Deducting Fees For Investment AdviceDeducting Fees For Investment Advice

John M. Janiga, professor, School of Business Administration, Loyola University, Chicago, and Lou

One of the most vexing issues in the federal income taxation of trusts over the last 15 years has been questions about the correct treatment of Internal Revenue Code Section 212 expenses.¹ Are such expenses fully deductible in arriving at a trust's taxable income? Or are they miscellaneous itemized deductions (MIDs) deductible only to the extent that they exceed 2 percent of a trust's adjusted gross income (AGI), often referred to as the “2 percent-of-AGI floor?” Although the answer may have important tax consequences for any Section 212 expense, it's particularly important for investment advisory fees (IAFs) that are often substantial for tr...