Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Friday, January 18, 2008

Supreme Court Holds Trust Investment Advisory Fees Subject to the 2% Floor


In its January 16, 2008 decision Knight v. Commissioner, No. 06–1286 (U.S. Jan. 16, 2008), the United States Supreme Court sided with the IRS on the issue of deductibility of investment advice fees paid by a trust.

Normally investment advisory fees incurred by individuals are deductible only to the extent they exceed 2% of an individual's adjusted gross income. In this case, the Trust argued that it should be allowed to fully deduct such fees under 26 U.S.C. § 67(e)(1).

The Supreme Court rejected the Trust’s argument and held that investment advisory fees incurred by the Trust were subject to the 2% floor. In a footnote, the court noted that the analysis in this case was equally applicable to decedents' estates.

Special thanks to Neil E. Hendershot, Esq. (Attorney at law, Goldberg Katzman, P.C., Adjunct Professor, Widener University School of Law) and Patrick S. Sylvester (Attorney at Law, Sylvester Law Firm, PC) for bringing this case to my attention.

You can read more about this case on Neil's blog at PA Elder, Estate & Fiduciary Law Blog.


Estate Administration, Income Tax, New Cases, Trusts | Permalink

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