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Can I take expenses associated with holding property in trust (property tax, insurance, utilities, condominium charges) as a deduction in the trust return.

Forum|Forum|7 years ago
June 4, 2019
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My mother passed in March. Her residence was left in a living trust and I am the successor trustee. We sold the property in November. So my question centers on whether we can deduct our expenses associated with carrying the property during the period between her death and sale of the property. The property was never rented, or occupied, during this period

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Best answer by MichaelL1

Yes, the costs incurred by the Trust to take care of the property and get it ready for sale are deductible expenses for the trust. They are protecting the trust assets until they could be sold.

In your case, the property was sold in a very short period of time.

The IRS’ criteria for a fully deductible expense is any expense that is both incurred in connection with the administration of the estate or trust and incurred due to the property being held in such estate or trust.

MichaelL1Answer

Employee

Yes, the costs incurred by the Trust to take care of the property and get it ready for sale are deductible expenses for the trust. They are protecting the trust assets until they could be sold.

In your case, the property was sold in a very short period of time.

The IRS’ criteria for a fully deductible expense is any expense that is both incurred in connection with the administration of the estate or trust and incurred due to the property being held in such estate or trust.

J

johnymac24Author

Since the trust has no Income and the expenses in questions are about $ 5K (and I think subject to 2% hurdle).....I am thinking I might be able to take the 266 section election to greater advantage by capitalizing these expenses instead - and using them to increase my LT Capital loss on the sale of the residence. I think this might be OK for the property taxes, home insurance, utilities - although perhaps capitalizing the condo association common charges might be a bit of a reach. Would welcome your thoughts on this. Again thanks so much for your assistance!