According to Law.com, much of the argument heard by the court concerned the difference between advice and fees incurred by fiduciaries versus individual investors. Chief Justice John Roberts brought up the idea of breaking up the costs for investment advice into those for “general stock picking advice,” and those for “specialized fiduciary advice,” and only providing an exception for the latter, the news report said.
Peter J. Rubin, counsel for the petitioner, said “all trust investment fees are distinctive, that what renders them distinctive and renders them fully deductible under the statute is that they are incurred as a result of distinctive fiduciary obligations,” according to Law.com.
Justice David Souter made the argument that the consequences of poor investment management are different for trustees than for individual investors. “If the individual investor does a very poor job of managing his investments, all he can ultimately do is cry about it,” Souter said, according to the news report. “But if the trustee does a very poor job, the trustee is going to get sued. So … when the trustee asks for an investment adviser’s advice, the trustee is addressing an issue that the individual does not have.”
Assistant to the Solicitor General Eric D. Miller, who represented the Commissioner of Internal Revenue, tried to argue that the statutory language regarding fees that “would not have been incurred if the property were not held by a trust or estate” means fees that “could not” have been incurred by an individual investor, but the argument was batted down by Justice Antonin Scalia. “‘[W]ould’ just does not mean ‘could,'” Scalia said. “I mean, would have, could have, should have … they’re different words.”
According to the news report, Justice Stephen Breyer noted that the legislative history of the statute shines “precisely no light whatsoever” on Congress’ intent.
The case is Knight v. Commissioner of Internal Revenue, 02-1286.