Comment on FR Doc # E7-14489

Re: Proposed Regulations under Section 67 (2 percent floor) The proposed regulations provide that administrative costs "unique" to estates and trusts are not subject to the 2 percent floor. It is obvious that the regulations were written with Subchapter J estates and trusts in mind, given the references to "beneficiaries" of the estate or trust, contests of wills and trusts, and the court cases cited in the preamble. The Office of Chief Counsel has published AM 2007-0010, which concludes than an individual's bankruptcy estate under Subchapter V (section 1398) is an "estate or trust." I recommend that AM 2007-0010 be revoked because the phrase "estate or trust" is necessarily limited to Subchapter J estates and trusts, as explained in my September 3 article in Tax Notes, Is an Individual's Bankruptcy Estate an "Estate or Trust"? See 116 Tax Notes 843-856. If the Office of Chief Counsel continues to maintain the position that "estate or trust" includes bankruptcy estates of individuals, it will then be necessary for the Office to determine which deductible administrative expenses (those described in section 1398(h)(1)) meet the "unique" test set forth in the proposed section 67 regulations. For example, are the costs incurred by the chapter 7 trustee in having the bankruptcy estate's income tax return prepared "unique" to the estate and thus deductible in full? Are the court costs incurred in filing the bankruptcy petition under chapter 7 or 11 "unique" to the estate? Are the costs of maintaining estate property and paying property taxes "unique" to the estate? All of these issues are discussed in my article. The answers are not easy but answers are required if the Office of Chief Counsel continues to maintain the position that a section 1398 bankruptcy estate is an "estate or trust" within the meaning of section 67(e)(1).