The “2% Floor” Grows Up

Ronald D. Aucutt (McLean, Virginia and Washington D.C.) has written an article entitled The “2% Floor” Grows Up – A Biography of Legislation, Litigation, and Regulations, 33 ACTEC Journal 214 (2008).

Here is an introduction to the article.

On January 16, 2008, the United States Supreme Court decided Michael J. Knight, Trustee v. Commissioner. In a unanimous opinion by Chief JusticeRoberts, the Court affirmed the Second Circuit and held that for federal income tax purposes trust investment advisory fees are subject to the 2% floor of IRC §67(a). Thus, after 21 years of maturation, the special rule for trusts and estates in IRC § 67(e) has burst into full adulthood, emancipated from the litigation in which rival forces had tried so hard to shape it. The question now is what kind of adult life this rule will have. Will it will stand up, find its own identity, and contribute responsibly to the community of tax policy? Or will it continue to show the scars of its hasty delivery in a House-Senate conference and a troubled upbringing in foster care, passed from court to court to court? The answer will have far reaching significance for all fiduciaries and their advisers.