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Sorry, in an attempt to make my question succinct, I simplified the situation. It sounds like I oversimplified it.

The entity in question is actually a trust, not an estate. The person who set up the estate put the real estate into it in 2005 and died last year. The property, now a rental, is still in the trust while I fight with the lender about how to get it distributed to the beneficiaries.

Yes. That would be a bit of an over simplification. There are some minor differences between trusts and estates, even though they both file 1041s. Passing through of deductions is one thing that happens only in an estate's final year. Trusts have a harder time passing losses through, although it can be done.

The trust has other assets including a business, and may well be around for several years. In the meantime, I understand that I can distribute income each year, but not expenses.

I don't think that is exactly correct. Much will depend on the terms of the trust. That is one thing that makes trust taxation difficult. The tax effects depend on what the trust says to do. So each trust is unique. But it is typical for the trust income to be netted against the trust expenses before that income is passed through to the beneficiaries. And it is possible to do that for tax purposes.

However, if the trust itself says the beneficiaries get all of the income and the trust corpus will bear the expenses, then that is what happens for tax purposes as well. There is no shortcut to reading and understanding the trust instrument here.

I have been told that the trust can't carry forward losses as an individual can.

That is not entirely correct. A trust is subject to the same passive loss rules that an individual is. If a trust is operating a business, it can incur a net operating loss and carry that forward (and back, I think). A trust has similar capital loss carryover provisions to individuals. So those losses are quite similar to individual taxation.

I have also been told that the trust cannot claim depreciation on the property.

That is just wrong. Trusts can claim depreciation. What happens to that depreciation will depend on the terms of the trust. The depreciation may be allocated to the corpus of the trust or to the income of the trust. If it is allocated to the income, the income beneficiaries would receive their portion of the depreciation.

Thus, any expenses (interest and depreciation) are "lost" until the property is distributed.

Again, this will depend on the terms of the trust. It is certainly possible for this to happen.

That is taking far longer than I'd hoped, which is why I asked my original question -- can beneficiaries claim it if the trust does not?

Not really. Once again, we're back to the terms of the trust. If some losses are trapped in the trust for a time, the beneficiaries can't just claim the expenses. They have to wait until the expenses are passed through to them.

And before anyone asks, I understand that this is a complex problem, and I'm working with CPA's and lawyers already. However, I am trying to collect more information so I know what questions to ask.

Good. This is a complicated area of taxation and law. You really need professional advisors with some good experience in trusts and estates.

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