IRS Issues Guidance on Investment Advisory Costs Subject to 2% Floor Under I.R.C. Sec. 67(a)

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On April 13, 2011, the Internal Revenue Service issued Notice 2011-37, providing interim guidance on the treatment of investment advisory and other costs subject to the 2% floor under I.R.C. Sec. 67(a). For taxable years beginning before the date final regulations on the issue are published, nongrantor trusts and estates will not be required to “unbundle” a fiduciary fee into portions consisting of costs that are fully deductible and costs that are subject to the 2% floor.

Notice 2011-37 is scheduled to be published in Internal Revenue Bulletin 2011-20 on May 16, 2011.