Interim guidance issued on unbundling trustee fees.

• Author: Nevius, Alistair M.
• Position: FROM THE IRS

On February 27, 2008, 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 (Notice 2008-32).

Prop. Regs. Sec. 1.67- 4 lists "unique" and "not unique" trust administrative expenses. Under the proposed regulations, only unique expenses are exempt from the 2% floor. The proposed regulations treat as unique only expenses that could not have been incurred by an individual. (The Supreme Court expressly rejected this treatment of trust expenses in Knight, S. Ct. Dkt. 06-1286 (U.S. 1/16/08).)

The proposed regulations also require that administrative fees that include both unique and nonunique expenses must be unbundled to identify the amount of each (Prop. Regs. Sec. 1.67-4(c))...