The beneficiary could use the trust income to finance the beneficiary's property with a loan from a lender in the beneficiary's jurisdiction. Then, the beneficiary would pay off the trustee's loan with the money from the property financing, and then deduct the interest from his or her foreign income.
All of this assumes that such interest is deductible from foreign income, and that the beneficiary has foreign income from which to deduct the interest. If not, then this is a dead end.
If the loan had originally been made for business purposes, and the beneficiary was receiving income from an enterprise in which he/she materially participated, then that would change things completely. But, as long as the beneficiary is receiving passive income
from the trust, and the loan is for a principal residence located outside of the USA, I don't see any way of transforming the interest into a valid deduction.
Please let me know if my answer is helpful, or if I can provide further clarification or assistance.
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