Trustees Relieved Of "Unbundling" Until Final Regulations Are Published

Trustees are relieved of "unbundling," according to IRS Notice 2011-37 that extends its no-unbundling-of-unitary-fees pronouncements to fiduciary income tax returns for all taxable years beginning before final regulations on this subject are published. The Notice was released on April 13, 2011.

Previously, the IRS released Notices 2008-32, 2008-116 and 2010-32, reacting to the Supreme Court's unanimous holding in Michael J. Knight, Trustee v. Commissioner, 552 U.S. 181 (2008), that trust investment advisory fees are subject to the "2% floor" of section 67(a) of the Internal Revenue Code. Those Notices confirmed that fiduciaries preparing 2007, 2008 and 2009 income tax returns would not be required to "unbundle" a unitary fiduciary fee to separately state the components of the fee that are subject to the 2% floor. See "Trustees Relieved of 'Unbundling' for 2009 Returns" and our Trusts and the 2% Floor analysis on section 67(e) and the Knight decision.