Tax Court: Trust can materially participate in a business

Description

Abstract: In a landmark 2014 case, the U.S. Tax Court opened the door to significant tax savings for certain trusts. In Frank Aragona Trust v. Commissioner, the court held that a trust can materially participate in a trade or business and even qualify as a “real estate professional.” This article explains the ruling and how it affects estate plans that include trusts that own real estate or other passive business interests.