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legislative intent to equate the taxation of trusts
with the taxation of individuals, limit the ability of
sophisticated taxpayers to use trusts or other complex
arrangements to lower their tax burden compared to
similarly situated individuals, and to minimize the
impact of the tax code on economic decision making.
[Id.]
Having reviewed our initial construction of section 67(e)
and the ensuing judicial developments detailed above, this Court
concludes that the interpretation set forth in O’Neill v.
Commissioner, 98 T.C. at 230-231, and expressed by the Courts of
Appeals in Scott v. United States, 328 F.3d at 139-140, and
Mellon Bank, N.A. v. United States, 265 F.3d at 1280-1281,
remains sound. The trustee here, in support of full
deductibility, relies on concepts rejected in the foregoing
decisions. Appeal in the instant case, barring stipulation to
the contrary, would be to the Court of Appeals for the Second
Circuit, which has not ruled on the issue. See Golsen v.
Commissioner, 54 T.C. 742, 757 (1970), affd. 445 F.2d 985 (10th
Cir. 1971). The Court therefore holds that the investment
advisory fees paid by the trust are not fully deductible under
the exception provided in section 67(e)(1) and are deductible
only to the extent that they exceed 2 percent of the trust’s
adjusted gross income pursuant to section 67(a).
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