What is the tax treatment of the costs to the user of family office services?
What methods are used to allocate costs among users, and what are the advantages and disadvantages of each? Are funds contributed to a family office considered “revenue” or “capital contributions”? What are the advantages and disadvantages of the various entities used for family offices? What additional tax issues arise when a family office serves non-family clients? Who — or what type of entity — is using the family office services? Probably the most fundamental issue is to identify the users of the family office services. Types of users include individuals, trusts, estates, operating businesses, and foundations. The tax treatment of costs is affected by the identity of the user. While there are similarities in the tax rules relating to individuals, trusts, and estates, the rules relating to operating businesses and foundations can be quite different. For example, costs related to the administrative task of paying bills are deductible for operating businesses. On the other hand, fam
