Trust charity depreciation allocation incorrect

[DeAllen]

All,

Per the example in Regs 1.662(c)-4(j), if a trust gives from its income to a charity, the charity gets a pro rata share of any depreciation and the trust can't use that amount of depreciation for a deduction. However, Lacerte doesn't do this properly because it yes allocates to the trust (on Schedule E) the charity's amount of depreciation. A workaround is to create a placeholder beneficiary and allocate to it the amount of income that the charity got as a donation so that the placeholder beneficiary gets the depreciation and not the trust. You have to be sure to override any income that the placeholder beneficiary gets, via Screen 43 (Schedule K-1 Overrides / Misc).

Any thoughts on this matter? Gracias!

[qbteachmt]

What sort of income is depreciating?

[DeAllen]

Hi qb!

The depreciation is appearing on the trust's Schedule E as an expense for rental income.

Regards.

[sjrcpa]

Is the charity the only income beneficiary on this return?

[DeAllen]

Hi sj!

Per the Regs example, there's beneficiary W who gets 50% mandatory and bene D who gets 25% discretionary and the charity gets  25%, so the trust should get 0% of the depreciation.

Enjoy the wkend!