IRS to Issue Regulations on Effect of Section 67(g) on Certain Deductions for Estates and Nongrantor Trusts

The U.S. Treasury Department and the IRS announced on Friday, July 13, 2018, that they intend to issue regulations on the impact of new section 67(g) of the Internal Revenue Code of 1986 on certain deductions for estates and nongrantor trusts. Section 67(g) was added to the Code by the 2017 Tax Act (P.L. 115-97) and suspends temporarily miscellaneous itemized deductions.

Tax practitioners expressed concern that section 67(g) might inadvertently eliminate the deduction for costs of estate and trust administration. Practitioners have also requested guidance on whether the suspension of miscellaneous itemized deductions prohibits trust and estate beneficiaries from deducting on their individual returns the excess deductions of the trust or estate incurred during the trust’s or estate’s final taxable year.

Treasury and the IRS have stated that forthcoming regulations will clarify that the costs of trust or estate administration are not miscellaneous itemized deductions suspended by section 67(g). Treasury and the IRS have also stated that new regulations will address the impact of section 67(g) on the ability of beneficiaries to deduct an estate’s or trust’s excess deductions upon termination of the estate or trust.

See IRS to Issue Regulations on Effect of Section 67(g) on Certain Deductions for Estates and Nongrantor Trusts, McGuireWoods.com, July 17, 2018.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.) for bringing this article to my attention.