This article discusses the first and only Tax Court case that addressed whether income that was earned by an irrevocable trust holding rental real estate was non-passive. Frank Aragona Trust v. C.I.R., was a victory for trust taxpayers, but the Tax Court did not fully analyze all of the aspects relating to passive activity rules. There will be many questions that are left unanswered for families that are creating succession plans for their rental real estate businesses. “It is imperative for advisors and their clients to review the complex matrix of passive activity rules and the application of state law fiduciary duties to derive a managerial structure that will suit both tax objectives and business management realities.” This in depth article provides extensive commentary and analysis about passive activity rules as they relate to rental real estate properties and what planners need to do to become more aware and prepared for the challenges of the future.
See Katie Groblewski and RoseMary Reed , Did Aragona Answer All Questions? An Analysis of Outstanding Issues for Trusts Owning Rental Real Estate, Wealth Strategies Journal, December 2, 2015.
Special thanks to Dominic Jones for bringing this article to my attention.
