The Internal Revenue Service has published final regulations to provide guidance on which costs incurred by estates or trusts other than grantor trusts are subject to a 2 percent floor for miscellaneous itemized deductions.

The final regulations in TD 9664 affect estates and non-grantor trusts. Section 67(a) of the Tax Code provides that, for an individual taxpayer, miscellaneous itemized deductions are allowed only to the extent that the aggregate of those deductions exceeds 2 percent of the adjusted gross income. Section 67(b) excludes certain itemized deductions from the definition of “miscellaneous itemized deductions,” while Section 67(e) provides that the adjusted gross income of an estate or trust should be computed the same way it would be for an individual.

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