WASHINGTON — The Internal Revenue Service has issued a proposal stating investment management and advisory fees paid by trusts and estates should be deductible only when they exceed 2% of the trust's adjusted gross income.
The proposed regulation comes as the U.S. Supreme Court preps to review the current law in Rudkin Testamentary Trust v. Commissioner when it reconvenes in October. In that case, the 2nd U.S. Circuit of Appeals in New York ruled expenses not subject to the 2% rule are those that could not have been incurred by an individual.
Some industry watchers have argued that any investment advisory expenses that can be incurred by individuals would have to use the 2% rule. Still, the IRS applied this same explanation in its proposal stating that the only trust and estate fees that can be fully deductible are those that are unique to a trust.
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