My client is the executrix of an estate. After the decedent's death she spent $10,000 travelling to the city where he lived to fulfill her duties as executrix like meeting with the lawyer and clearing out his apartment. These expenses were paid for by the estate. Can they be deducted on form 1041?
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Yes, IF it was to manage income producing property.
TTB, page 21-10, "Expenses for administration of an estate or trust are deductible under IRC Section 212, including trustee and personal representative fees...."
"IRC Section 212 allows deductions for expenses paid:
* For the production or collection of income,
* For the management, conservation, or maintenance of property held for the production of income, or
* In connection with the determination, collection or refund of any tax (income, estate, gift, property, or other tax).
"2% AGI floor. Expenses deducted under IRC Section 212 are generally deductible only to the extent they exceed 2% of AGI. Exception: administrative expenses that would not have been incurred if the property were not held in the estate or trust are not subject to the 2% AGI floor."
So if the travel expenses of the personal rep was just to clean up the garbage in the apartment and meet with the lawyer to figure out who to give the personal items to, there would be no 1041 deduction.
But if a substantial amount of the travel was to take care of the decedents investments and meet with the lawyer to start the probate process on these assets, the expenses are administration expenses for the 1041, not subject to the 2% AGI limit.
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