Sunday, April 6, 2014
Recently, the Tax Court in The Frank Aragona Trust v. Comm'r., held that it is now an option for a trust to qualify for the coveted title of "real estate professional" under the passive loss rules. This holding permits trusts to avoid the passive loss deduction limitations. The IRS claimed the trust could not be a real estate professional because the test for real estate professional looked to "personal services," and a trust was an entity that could not perform personal services. Additionally, the IRS if a trust qualified, the relevant participation must come from the fiduciaries in their capacity as fiduciaries and not as employees. The court disagreed with the first claim and did not rule on the second issue, but did say a trust could qualify as a real estate professional.
See Steven R. Schneider, Tax Court Decision Will Help Trusts Avoid Passive Loss Limitations and New 3.8% Tax, Tax Law Round Up, Mar. 29, 2014.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.