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New IRC Section 67(g) and Form 1041 Trust Deduction Rules Post-Tax Reform

Navigating Uncertain Treatment of Fiduciary Fees, State and Local Taxes, and Other MIDs

An encore presentation featuring live Q&A

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

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Conducted on Wednesday, August 8, 2018

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 new deduction structure for Form 1041 under the new tax law. The panel will outline the specific changes the new law makes to fiduciary deductions, detail the impact of income items newly 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 major change that may substantively affect trusts is the enactment of Section 67(g), which eliminates all 2% miscellaneous itemized deductions (MID) for tax years 2018-2025. There are questions as to whether this change will prevent fiduciaries from deducting fiduciary fees and income-tax preparation costs for trusts.

However, IRC 67(e) excludes from the 2% MID floor any deductions of specific expenses which would have been incurred if the property were not held in a trust or estate. The Service has not issued final guidance, and fiduciary advisers should explore the possibility of deducting trustee fees from trust income.

Likewise, the deduction cap on state and local property taxes may hit trusts and estates hard. However, this deduction too may be subject to a carve-out, because 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 key trust and estate administration expenses.

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Outline

  1. Section 67(g) provisions on 2% miscellaneous itemized deductions and possible impact on trust and estate deductions
  2. Intersection of IRC 67(g) with Section 65(g) 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 discuss these and other important topics:

  • Which deductions do trusts and estates lose under the new tax law?
  • What are the bases for trusts and estates avoiding the cap on deductibility of state and local taxes under the new law?
  • What are possible areas of uncertainty in IRS interpretation of treatment of fiduciary fees and other itemized deductions?
  • What are the planning implications of changes in deductions under the new tax law?

This is an encore presentation with live Q&A.

Faculty

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

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

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