Administrative expenses of bankruptcy estate are deductible from gross income.

• Jurisdiction: United States
• Author: Fiore, Nicholas J.
• Date: 01 January 2002

Is a trustee of a Chapter 7 bankruptcy estate entitled to deduct expenses of administering the estate "above the line," as a deduction from gross income under Sec. 67(e), or is he limited to deducting the expenses as an itemized deduction subject to the two-percent floor for miscellaneous deductions under Sec. 67(a)?

Analysis

Sec. 1398 allows special tax treatment for individuals who are in bankruptcy pursuant to Chapter 7 or Chapter 11 of the Bankruptcy Code. Sec. 1398(c)(1) sets forth the general rule that the taxable income of a bankruptcy estate is computed in the same manner as it is computed for an individual. Sec. 1398(e)(3) states that, except as otherwise provided in this section, the determination of whether any amount paid or incurred by the estate is allowable...