Section 45IAC3.1-1-15. Application of excess deductions of estate or trust

   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. (Department of State Revenue; Reg 6-3-1-3.5(c)(060); filed Oct 15, 1979, 11:15 am: 2 IR 1519; errata, 2 IR 1743)