Knight v. Comm'rKnight v. Comm'r
A unanimous U.S. Supreme Court on Jan. 16, 2008, ruled that trust investment advisory fees (IAFs) are subject to the 2 percent floor, handing a defeat to banks and taxpayers who'd hoped all IAFs would be found to be fully deductible. In Knight, Trustee of William L. Rudkin Testamentary Trust v. Commissioner, 128 S. Ct. 782 (2008) which is known both as the Knight case and the Rudkin case the question
January 1, 2009
David A. Handler
A unanimous U.S. Supreme Court on Jan. 16, 2008, ruled that trust investment advisory fees (IAFs) are subject to the 2 percent floor, handing a defeat to banks and taxpayers who'd hoped all IAFs would be found to be fully deductible.
In Knight, Trustee of William L. Rudkin Testamentary Trust v. Commissioner, 128 S. Ct. 782 (2008) — which is known both as the Knight case and the Rudkin case — the question was whether IAFs incurred by a trust in managing its investments are subject to Internal Revenue Code Section 67(e)'s 2 percent floor. That section allows a trust to deduct certain expenses from taxable income — but only to the extent the deductions exceed 2 percent of adjusted gross income.
Section 67(e)(1) provides that s...
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