FAS Analysis of Section 67(e) Updated in Light of Notice 2008-32

March 25, 2008

On February 27, 2008, the Internal Revenue Service released Notice 2008-32, reacting to the Supreme Court’s unanimous holding in Michael J. Knight, Trustee v. Commissioner, 552 U.S. ___ (No. 06-1286, Jan. 16, 2008), that trust investment advisory fees are subject to the “2% floor” of section 67(a) of the Internal Revenue Code. Among other things, Notice 2008-32 reopened the period for public comment on the proposed section 67(e) regulations until May 27, 2008, and confirmed that fiduciaries preparing 2007 income tax returns will not be required to “unbundle” a unitary fiduciary fee to separately state the components of the fee that are subject to the 2% floor. See “Internal Revenue Service Confirms That ‘Unbundling’ of 2007 Unitary Fiduciary Fees Is Not Needed.”

Fiduciary Advisory Services has updated its analysis on section 67(e) and the Knight decision in light of Notice 2008-32. See Trusts and the 2% Floor.

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