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Trust can’t deduct full cost of investment advice

A trust can’t deduct on its tax return the entire amount it spends for investment advice – at least in most cases, the U.S. Supreme Court has decided.

The case involved a trustee who paid $22,000 for investment advice.  He tried to deduct this amount from the $625,000 in income the trust reported on its tax return. For an individual, investment advisory expenses are a “miscellaneous itemized deduction” and they can be deducted only to the extent they exceed 2 percent of adjusted gross income.

The trustee argued the rule should be different for trusts, but the Supreme Court said the rule in most cases was the same for trusts as it was for individuals.

The court said the result might be different if they trust somehow had expenses that would be unlikely for an individual to have.  But in this case, the trust received “plain vanilla” financial advice that was similar to what would be provided to an individual.

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