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Knight v. Commissioner of Internal Revenue

Docket No.: 06-1286
Certiorari Granted: Jun 25 2007
Argued: November 27, 2007
Decided: January 16, 2008

PartyNames: KNIGHT, TRUSTEE OF WILLIAM L. RUDKIN TESTAMENTARY TRUST v. COMMISSIONER OF INTERNAL REVENUE
Petitioner: Michael J. Knight, Trustee of the William L. Rudkin Testamentary Trust
Respondent: Commissioner of Internal Revenue

Court Below: United States Court of Appeals for the Second Circuit

Michael J. Knight, Trustee of the William L. Rudkin Testamentary Trust
v.
Commissioner of Internal Revenue
552 U.S. 181 (2008)
Background:

There is a deep, irreconcilable and widely noted conflict among the Second, Fourth, Sixth and Federal Circuits about the meaning of 26 U.S.C. § 67(e) -- which permits trusts and estates to deduct on their income tax returns certain administrative expenses -- and whether the statute permits fees for investment management and advisory services to be fully deducted on trust's and estate's income tax returns. This is an important and recurring question of federal tax law that involves deductions by trusts and estates that total in the billions of dollars annually.

Question Presented:

The Question Presented is: Whether 26 U.S.C. § 67(e) permits a full deduction for costs and fees for investment management and advisory services provided to trusts and estates.

Question:

Does 26 U.S.C. 67(e) allow trusts and estates to fully deduct the cost of investment management and advisory services on their income tax returns?

Holding: affirmed
Vote: 9-0
Read KNIGHT V. COMMISSIONER OF INTERNAL REVENUE opinion (PDF)
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