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2(c), Income Tax Regs. Because the deductions here under
consideration constitute "Miscellaneous Itemized Deductions"
within the meaning of section 67(b), the provisions of section
67(a) are applicable.
The applicability of section 67(a) is further supported by
section 67(c), which prohibits the indirect deduction through a
pass-through entity of amounts which would not be allowable as a
deduction if paid or incurred directly by an individual. The
trust is a "pass-through entity". See sec. 1.67-2T(g)(1)(i),
Temporary Income Tax Regs., 53 Fed. Reg. 9878 (Mar. 28, 1988).
As stated in sec. 1.67-2T(b)(1), Temporary Income Tax Regs., 53
Fed. Reg. 9877 (Mar. 28, 1988), "the [sec. 67(a)] limitation
applies to the grantor * * * of a grantor trust with respect to
items that are paid or incurred by a grantor trust and are
treated as miscellaneous itemized deductions of the grantor". If
the expenses were directly paid or incurred by petitioner, the
amounts of the deductions would have to be reduced in accordance
with section 67(a). Petitioner cannot deduct a greater amount
merely because the deductions were passed through to her from the
trust.
Accordingly, we hold that section 67(a) is applicable to the
deductions attributable to the trust, and respondent's
adjustments in this regard are sustained.
In order to reflect the foregoing,
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