Line 15a—Other Deductions Not Subject to the 2% Floor

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Line 15a—Other Deductions Not Subject to the 2% Floor

Attach your own schedule, listing by type and amount all allowable deductions that are not deductible elsewhere on Form 1041.

Do not include any losses on worthless bonds and similar obligations and nonbusiness bad debts. Report these losses on Schedule D (Form 1041).

Do not deduct medical or funeral expenses on Form 1041. Medical expenses of the decedent paid by the estate may be deductible on the decedent's income tax return for the year incurred. See section 213(c). Funeral expenses are deductible only on Form 706.

The following are examples of deductions that are reported on line 15a.

Bond premium(s). For taxable bonds acquired before October 23, 1986, if the fiduciary elected to amortize the premium, report the amortization on this line. You cannot deduct the amortization for tax-exempt bonds. If you made the election to amortize the premium, the basis in the taxable bond must be reduced by the amount of amortization.

For tax-exempt bonds, you cannot deduct the premium that is amortized. Although the premium cannot be deducted, you must amortize the premium and reduce the estate's or trust's basis in the tax-exempt bond by the amount of premium amortized. In the case of a premium on a tax-exempt bond, or if the fiduciary has made an election to amortize the premium on a taxable bond, the basis in the bond must be reduced by the amount of amortization.

For more information, see section 171 and Pub. 550.

If you claim a bond premium deduction for the estate or trust, figure the deduction on a separate sheet and attach it to Form 1041.

Casualty and theft losses. Use Form 4684, Casualties and Thefts, to figure any deductible casualty and theft losses.

Domestic production activities deduction. The estate or trust may be able to deduct up to 9% of its share of qualified production activities income (QPAI) from the following activities.
  1. Construction performed in the United States.

  2. Engineering or architectural services performed in the United States for construction projects in the United States.

  3. Any lease, rental, license, sale, exchange, or other disposition of:

    1. Tangible personal property, computer software, and sound recordings that the estate or trust manufactured, produced, grew, or extracted in whole or in significant part within the United States;

    2. Any qualified film the estate or trust produced; or

    3. Electricity, natural gas, or potable water the estate or trust produced in the United States.

In certain cases, the United States includes the Commonwealth of Puerto Rico.

The deduction does not apply to income derived from:

  • The sale of food and beverages the estate or trust prepared at a retail establishment;

  • Property the estate or trust leased, licensed, or rented for use by any related person; or

  • The transmission or distribution of electricity, natural gas, or potable water.

The deduction cannot exceed 9% of modified AGI or 50% of certain Form W-2 wages. QPAI, as well as Form W-2 wages, must be apportioned between the trust or estate and its beneficiaries. For more details, see Form 8903, Domestic Production Activities Deduction, and its separate instructions.

Special rule for oil-related QPAI.

If the estate or trust has oil-related QPAI, the domestic production activities deduction is reduced by 3% of the smallest of:

  • Oil-related QPAI,

  • QPAI, or

  • Modified AGI.

See Form 8903 for details.

Net operating loss deduction (NOLD). An estate or trust is allowed the NOLD under section 172.

If you claim an NOLD for the estate or trust, figure the deduction on a separate sheet and attach it to this return.

Estate's or trust's share of amortization, depreciation, and depletion not claimed elsewhere. If you cannot deduct the estate's or trust's apportioned share of amortization, depreciation, and depletion as rent or royalty expenses on Schedule E (Form 1040), or as business or farm expenses on Schedule C, C-EZ, or F (Form 1040), itemize the estate's or trust's apportioned share of the deductions on an attached sheet and include them on line 15a.

Note.

Do not report the beneficiary's apportioned share of depreciation, depletion, and amortization on line 15a. Report the beneficiary's apportioned share of deductions on Schedule K-1 (Form 1041), box 9.

Itemize each beneficiary's apportioned share of the deductions and report them in the appropriate box of Schedule K-1 (Form 1041).