AICPA Recommendations Adopted in Final Nongrantor Trust and Estate Regulations

June 24, 2014

Recommendations made by the American Institute of CPAs (AICPA) were included in the long-anticipated final regulations from the Internal Revenue Service (IRS) governing costs incurred by an estate or nongrantor trust that are subject to a two percent floor for miscellaneous itemized deductions under Internal Revenue Code section 67(e).

The final regulations (TD 9664) issued May 9 incorporated several of the AICPA's suggestions and clarifications, including treatment of ownership costs, appraisal fees, and certain other fiduciary expenses that are fully deductible.

Unfortunately, the IRS rejected the nearly unanimous opinions expressed in public comments, including the AICPA's, that trustee fees should not be unbundled.  However, the IRS followed the AICPA’s suggestion that if the unbundling requirement were to be retained in the final regulations (which it was), the final regulations should retain the flexibility of allowing the use of any reasonable method to make the allocation to investment advice.  The AICPA remains concerned about the challenges and compliance burden of "unbundling," which will become effective for taxable years beginning on or after May 9, 2014.

For more details, read the AICPA’s December 5, 2011 comment letter and see the Section 67(e) resource page on the AICPA website.