs appraisal fees in order to determine the fair market value of assets as of the decedent’s date of death, that would be an expense that would not be incurred commonly or customarily by an individual. Accordingly, the fee would not be subject to the 2% floor and would be reported on Line 15a. On the other hand, the cost of appraisals for other purposes, such as for insurance, would commonly or customarily be incurred by individuals and, thus, subject to the 2% floor and reported on Line 15c.

 

Another example involves rental of safe deposit boxes. Rental fees for safe deposit boxes is an expense that is commonly or customarily incurred by individuals in order to safeguard valuable papers and/or property and would be subject to the 2% floor and reported on Line 15c.

 

You might want to read through this Internal Revenue Bulletin --> http://www.irs.gov/irb/2014-22_IRB/ar05.html

 

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ron6612
Level 4

For an estate tax return, can i deduct expenses of administering the estate on line 15a of form 1041?

On 15a the instructions say attach schedule of the administrative deductions. Would this be a manual attachment to the 1041 itemizing the total deduction taken on 15a?

tagteam
Level 15

For an estate tax return, can i deduct expenses of administering the estate on line 15a of form 1041?

I am not certain what you mean by "manual attachment", but it should be attached as per IRS instructions.

 

Regardless, TurboTax Business will attach the statement for you automatically if you have entered items under Other deductions in the Expenses, taxes, and fees section of the program.

Critter-3
Level 15

For an estate tax return, can i deduct expenses of administering the estate on line 15a of form 1041?

Switch to the FORMS mode to see all the forms, schedules and statements that will be filed as part of the return. 

ron6612
Level 4

For an estate tax return, can i deduct expenses of administering the estate on line 15a of form 1041?

I was wondering if the 1041 was done manually since it is very simple.  In that case the 1041 says to include a schedule of the deductions but there is no form that is a schedule.  So was wondering if you just make up a manual schedule and attach it to the 1041?

tagteam
Level 15

For an estate tax return, can i deduct expenses of administering the estate on line 15a of form 1041?


@ron6612 wrote:

So was wondering if you just make up a manual schedule and attach it to the 1041?


Yes, you could certainly draft your own manual schedule and attach and mail it together with your 1041.

 

Note that the 1041 form may appear to be very simple but that is deceptively so. For example, if you have to calculate tax on qualified dividends and/or capital gains and/or if there are distributions, you are better advised to use tax preparation software or have the return prepared by a tax professional.

ron6612
Level 4

For an estate tax return, can i deduct expenses of administering the estate on line 15a of form 1041?

Thanks for the advice.  All we have is annuity taxable income less some administrative expenses as per a schedule that you noted and two distributions to the beneficiaries that will require K1's.  The effect of all of this would be reducing that taxable income to around 8,000 for an easy tax calculation.  I do our taxes in Deluxe but didn't think that what is noted above would warrant an investment in the turbo business software?  Am I missing anything else to make the investment in software worth it?

tagteam
Level 15

For an estate tax return, can i deduct expenses of administering the estate on line 15a of form 1041?


@ron6612 wrote:

Am I missing anything else to make the investment in software worth it?


You are not missing anything else. Given your scenario, you can most likely prepare the return manually.

ron6612
Level 4

For an estate tax return, can i deduct expenses of administering the estate on line 15a of form 1041?

Thanks for all your help!  Two more questions please. Can some of the trust income be kept in trust and not distributed to take advantage of the lower trust tax rate for the first $8000 of income?  I also learned that a theft of jewelry into the estate can be tax deductible. Do you know where on 1041 this loss can be taken?  Thanks again!

Critter-3
Level 15

For an estate tax return, can i deduct expenses of administering the estate on line 15a of form 1041?

It depends on what the trust document dictates ... seek local professional assistance if you don't understand the trust document directives.    And the trust rates go up higher much much faster than individual tax returns.  https://www.thebalance.com/2015-income-tax-brackets-estates-and-trusts-3504855

ron6612
Level 4

For an estate tax return, can i deduct expenses of administering the estate on line 15a of form 1041?

Trust document states assets divided 50-50 to two beneficiaries. I wanted to leave a little bit in trust to get the lower tax rate for $9260 of income. I think the theft loss would be on 4684 form and administrative costs would be on manual schedule. Thanks again for your assistance!

tagteam
Level 15

For an estate tax return, can i deduct expenses of administering the estate on line 15a of form 1041?


@ron6612 wrote:

I wanted to leave a little bit in trust to get the lower tax rate for $9260 of income. 


As @Critter-3 implied, you cannot do that unless the trust document gives you the authority to do so. 

 

Seek local professional guidance.

hzielin
New Member

For an estate tax return, can i deduct expenses of administering the estate on line 15a of form 1041?

Can I deduct costs for a comparative market analysis to determine FAIR MARKET VALUE of house on 1041?

Anonymous
Not applicable

For an estate tax return, can i deduct expenses of administering the estate on line 15a of form 1041?

Appraisal fees. Appraisal fees
incurred to determine the fair market
value of assets as of the decedent's
date of death (or the alternate valuation
date), to determine value for purposes
of making distributions, or as otherwise
required to properly prepare the estate's
or trust's tax returns, or a
generation-skipping transfer tax return,
are not incurred commonly or
customarily by an individual and are
deductible.

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