In December 2017, the US Tax Court in a memorandum decision overruled the determination by the Internal Revenue Service that expenses incurred by a family office were “Section 212 expenses,” that is, miscellaneous itemized deductions. As a result, the expenses incurred by the family office were treated as fully deductible trade or business expenses for federal income tax purposes. Mark Leeds, of the New York office of Mayer Brown, analyzes this recent decision and discusses how other family offices can benefit from the court’s analysis to ensure that their expenses are deductible. The court’s decision is especially important in light of recent tax reform legislation that denies deductions for expenses incurred for the production of income beginning in 2018.
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