Tax Legal Services · Primary-source case analysis

Bingham’s Trust: Tax Litigation and Trust Windup Costs Were Management Expenses Under Then-Current Law

By Aneeta Mishra and Timothy Chan

Published August 17, 2026

Trust of Bingham v. Commissioner examined legal and administrative expenses incurred when a testamentary trust disputed a tax assessment, reached the end of its term, and distributed corpus to the remaindermen.

The trustees incurred tax-contest and termination expenses

The challenged amounts included professional costs connected with contesting an income-tax deficiency and carrying out the trustees’ duties as the trust expired and property was distributed.

The property remained held for income production during windup

The approaching distribution date did not strip the trust assets of their income-producing character or make the trustees’ concluding management functions unrelated to the property.

Direct connection to management supported deduction

The Court read the nonbusiness-expense provision in parallel with the rule for ordinary business expenses. Litigation did not itself have to produce income when it directly arose from managing income-producing property.

Modern deductions require current-law analysis

The Court reversed the denial under the law then in force. Present treatment depends on the current Code, including sections 67 and 212, trust-specific rules, capitalization principles, allocation, and the tax year involved.

Key takeaways

• Classify each fee by the matter and property-management function it serves.
• Separate trust administration from personal beneficiary expenses.
• Allocate mixed expenses and preserve invoices, engagement terms, and work descriptions.
• Apply the Code and regulations in force for the particular trust and tax year.