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1041 Trust deductions

Level 2

Hi all, I have a client is the trustee on his aunt's estate.  The aunt has passed away and the trust will distribute all assets to the beneficiaries in 2020 and early 2021. I researched that all distributions paid within 65 days after end of calendar year can be treated as if paid by 12/31.  Does this apply to all expenses as well such as the Trust's tax return preparation fees and legal fees. This would allow us to file the 1041 as a final tax return in 2020 although not all expenses and distributions are made until early 2021.

thanks for the help!

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Level 15

No it doesn't apply to deductions. Have them pay you by 12/31.

If this is really an estate, consider using a fiscal year. Trusts have to use calendar year.


ex-AllStar

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3 Replies 3
Level 15

No it doesn't apply to deductions. Have them pay you by 12/31.

If this is really an estate, consider using a fiscal year. Trusts have to use calendar year.


ex-AllStar

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Level 2

Thank you! Your reply is very helpful.

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Level 11

Estates don't have trustees.  In some situations, a trust can elect to be taxed as an estate under Section 645, which then allows a fiscal year election.  If that looks complicated, refer the client to someone more familiar with trust and estate taxation.