Fees paid to trustee

[bgiez]

Client is trustee for her disabled friend's trust and is not in the business of being a trustee. After several years of performing this duty, friend insists that my client gets paid for her time. So, in 2010, she will be getting a 1099MISC with an amount in box 7. I've tried several searches on the web portal, but the closest, and only, thing that bears any resemblance to my client's situation is from Pub 559. (perhaps I'm just not using the best search terms) It talks about fees paid to a personal representative of an estate not being subject to SE tax except in very specific circumstances. Which is what my memory is telling me for the trustee's fee in this situation.

Can anyone point me to a reference dealing with a trustee who is not in the business of being a trustee?

Thanks for any input.

[Burke]

Trustee's fees in this case are just like executor's fees. Misc income, line 21, not subject to SE tax.

[JON]

I think

this was discussed before and it was suject to SE. As I remember the discussion it basically said the trustee of an estate is seen as a very temporary job. Even the feds do not want it open more than two years. Trustee is, in most cases, and ongoing job. Love to know where you got your information Burke. I think I was saying no SE before and was corrected that "estate" is a specific exception. I would like it if it could apply to more...

[taxea]

How can she say this is not a business when it has been engaged in for several years?
Line 21 is for income that, to my understanding, is a one time thing and not done consistantly over a period of time. I would do a Sch C and take the expenses.

It is one thing to take on the task of personal rep/trustee to close out an estate and distribute the assets and much different to manage the financials/etc over an extended period of time.

[Burke]

Facts and circumstances. There are professional trustees who actively manage trusts, and then there are family members who usually are named not for any expertise in the field, but for the personal relationship they bear. In the latter case, for one who is not actively involved in the management and/or investment of assets, and who is paid the statutory fee under state law and no more, who usually contracts with others for the tax returns, etc., it is not considered a trade or business.

[S T]

From Pub 559

For sure "personal representative" are not subject to SE, but are taxable, if you are not in the trade or business, one would think this would extend to a family member that was named successor trustee of a Family Trust

http://www.irs.gov/taxtopics/tc307.html STRIKE THIS URL - MUST HAVE HAD SOMETHING IN MY CLIPBOARD THAT I DIDN'T NOTICE.

CORRECT URL that I meant to post is http://www.irs.gov/publications/p559...blink100099499 See Fees Received by Personal Representatives

Sandy

[bgiez]

Can you point me to the reference for this?

Facts and circumstances. There are professional trustees who actively manage trusts, and then there are family members who usually are named not for any expertise in the field, but for the personal relationship they bear. In the latter case, for one who is not actively involved in the management and/or investment of assets, and who is paid the statutory fee under state law and no more, who usually contracts with others for the tax returns, etc., it is not considered a trade or business.

What is the statutory fee? The friend's accountant told my client to keep track of her hours and pay herself at $20 per hour.

[S T]

Try

Try to "google" for your State
Most all states have a "statutory Fee" for personal reps and trustees, the same as if an Attorney (usually) have to follow.

Might try "Google" Probate for your State - usually a percentage of the estate, but could be ???.

Here is another link that might assist you http://www.taxalmanac.org/index.php/...employment_tax

Sandy

[Burke]

What is the statutory fee? The friend's accountant told my client to keep track of her hours and pay herself at $20 per hour.

In your title you stated "can you point me to the reference on this?" Note that titles do not appear when Quote is used.
I am basing this on a thorough reading of Rev Ruling of 58-5, which specifically addressed fees paid to executors, but which tenets apply also to any fiduciary, including a trustee of a trust. Note that even executors don't get an automatic pass on this. Depending on their activities, their payments may also be subject to SE tax. The fact that trusts by their very nature, usually exist for a number of years, does not, in my opinion, alter this. It is still one activity (unless the trustee is doing this for several different ones or is in the profession of administering trusts.) We all know of estates that last for years, even decades, which usually incorporate ongoing business activities. And if a trust had an ongoing business or income-producing rental property, I would apply the same principle to it as I would an estate, under 58-5. The statutory fee is mandated by each state's probate system and can be found by calling any local official to whom accountings are rendered. Probably can be downloaded from a state website as well, as these fees -- at least in my state -- are uniform from locality to locality. Note that the exception referred to in 58-5 specifically referred to a flat fee under state law. The $20 per hour method you mention throws muddy water on the SE tax question, IMO. I would not recommend it if she is trying to avoid that problem. I do not believe a reimbursement from the trust for actual expenses incurred would incur this situation if she wished to do that.