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IRC Section 67(g) and Form 1041 Trust Deduction Rules: Fiduciary Fees, State and Local Taxes, and Other MIDs

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Thursday, June 4, 2020

Recorded event now available

or call 1-800-926-7926

This course will provide fiduciary tax advisers and compliance professionals with a practical guide to the deduction structure for Form 1041 under the latest tax reform. The panel will outline the specific changes that tax reform makes to fiduciary deductions, detail the impact of income items taxable at the trust or estate level, and discuss the specific changes in tax allocation between entity and beneficiaries after the law change.

Description

Tax reform changes the tax consequences for trusts and estates and may increase taxes for many trusts and beneficiaries on trust income. The law eliminates some common deductions enjoyed by individual taxpayers and fiduciary entities. For individual taxpayers, lower marginal rates and an increased standard deduction offset the loss of these deductions.

A significant change that may substantively affect trusts is the enactment of Section 67(g), which eliminates all 2 percent miscellaneous itemized deductions (MID) for tax years 2018-2025. IRS Notice 2018-61 clarifies that fiduciary fees and income tax preparation costs for trusts are deductible. However, IRC 67(e) excludes from the 2 percent MID floor any deductions of specific expenses that would have been incurred if the property were not held in a trust or estate.

Likewise, the deduction cap on state and local property taxes may hit trusts and estates hard. However, this deduction may also be subject to a carve-out. The law provides an exception to the cap for personal and real property tax expenses incurred for the production of income, as described in Section 212.

Listen as our panel provides tax advisers with a solid grasp of the changes and uncertainties in deducting relevant trust and estate administration expenses.

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Outline

  1. Section 67(g) provisions on 2 percent MIDs and possible impact on trust and estate deductions
  2. Intersection of IRC 67(g) with Section 67(e) and potential uncertainty in treatment of fiduciary fees
  3. State and local tax deduction cap and possible exception for trusts under Section 212
  4. Excess deductions on termination of an estate or trust

Benefits

The panel will address these and other essential matters:

  • Deductions that trusts and estates lose under the new tax law
  • Caps on state and local tax deductions
  • The impact that the elimination of the 2 percent MID will have on estates and trusts
  • Specific expenses that would have been incurred if a property was not held in an estate or trust that may be excluded from the 2 percent MID floor

Faculty

Doyle, Jere
Jeremiah W. (Jere) Doyle, IV
Senior Vice President
Bank of New York Mellon

Mr. Doyle provides clients with integrated wealth management advice on how to hold, manage and transfer their...  |  Read More

Patterson, Jacqueline
Jacqueline Patterson, CPA, JD
Partner
Buchanan & Patterson

Ms. Patterson specializes in tax, estate and financial transactions, with an emphasis on asset protection and...  |  Read More

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