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Posted by Benjamin Yazersky CPA on March 28, 2007, 5:15 pm
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> I'm helping my son prepare the first 1041 for an irrevocable
> trust that came into existence upon the death of the
> grantor, a Florida resident. It is a complex trust. This is
> not my area of expertise. The issue I am wrestling with is
> the allocation of certain expenses and whether they should
> be allocated to principal or allocated to income and be
> deducted as a Misc. Itemized deduction.
expenses have to be allocated
between pricnipal & income
between taxable & tax exempt income
>
> The decedent's residence is now investment property. It is
> up for sale and has not been rented. The house is in a
> community that has an association that takes care of the
> common area. There are various assessments and special
> assessments for maintenance and repairs to the common area
> and clubhouse. There were repairs to the house. There are
> utility expenses for the house. There is also a large
> vacant home insurance expense.
should be deductible-to maintain & preserve the assets of
the trust
> I have allocated all these expenses to trust income and
> deducted them as being ordinary and necessary expenses paid
> for the management, conservation, or maintenance of property
> held for the production of income. This is the IRC Sec. 212
> definition.
>
> As an aside for you Californians: Does anyone know if a
> trust return needs to be filed in CA because the trustee is
> a CA resident? The trust was formed in Florida for a FL
> resident who died in FL.
If the real property is FL & the decedent resided there, it
is probably a FL trust Check CA laws - in some states a
resident trustee can create a filing requirement. (my
expertise is w/NJ & NY fiduciary requirements)
Had a situation in my office recently where NY settlor
created an irrevocable trust with a NJ resident trustee -
all intangible assets wound up with no state fiduciary
return - no NY sourced assets & a NJ trustee in no way
created a connection (nexus) w/NJ
___________________________________
<<< Benjamin Yazersky, CPA [NJ & NY] >>>
-----> real address on hobokeni or hobokenx <-----
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