Trusts Payment of Investment Advice Fees, Writing a Memorandum to the Clients File Facts: Your client, Justin

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Question:

Trust’s Payment of Investment Advice Fees, Writing a Memorandum to the Client’s File Facts: Your client, Justin Pauly, is employed as a car salesman. Justin’s aunt, Marge Simmons, recently died, and her last will and testament provided for the creation of the “Marge Simmons Trust” (the “Trust”). Most of Marge’s assets were sold, and the proceeds (approximately $2 million) were transferred to the Trust. The principal and income of the Trust are pay- able to Marge’s eight nieces and nephews at set intervals. Marge’s will named Justin as the sole trustee of the trust. Justin wants to invest the assets of the Trust to earn a fair amount of income, but he has very little personal investment experience. As a result, Justin hired Sally Cookson, a well-respected professional investment adviser, to adviseJustin on how to invest the Trust’s assets. You will be meeting with Justin next week and know that he will be asking you whether there are any limitations on the deductibility of the investment advice fees the Trust is paying to Sally.

Required: Is there any authority indicating whether the Trust can deduct the investment advice fees it is paying to Sally?

Research this question, considering the relevant Code section(s), regulation(s), cases, and/or rulings, and write a brief memorandum to the client’s file that addresses this question.