@HRM wrote:
Let me ask again. A portion of the Trust is invested in the market by a Investment Advisor firm and earns income.
The firm charges approximately 2% fee. Would not the taxable income that is distributed to the beneficiary be the income less the fee? If so, where should the fee be deducted?
I understood your scenario before you posted the above response and the answer continues to be that the trust is unlikely to be able to deduct the fees (read below and the italicized words in my previous post).
The problem is investment advisory fees were miscellaneous itemized deductions subject to the 2% AGI floor. Those deductions were almost entirely eliminated by the TCJA (tax reform) so the fees are no longer deductible as itemized deductions (nor deductible otherwise).
In order for those fees to be deductible by the trust, you need to show that a typical individual would not have incurred those fees if that individual held the investments in his/her individual account, which is simply a tough argument to sell; an individual would have likely also incurred the same fees as the trust.
