The PAL rules and estate planning – Can you reduce your trust’s tax bill?
Abstract: Trusts can accomplish a variety of estate planning goals, including wealth distribution, asset protection, estate and gift tax reduction, and probate avoidance. But taxpayers should not overlook their income tax treatment. By reducing a trust’s income tax bill, they can preserve more wealth for their heirs. This article covers a U.S. Tax Court ruling addressing material participation in regard to passive activity loss (PAL) rules, and how the court’s decision created new tax-saving opportunities for many trusts. A sidebar defines a “real estate professional.”