New Regulations on 2% Floor for Miscellaneous Deductions

The IRS issued final regulations on which costs to estates or nongrantor trusts the 2% floor will apply to. The new regulations include a list of all tax return preparation costs that will not have the floor applied. It also provides examples of costs that do not apply because they are fully deductable, such as real estate taxes. The burden of proof for not applying the 2% floor falls on the taxpayer, and thus a trustee needs to request detailed bills to be able to determine and prove which deductions should not have the floor applied.

See Kathleen Adcock, Finding Our Way Through the Knight – IRS Issues Final Regulations to Guide Us Through Miscellaneous Deductions for Estates and Nongrantor Trusts, Bloomberg BNA, June 25, 2014.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.