Trust's investment advisory fees.

• Author: Laffie, Lesli S.
• Position: COURT DECISIONS

In William L. Rudkin Testamentary Trust, 124 TC No. 19 (2005), the Tax Court held that investment advisory fees that a trust paid were deductible only to the extent they exceeded 2% of the trust's adjusted gross income (AGI) under Sec. 67(a). For purposes of this floor, under Sec. 67(e), a trust's AGI is computed the same way as for an individual, except that costs paid or incurred in connection with trust administration that would not have been incurred had the property not been held in the trust, can be deducted in arriving at AGI.

Background: In William J. O'Neill, Jr. Irrevocable Trust, 994 F2d 302 (6th Cir. 1993), nonacq., 1994-2 CB 1, rev'g 98 TC 227 (1992), the Sixth Circuit reversed the Tax Court and held that investment counseling fees paid by a trust to aid the trustees in discharging their fiduciary duty to the...