Deductibility Of Trustee Fees FOLLOWING THE Taxes Careers And Slashes ActOn by
We expect the IRS to concern assistance to clarify this issue. While we wait for further guidance, it is worth noting that there surely is support for a posture these fees are still deductible. Section 67 allows a deduction for certain “miscellaneous itemized deductions” and then the extent the total amount surpasses 2% of modified revenues (AGI).
Section 67(e), however, carves out an exception for estates and nongrantor trusts. If fiduciary fees aren’t at the mercy of the 2% floor, are they considered miscellaneous itemized deductions nevertheless? Section 67(b) defines “miscellaneous itemized deductions” as “the itemized deductions other than” deductions which may be claimed under certain specifically enumerated code sections, such as interest and taxes.
The term “itemized deductions” is described in Section 63(d) as “the deductions allowable under this section other than – (1) the deductions allowable in arriving at adjusted revenues” and (2) certain other deductions not relevant here. The Conference Agreement adopted the Senate amendment. As discussed previously, certain estate and trust administration expenses, such as fiduciary fees related to administration and tax preparation fees for a trust, are not subject to the 2% floor under present law. Therefore, it appears that Congress may have designed for these fees to stay deductible.
- 14 Relief (The worst is over…) about 2017
- Develop a secured asset Allocation Plan/ Investment Policy Statement (IPS)
- Assets carried at revalued quantities under IAS 16 and IAS 38
- BRIC Hedge Fund Research
- 1 share of EQR at the average price of $58.93 = $58.93
- The inclusion of bankruptcy risk in firm valuation
- Rs. 980/- per annum
When calculating substitute minimum tax (AMT) liability, a taxpayer is prohibited certain deductions, including miscellaneous itemized deductions, and must add these deductions when calculating his alternate minimal taxable income. Schedule I, the AMT form applicable to estates and trusts, has historically only added back miscellaneous itemized deductions which were subject to the 2% floor. To determine the treatment of their fiduciary fees and administrative expenses, fiduciaries and financial institutions should seek the help of professionals well-versed in the taxation of estates and trusts and attuned to advancements in IRS thinking and guidance.
1 Beneath the “unbundling” rules, Reg. Section 1. Whenever we refer to “fiduciary fee,” we imply that part of the bundled fee allocable to trust or estate administration. Any part allocable to investment management – a cost commonly or customarily incurred by an individual – is a miscellaneous itemized deduction, and at the mercy of the 2% floor.
Thus, trustees have been necessary to “unbundle” any fees that contain both types of expense to be able to distinguish which part is at the mercy of the 2% floor. 2 For grantor trusts, items of income and expenditure pass through to the grantor, and the trust is disregarded as a separate taxable entity. Thus, administration expenses for a grantor trust are attributed to the grantor/owner. Under the rules that was in place for 2017, those expenses were subject to the 2% floor. Under the new law, after Dec 31 for tax years beginning, 2017 and before January 1, 2026, the entire deduction will be disallowed. 3 Form 1041, U.S. TAX Come back for Trusts and Estates, series 15c, emphasis added.