Preparers of fiduciary tax returns for tax years 2011 and 2012 will not be required to unbundle fiduciary fees, but they still must treat payments readily identifiable as subject to the 2% floor separately from a bundled fiduciary fee.
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Tax Planning; Tax Minimization
IRS Proposes New Rules for Deducting Fiduciary Fees
The IRS issued proposed regulations intended to reflect the Supreme Court’s 2008 holding in Knight on income tax deductibility by estates and nongrantor trusts of investment advisory and other fees.
Guidance on Unbundling Trustee Fees Extended
The IRS announced that it is extending interim guidance on the treatment of investment advisory fees and other costs subject to the 2% floor under Sec. 67(a).
IRS Extends Guidance on Trustee Fees
The IRS announced that it is extending interim guidance on the treatment of investment advisory fees and other costs subject to the 2% floor under Sec. 67(a).
Trustee Compensation: Proceed with Caution
This item illustrates the issues that can lead to litigation on trustee compensation.
Guidance on Unbundling Trust Fees
The IRS announced that for tax years beginning before January 1, 2008, nongrantor trusts and estates would not be required to unbundle their fiduciary fees to determine what portion is subject to the Sec. 67(a) 2% threshold for itemized deductions.
Significant Recent Developments in Estate Planning
This article examines developments in estate, gift, and generation-skipping transfer tax planning and compliance between June 2007 and May 2008.
How Will Final Regs. Apply the Knight “Commonly Incurred” Test?
In Knight, the Supreme Court held that under Sec. 67(e), a trust expense otherwise subject to the 2% of AGI floor is fully deductible under the exception in Sec. 67(e) only if it would be uncommon for an individual holding the same property to incur the expenses.
Interim Guidance Issued on Unbundling Trustee Fees
The IRS announced that for tax years beginning before January 1, 2008, nongrantor trusts and estates will not be required to unbundle their fiduciary fees to determine what portion is subject to the Sec. 67(a) 2% threshold for itemized deductions.
Impact of the Supreme Court’s Knight Decision on Investment Advisers
The Supreme Court held that deductible investment fees incurred by a trust or estate are subject to the 2% miscellaneous deduction floor unless they are fees of a type that individuals would not commonly or customarily incur.
The Ongoing Sec. 67(e) Controversy and the New Preparer Penalties
This item discusses how the 2% floor affects a trust’s regular tax and alternative minimum tax (AMT), the effect of the recent Supreme Court decision in Knight on the continuing controversy, and the efficacy of the proposed regulations in the wake of the Knight decision.
Supreme Court Holds Investment Advisory Fees Are Subject to 2% Floor
The Supreme Court held that investment advisory fees are generally subject to the 2% floor but refused to go as far as the Second Circuit in saying that the exclusivity test requires that the fees could not have been incurred by an individual.
Prop. Regs. Address Deductibility of Trust and Estate Costs
Editor: Kevin F. Reilly, J.D., CPA In July, the IRS issued proposed regulations (REG128224-06) providing guidance on whether costs incurred by estates or nongrantor trusts are subject to the 2% floor for miscellaneous itemized deductions. The new rules intend to clarify the deductibility of advisory fees paid by estates and
Prop. Regs. Clarify Treatment of Trust Administrative Expenses
Under Sec. 67(a), miscellaneous itemized deductions are allowed only to the extent that they exceed 2% of a taxpayer’s adjusted gross income (AGI). The AGI of an estate or trust is computed in the same manner as for an individual for these purposes, except that, under Sec. 67(e)(1), administrative costs
Allocating Partnership Depreciation Between Trusts and Beneficiaries
This article reviews how depreciation from a partnership is allocated between a trust and its beneficiaries and highlights the potential trap the allocation can cause when the depreciation deduction flows through a partnership.
Rudkin Files Supreme Court Petition
On March 23, 2007, the Rudkin Testamentary Trust petitioned the Supreme Court to resolve the split in the circuits over whether Sec. 67(e) allows estates and trusts to fully deduct investment management fees. (The American Bankers Association will also file an amicus brief.) The Second Circuit created a three-way split
Did the Second Circuit Err in Rudkin Testamentary Trust?
This article examines how the Second Circuit reached its decision and how trustees and practitioners should respond to this questionable ruling.
employee benefits & pensions
Profits interests: The most tax-efficient equity grant to employees
By granting them a profits interest, entities taxed as partnerships can reward employees with equity. Mistakes, however, could cause challenges from taxing authorities.
