My Cal trust has taxable and exempt income, and related inv. expenses I enter on line 6 of the Dividend tab. How to allocate expense b/w sources of income?

Forum|Forum|3 years ago
March 6, 2023
5 replies
37 views

On the "Other Deductions" screen I chose "1" to allocate between sources but return does not allocate. What did I miss.

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sjrcpa

Level 15

At the federal level, investment expenses are not deductible.

The more I know the more I don’t know.

BobKamman

Level 15

Investment advisory fees.

Fees for investment advice, including any related services that would be provided to any individual investor as part of an investment advisory fee, are incurred commonly or customarily by a hypothetical individual investor and are not deductible. However, certain incremental costs of investment advice beyond the amount that would normally be charged to an individual investor are deductible.

An incremental cost is a special, additional charge that is added solely because the investment advice is rendered to a trust or estate rather than to an individual, including balancing beyond the usual varying interests of current beneficiaries and remaindermen. The deductible portion of the investment advisory fees is limited to the amount of those fees, if any, that exceeds the fees normally charged to an individual investor. See Regulations section 1.67-4(b)(4).

B

beepyoyo-sbcglobAuthor

Level 3

Thx for the response. I'm assuming that the investment expenses are subject to the 2% floor. The Reg you site addresses expenses not subject to the 2% floor. It is necessary to allocate the expense, for state purposes (in the case of my trust, California), between taxable and tax exempt income. The portion allocate to taxable income then is subject to the 2% floor calculation. The investment expense was reported on the 1099-DIV. Thus, I entered into on the Dividends screen, line 6. On the Other Deductions screen I indicated that I want to allocate between taxable and exempt income. Yet, when I look at the state return the allocation has not been done.

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