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I met a CPA who said that he deducts utilities, maintenance, insurance etc for a decedent's personal residence from date of death to date of sale on Form 1041. He said such expenses were not subject to the 2% limitation because they would not have been incurred but for the death.
I've deducted those expenses on the 706 but I didn't think they could be deducted on Form 1041.
Could they be capitalized and added to the basis of the residence to create a loss or decrease a gain?
What are other people doing?
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Member
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Last Login: 6/26/2007 10:52:48 AM
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| IRS Reg. 1.212-1(i). Expenses that are necessarily incurred in preserving and distributing the estate are deductible, including the cost of storing or maintaining estate property, if it is impossible to distribute the property to the beneficiaries immediately. IRS 1.212-1(n). Allowable expenses do not include outlays for additions and improvements to estate property. Expenses to maintain and preserve property of an estate are deductible as administration expenses, which may be claimed on either the income tax return of the estate (Form 1041) or the estate tax return (From 706). When a beneficiary occupies a residence rent-free that is held by an estate or trust, the ficuciary's expenses of maintaining and preserving such residence (other than taxes and qualified personal residence interest) are not deductible, since in that case the expenses related to assets that are held for personal use and are not deductible by an estate or trust (or an individual). Also, these expenses are not indirect distributions to the beneficiary. If these expenses of maintaining estate property are claimed as deductions on Form 1041, a statement must be filed irrevocably waiving the right to claim the deductions on the estate tax return (Form 706). Harvey.
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| I believe as these are section 212 expenses that they would be subject to the 2% AGI limitation
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Last Login: 10/4/2007 4:49:42 PM
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I did not have time to verify this against the regs, but PPC's 1041 deskbook lists "expenses incurred to maintain and preserve property of an estate" as deductions not subject to the 2% floor, just as the original person who posted the query had been told.
Carol Ach
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| Carol is correct. Since these expenses (expenses incurred in the preservation & maintenance of estate/trust property under Sec. 212) are "administration expenses", they are not subject to the 2% floor.
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