Application of excess deductions of estate or trust

Sec. 15. Allocation of Excess Deductions. After the fiduciary of a trust or an estate in the year of termination has applied the allowable

deductions against the income to which the deductions were directly attributable, he may apply the excess of such deductions against any item of

gross income subject to the following limitations.

Deductions allocable to tax exempt income must be used only against tax exempt income. Any excess of such allocated deductions cannot

be used to offset taxable income. Therefore, deductions allocable to tax exempt income will not be taken on Form IT-41.

Excess deductions other than deductions from business income, cannot be extended to the beneficiary in the year of termination since these

deductions are itemized deductions for Federal tax purposes and not allowable when filing the Individual Income Tax Return.