Trust Updates Archive

Banks Trusts IRS Advisory Fees Taxes Deduction Itemized Supreme Court IRS Extends Deductibility of Bundled Fee

(Dec. 16, 2008--Chicago, IL) -- Fiduciaries received an early present from the IRS when the agency announced that it was delaying until tax year 2009 the requirement that they provide a breakdown of bundled fees.

The extension effectively means an extra 12 months to implement the requirement resulting from the U.S. Supreme Court ruling this January in Knight v. Comm'r of Internal Revenue, (No. 06-1268) and also allows taxpayers to fully deduct fiduciary fees in 2008.

The high court ruled that investment advisory fees paid by an estate or trust are not fully-deductible "unique costs." For many taxpayers, this restricts the deductibility of fiduciary investment advisory fees to miscellaneous expenses on their 1040. These type of expenses are not deductible dollar-for-dollar, but only to the extend that, in aggregate, they exceed 2 percent of the taxpayers adjusted gross income.

In an advance copy of Notice 2008-116, the IRS says that for tax year 2008 the "full amount of the bundled fiduciary fee [may be deducted] without regard to the 2-percent floor." Payments by the fiduciary to third parties for expenses subject to the 2-percent floor should be readily identifiable, says the IRS, and must be deducted as a miscellaneous expense.

For more on this topic and unique costs, see the upcoming issue of Trust Regulatory News.

No statement in this issue is offered as or should
construed as legal opinion or advice

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