Aucutt on the Proposed Regulations on Section 67(e) and the 2% Floor

May 27, 2008

McGuireWoods’ Ronald D. Aucutt has urged the Internal Revenue Service and the Treasury Department to provide in final regulations that the “2% floor” for miscellaneous itemized deductions should not apply to most trusts and decedents’ estates. His letter to the Service and Treasury addresses regulations under section 67(e) of the Internal Revenue Code that were proposed in July 2007 and the U. S. Supreme Court’s decision in the Knight case in January 2008. Among other things, Ron argues that the principle purpose of the 2% floor is simplification, but applying the 2% floor to trusts would be very complicated, not simplifying. He concludes that “as a matter of sound tax policy and old-fashioned self-restraint, the final regulations should affirm that fiduciary administration expenses, including the costs of investment advice, in decedents’ estates and in trusts with more than one beneficiary, will not be subject to the 2% floor.” His letter to the Service and Treasury is available on the McGuireWoods website.

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