The U.S. Supreme Court heard arguments in a case involving the ability of trusts to deduct fees for investment advice.
The case, Knight v. Commissioner of Internal Revenue, involved a statute in the Tax Code that allows amounts to be fully deducted if they are "costs which are paid or incurred in connection with the administration of the estate or trust and which would not have been incurred if the property were not held in such trust or estate." The proceedings involved the question of whether trusts and fiduciary obligations had a distinctive nature and if they differed from the fees for investors, and if they were subject to a 2 percent floor.
"The commissioner's current reading of the statute and the commissioner's previous readings of the statute are wrong," said Peter J. Rubin, making his argument on behalf of the petitioner.
One justice found little guidance in the legislative history of the statute. "I've read the legislative history, which shows to me, anyway, precisely no light whatsoever," said Justice Stephen Breyer.
Admitting he wasn't as interested in the legislative history, which was silent on Congress's objective, Justice Antonin Scalia remarked, "The dog didn't bark."
Eric Miller, arguing on behalf of the Solicitor General, had this exchange with the justices about an argument that relied on the difference between the words "would" and "could" in the statute.
"You didn't think much of this argument before the Second Circuit adopted it, did you?" asked Chief Justice John Roberts. "You didn't argue this before the Court of Appeals?"
"We did not argue it before," said Miller.
"So you have a fallback argument," said Roberts.
"Well, that, that's right," said Miller.
"Well, now might be a good time to fall back," advised Roberts.
