Updated July 22, 2015
Trust Accounting Income / Estate Accounting Income Chicago Illinois
The taxable income of a trust or an estate is computed similarly to that of an individual.
Gross income is computed as if it were an individual and includes items such as interest, dividends, royalties, rents, gain on sale of property, and income from businesses, trusts, partnerships, or other sources. Life insurance proceeds are included in the value of the estate, but generally are not taxable as income to the estate. Income in Respect of a Decedent is also taxed if received by the estate. Capital gains are taxed to the estate, and the gain must be added to the principal of the estate.
Deductions generally follow the same rules allowed to individuals. Trustee fees, Administrator fees, and tax preparation fees are fully deductible. Administration fees are deductible if they were not deducted on the estate tax return.
If there is no designation in the trust instrument, the act charges depreciation to income. The allowable depreciation deduction must be allocated between the estate and each beneficiary in proportion to the amount of the fiduciary income which is taxable to each party. Fiduciary NOL’s are computed without regard to charitable contribution or deductions for distributions. Carryovers by the fiduciary are permitted.
Most of the same credits available to individuals may offset regular tax on these returns as well. But many are impossible given the fact that a fiduciary, by definition has no dependents.
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Chris Amundson is the President of Accounting Solutions Ltd., a full service public accounting firm of Certified Public Accountants and Enrolled Agents handling the bookkeeping, accounting, tax preparation, and audit representation needs of Businesses, Estates, Trusts, and Upper Income Individuals.