Deducting Attrny Fees for PLR on 1041

[golfeveryday87]

One of my clients is the Co-Trustee and Co-Beneficiary of a trust that was created when their Uncle passed away. Their Uncle had made the trust the beneficiary of his IRA. The 2 beneficiaries wanted to split the IRA FBO each of them and were told by many investment companies that in order to split the IRA they would need to get a PLR. They paid an attorney to prepare the PLR. Am I allowed to deduct this attorney bill on this years form 1041 based on code section 67(e) (deduction allowed if property not held in trust) or any other code section? Or is there something else I could do with the attrny fees or IRS PLR fees?

Thank you

[Brad Imsdahl]

TTB, page 21-12 under Author's Comment says that there is little written guidance on expenses that meet the test for full deduction (as opposed to being subject to the 2% AGI limitation). The tax courts basically have ruled that the expense must be unique to the administration of an estate or trust.

So you would have to consider the question, if there were no trust, would the two beneficiaries still need to pay attorney fees for a PLR to split the IRA?

Yes - the deduction is subject to the 2% AGI limitation.
No - the deduction qualifies for full deduction under Section 67(e).

[golfeveryday87]

So it isn't a question of wheather it is deductable, but whether it is subject to the 2% of not?

[New York Enrolled Agent]

I think your conclusion - deductible but perhaps subject to 2% rule - is correct. The answer to your question may depend upon where your client lives.

There is a split in the Circuit Court of Appeals. There was a recent case in the Second Circuit that you might want to read. The taxpayer loses (2% rule applies) but the case also gives a good history and cites where the Circuits disagreed. For example, if you're in the Sixth Circuit you probably have a better chance than the Second Circuit.

Rudkin 98 AFTR 2d 2006-7368 (10/18/06)

[golfeveryday87]

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[OldJack]

So you would have to consider the question, if there were no trust, would the two beneficiaries still need to pay attorney fees for a PLR to split the IRA?

Ok... I'll show my ignorance by asking what does "PLR" mean?

Its not fair to post questions and answers with such abbreviations that other readers may not recognize without spending time researching the subject. 10 lashes with a wet noodle!!

[golfeveryday87]

Private Letter Ruling

[S T]

Plr

You are not alone Old Jack, I also went to google and looked it up and decided it was Private Letter Ruling.

Clear and concise posts definitely help us!

Sandy

[golfeveryday87]

deducting Private Letter ruling fees

It looks like most agree that attorney fees to write a PLR to slt the IRA would be deductable