How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Arthur Rubin Your Own Question
Arthur Rubin
Arthur Rubin, Tax Preparer
Category: Tax
Satisfied Customers: 1561
Experience:  22 years of tax preparation experience, including individual, trust, and estate returns.
Type Your Tax Question Here...
Arthur Rubin is online now
A new question is answered every 9 seconds

in preparing an initial 1041, no 706 requirement. I have expenses

Customer Question

in preparing an initial 1041, no 706 requirement. I have expenses such as trustee travel & lodging, trustee was reimbursed by trust for cleaning up house, changing locks, packaging boxes, dump fees, ect... on decendents personal residence. Postage, death certificate fees, court filings.--which are deductible & ARE THEY SUBJECT TO THE 2% FLOOR?
Submitted: 8 years ago.
Category: Tax
Expert:  Arthur Rubin replied 8 years ago.



Thank you for using Just Answer.


Trustee fees (declared as income by the trustee), travel and lodging, are deductible expenses not subject to the 2% floor, as they would not be paid if it were an individual return.


Fees for cleaning the house, changing locks, packaging boxes, dump fees, etc. would be capitalized or deducted subject to the 2% limit, if the estate plans to sell the house. (Yes, I know, estates, not being real people, do not have plans, but you know what I mean.) It makes no difference whether the fees were paid to the trustee to pay expenses, or whether the estate paid the expenses directly.


If the house is to be transferred to a beneficiary, then only what would normally be a capital expenditure could be reported as such; other expenses would only be deductible to the estate if they were taxable to the beneficiary, and there are probably few such.


Postage for most things is deductible, but I would say it would be subject to the 2% floor in most cases, even if the underlying expenses would be not subject to the 2% floor.


Court filings (unless the court proceedings were for something other than the estate, for example following up on a lawsuit the decedent filed or could have filed) should be deductible, and not subject to the 2% floor.


Funeral expenses are only deductible on the 706.


Medical expenses for the decedent may be deductible on the decedent's final return, even if paid by the estate.


I can't find a specific listing for death certificates; I would lean toward them being deductible, but subject to the 2% floor. You need them, not exactly because you are an estate, but because you need a clear title from the decedent.


Schedule B, and the distribution section of schedule I, is not necessary if no distributions are made, required to be made, or deemed to be made (under section 663(b)) during the tax year.


You should know that an estate can elect a year other than January-December; the deadline for making that election is the due date of the return, 4 and 1/2 months after the end of the first tax year.

Arthur Rubin and 3 other Tax Specialists are ready to help you
Customer: replied 8 years ago.

Thank you Arthur, your response is very helpful.


One follow up if I may, regarding reimbursments to trustee for travel & lodging to finalize estate.


Since these expenses were reimbursed to the trustee they are trustee fee's, the trustee will file a Sch-C and report the income and the expenses, since he received no compensation other than reimbursments for travel & lodging his net income would be 0.00, what is your thought on not deducting those expenses on the 1041 and the trustee not claiming any income or expenses?

Expert:  Arthur Rubin replied 8 years ago.

I tend to disagree with that analysis:


Unless the personal representative ("trustee" is not the correct term for an estate, but only for a trust, even though I use it for simplicity) is a professional , his (or her) fees are not Schedule C income, but are miscellaneous income; and reimbursed expenses are valid expenses of the estate. I would consider the trustee a conduit for valid expenses of the estate, especially if the estate doesn't have a checking account or credit cards. (At least that's how I report it for the Rubin Trust, of which I am a trustee and beneficiary. That Trust does have a "checking" account at the broker, but it has a $500 minimum.) If you are the trustee, and provide professional tax preparation services to the estate, it does not necessarily make you a professional trustee/administrator.


If the trustee is a professional trustee, the estate should deduct the fees as trustee fees, and the trustee can deduct them as expenses, making it a $0 net Schedule C. (If the Schedule C shows a $0 net, it might lean against a "business" status.


There is a Private Letter Ruling which suggests that a trustee would not be considered "professional" if he is administering trusts or estates with a total of no more than two grantor/decedents, and he is a named beneficiary of said trusts and estates. The number of trusts or estates administered is not entirely relevant, as some people set up multiple grantor trusts for various non-tax reasons.


(Edited to note that a professional tax preparer may not be a professional estate administrator.)

Customer: replied 8 years ago.

Thanks Arthur

In this case the decendent had a trust set up prior to death and a friend is the sucessor trustee I do not beleive he is a professional(this is the only trust he is a trustee for, but he is not a beneficiary)


So if I understand correctly, the travel, lodging, phone, ect.. expenses would be deductible to the trust (subject to the 2% floor?) and since the trustee han no compensation other than reimbursments he would have no income, but if he did receive compensation it would be misc income (line 21 of the 1040). What if he had expenses- would he net it against the income and report that as misc income or would he claim the full income and deduct his exp's elswhere? (shc A misc itemized?)

Expert:  Arthur Rubin replied 8 years ago.

I would say that the trustee is not a professional, although I haven't seen any PLRs or Revenue Rulings which specify that.


I would say the trustee is acting as a conduit in paying expenses, so that reimbursed expenses (even those of the trustee) are not reported on the trustee's tax return, but only as valid deductions on the trust's or estate's 1041. There might be a difficulty in that the trustee could (physically) pay for his personal expenses out of the trust or estate, but that should only be in questioned, either on the trustee's 1040 or the 1041, if the 1041 were audited.


Any income to the trustee would be reported as miscellaneous income, described as trustee fees, where a description is needed. I'm having trouble finding where unreimbursed expenses would be deducted, if they could be deducted at all; I've got it narrowed down to (for 2008) a separate addition on the line to the left of 1040 line 36, 1040 Schedule A line 23, or 1040 Schedule A line 28. I'll continue the research and get back to you.


Update: The only justification I can match is 1040 Schedule A line 23 (miscellaneous itemized deductions, subject to the 2% limit), limited to the income reported as fees on 1040 line 21, and even that justification is weak. It might be the expenses would not be deductible to the trustee, but only to the trust. If the trustee were a beneficiary, it could be justified as expenses related to the preservation of property (namely that belonging to the trust), which would definitely fit on 1040 Schedule A line 23.

Expert:  Arthur Rubin replied 8 years ago.

I edited the answer while you were viewing.


In spite of my "signature" above, you need not Accept again, although Feedback would still be appreciated.

Customer: replied 8 years ago.

Hi Arthur, That helps alot, I think I can take it from here. sounds like the trustee simly should have the trust pay all exp's itsellf, he will have little to no expenses associated with his duties, so if he receives a fee for his service the full amount would be misc income - no deductions


Thanks again for your help