1041-US: Allocating indirect expenses (FAQ)

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Question

What methods are available for allocating indirect expenses?

Answer

The following two methods are available for allocating indirect expenses among all income types.

Example

Let's say your client gives you the following information. 

Income/expenses/fees Total
Rents $10,000
Direct expenses $6,000
Tax-exempt income $1,000
Indirect fiduciary fees $500


Here's the outcome of each method.

  • Gross method: $455 of the fiduciary fees will show on Form 1041, line 12 (500 x 10,000) / (10,000 + 1,000)
  • Net method: $400 of fiduciary fees will show on Form 1041, line 12 (500 x 4,000) / (4,000 + 1,000)

Related topic: 1041-US: Expense allocations (FAQs)

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