Trust and estate administration expenses still deductible under the TCJA
The IRS announced in Notice 2018-61 that it believes, and intends to issue regulations that clarify, that deductions allowable under Sec. 67(e)(1) of costs paid or incurred in connection with the administration of a nongrantor trust or estate are unaffected by Sec. 67(g), added by the law known as the Tax Cuts and Jobs Act, P.L. 115-97, which suspends Sec. 67(a) miscellaneous itemized deductions for tax years 2018 through 2025. This is also true of deductions allowable under Sec. 67(e)(2), i.e., the personal exemption of estates and trusts under Sec. 642(b) or income or other amounts required to be distributed currently under Sec. 651 or 661, the notice advised. However, an estate or trust administration expense that would commonly or customarily be incurred by an individual and therefore deductible under Sec. 67(a) — including any allocable portion of a "bundled" fee — is a miscellaneous itemized deduction subject to suspension by Sec. 67(g) and thus is not deductible to the estate or nongrantor trust during the suspension of Sec. 67(a). The suspension also "appears to include" a Sec. 642(h)(2) excess deduction upon the termination of a trust or estate that is treated as a miscellaneous itemized deduction of the beneficiaries, the IRS stated. The IRS requested comments on this latter issue.
Preparer due-diligence regs. to be updated for TCJA
The IRS proposed in REG-103474-18 to update Regs. Sec. 1.6695-2(e) to reflect amendments made by the TCJA to Sec. 6695(g), which imposes a penalty on tax return preparers for failure to be diligent in determining taxpayers' eligibility for certain tax benefits. Specifically, the TCJA added head-of-household filing status to the credits subject under prior law to the due-diligence requirements (the earned income tax credit, the child tax credit, and the American opportunity tax credit). The proposed regulations also add an example illustrating how the penalty ($520 per failure, for returns or claims for refund required to be filed in 2019) may apply separately to a failure with respect to the head-of-household determination and to any of the applicable credits, potentially resulting in multiple penalties arising from a single return.