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T.C. 227 (1992). The result has been a split in authority on the
issue.
This Court in O’Neill v. Commissioner, 98 T.C. at 230-231,
held that investment advice costs were not deductible under
section 67(e), reasoning as follows:
We believe that the thrust of the language of section
67(e) is that only those costs which are unique to the
administration of an estate or trust are to be deducted
from gross income without being subject to the 2-
percent floor on itemized deductions set forth at
section 67(a). Examples of items unique to the
administration of a trust or estate would be the fees
paid to a trustee and trust accounting fees mandated by
law or the trust agreement. Individual investors
routinely incur costs for investment advice as an
integral part of their investment activities.
Consequently, it cannot be argued that such costs are
somehow unique to the administration of an estate or
trust simply because a fiduciary might feel compelled
to incur such expenses in order to meet the prudent
person standards imposed by State law.
The Court of Appeals for the Sixth Circuit reversed in O’Neill v.
Commissioner, 994 F.2d at 304-305. Although the Court of Appeals
concurred that “certain expenditures unique to trust
administration are excepted from the two percent floor”, the
Court disagreed with our analysis as to why the costs in dispute
were not unique. Id. at 303-304. Noting our statement that
individual investors routinely incur costs for investment advice,
the Court of Appeals opined: “Nevertheless, they are not
required to consult advisors and suffer no penalties or potential
liability if they act negligently for themselves. Therefore,
fiduciaries uniquely occupy a position of trust for others and
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