October 8, 2007

Mr. David M. English

University of Missouri-Columbia

203 Hulston Hall

Columbia, MO 65211-4300

Mr. Scot W. Boulton

Polsinelli Shalton Welte Suelthaus PC

Suite 1200, 7733 Forsyth

Clayton, MO 63105

Mr. James D. Spratt, Jr.

King & Spalding LLP

1180 Peachtree Street

Atlanta, Georgia 30309

Mr. Steven B. Gorin

Thompson Coburn LLP

One US Bank Plaza

St. Louis, Missouri 63101

RE:     AICPA Comments on NCCUSL Proposed Changes to UPIA Sections 401, 505 and 409

Dear Mssrs. English, Boulton, Spratt, and Gorin:

The American Institute of Certified Public Accountants (AICPA) is submitting comments on proposed changes submitted by the American Bar Association (ABA) and American College of Trust and Estate Counsel (ACTEC) to the National Conference of Commissioners on Uniform State Laws (NCCUSL) relating to the Uniform Principal and Income Act (UPIA) Sections 401, 409, and, 505. The UPIA defines how receipts and disbursements of an estate or trust are allocated between income and principal. We are in general agreement with the proposals submitted by ABA and ACTEC with slight modifications as outlined in our comments.

The AICPA is the national professional organization of certified public accountants comprised of approximately 330,000 members. Our members advise clients on federal, state and international tax matters, and prepare income and other tax returns for millions of Americans, providing. Our members provide services to individuals, not-for-profit organizations, small and medium-sized business, as well as America’s largest businesses.

We suggest additional changes to UPIA section 401 to allow trustees to allocate to income only that portion of a receipt that can, at the time of receipt, be determined to be truly income from the nature of the receipt. Remaining cash will be allocated to principal, until final determination of the proper classification can be made.

In addition, we note that while the proposed revisions to UPIA section 401 go a long way toward easing the burden on trustees who do not possess a power to adjust, we believe that they do not go far enough in addressing the confusion that currently exists over the interplay between UPIA sections 401 and 505. These sections instruct the trustee how to allocate receipts from an entity and the taxes related thereto between income and principal beneficiaries. In particular, it is unclear in which order UPIA sections 505(c) and 505(d) should apply. Applying them in different order achieves a vastly different tax allocation between income and principal. If the desired tax allocation is the Gamble interpretation as explained in our comments, then we suggest specific language for UPIA section 505(d).

Further, the AICPA believes that NCCUSL should address the issues raised by Rev. Rul. 2006-26, which rejects the applicability of UPIA section 409 to IRA accounts held in trusts intended to qualify for the marital deduction under IRC section 2056. For an IRA, and other similar types of plans for which the underlying earnings and growth are ascertainable, the trustee should be able to look through to the underlying investments and determine the amount of interest, dividends or their equivalent earned during the period and allocate this amount to income and the balance to principal. For those accounts for which the underlying earnings and growth are not ascertainable, AICPA recommends the adoption of a unitrust approach allowing the trustee to allocate an amount equal to no less than 3 percent nor greater than 5 percent of the fair market value of the IRA account to income and the balance to principal. Thus, we support the recommendation of ABA and ACTEC members to NCCUSL to include an “income allocation provision” and a “mandatory distribution provision” in UPIA section 409 as further described in their Memorandum to James Gamble dated July 1, 2007.

We thank you for the opportunity to present our comments and welcome the opportunity to discuss our comments further with you or others at NCCUSL or the IRS. Please feel free to contact me at jeffrey.hoops@ey.com; Steven A. Thorne, Chair of the AICPA Trust, Estate, and Gift Tax Technical Resource Panel, at stethorne@deloitte.com; F. Gordon Spoor, Chair of the AICPA Technical Issues Task Force, at fgs@spoorcpa.com; or Eileen R. Sherr, AICPA Technical Manager, at esherr@aicpa.org to discuss the above comments or if you require any additional information.

Sincerely,

Jeffrey R. Hoops

Chair, AICPA Tax Executive Committee

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