1041 Trust Return Deductions

[Gail Scarfino]

I've been filing individual returns for 20 years, but I'm working for a new firm this yea,r and will be filing some Trust returns. I have been trying to study/research to get ready. One area that I'm having trouble with (and I already know I'll have a 1041) like this is with deductions. What I know so far is that the grantor died in January, investments were liquidated, a condo was sold, and all distributions were made to the beneficiaries by the end of the year. There will be taxable income that will be passed to the beneficiaries so I want to make sure I get all the deductions. I am reading that mortgage interest, realestate taxes, PP taxes, and condo assn fees are all deductable, I'm just not clear on it. These are expenses that belonged to the grantor, but were paid out of the trust account after her death, until the condo was sold. It was not money borrowed by the trust, and none of the beneficiaries lived there at any time. If these are deductable expenses, what about the utility bills etc., that had to be paid from the account. I do know how to report the sale, step-up basis and all that. For whatever reason, I just can't seem to understand these deductions, I think I am over thinking it. I even did the TaxBook CPE estate course, but that didn't clear it up. I would appreciate any feedback. Thank you!

[ATSMAN]

I am not in my office so I can't look it up but from memory if these expenses were incurred by the Trust to preserve the property and get it ready for sale and there was NO personal use then the trust may be able to deduct these expenses up to the usual limitations.

Obviously the key fact is that there was NO personal use of the residence after the owner's death. Which as you may already know is generally not the case because a relative moves in temporarily to use it if it is a nice property.