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TRUSTS AND BUNDLED FEES

February 28, 2008

The IRS yesterday issued rules on how trusts treat "bundled" trust administration fees on 2007 returns in light of the recent Supreme Court decision that subjects trust investment advisory fees to a 2% of AGI floor for deductions. Notice 2008-32 says trusts will be allowed to deduct in full "bundled" fiduciary fees, even if they may include investment advisory fees, on their 2007 1041s. But:

Payments by the fiduciary to third parties for expenses subject to the 2-percent floor are readily identifiable and must be treated separately from the otherwise Bundled Fiduciary Fee.

The notice says regulations will be issued for future years soon.

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