Clarification Regarding Deduction of Expenses by Trusts and Estates

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In Notice 2018-61, the Department of the Treasury (“Treasury”) and the Internal Revenue Service (“IRS”) announced that they plan to issue regulations clarifying the impact of Internal Revenue Code section 67(g) on the deductibility of certain expenses by estates and trusts.

Section 67(g) was enacted as part of the Tax Cuts and Jobs Act (the “2017 Tax Act”) on December 22, 2017, and disallows all miscellaneous itemized deductions for tax years beginning after December 31, 2017, and before January 1, 2026. Many practitioners have been concerned that section 67(g) may impact the ability of estates and trusts to deduct certain expenses. However, Treasury and the IRS do not believe that section 67(g) should be read to affect the ability of estates and trusts to deduct expenses described in sections 67(e)(1) and 67(b). Treasury and the IRS plan to issue regulations to clarify this point.

The full text of the notice can be found here:  https://www.irs.gov/pub/irs-drop/n-18-61.pdf.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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