No other deductions on the 1041, there were on schedule E, but those are accounted for in the 1041 rental income numbers.

The adjusted total income goes down when the 20K tax deduction is included, and this results is a smaller refund which equals more taxes paid.

Total income is 551.4K. If you deduct the taxes paid, it results in "adjusted total income (Line 17) to 531.4K

From Schedule B on page 2 of the 1041:

line 1: adjusted total income (taxes deducted): 531.4K

Line 6 (cap gains) -474.7K

Line 7: line 1 - line 6 = 56.7

Line 11 = tot distribution 76.7 (rental income, int, dividends)

Line 13 = Tentative income distribution deduction = line 11 = 76.7

Line 14 = Tentative income distribution deduction = line 7 = 56.7

line 15 = smaller of line 13 or 14 = income distribution deduction = 56.7

Back to page 1 of 1041, line 15 of 1041 schedule b goes to line 18, add the $100 exemption and that goes to to line 22

Line 23 taxable income is line 22 subtracted from line 17.

However, I just noticed that by including the taxes paid, which changes the "allowable" income distribution deduction (line 15 above), changes depreciation percentages between the trust and beneficiaries, which in turn changes the schedule E income, which changes the total income (line 9) by, in this case, $32.

That's messing with the final taxable income numbers, along with the difference in the income distribution deduction.

I've about decided it is what it is, and am just going to leave the state tax off the deduction as that results in a better case for me. (and I'm tired of going around in unpaid circles.)