Material Participation Rules for Trusts: Leveraging the Aragona Trust Holding to Minimize NIIT Impact
Avoiding the Passive Activity Loss Rules for Trusts Through Strategic Planning
Recording of a 110-minute CPE webinar with Q&A
This course will provide tax professionals with a deep dive into the determination of “material participation” (MP) as the concepts apply to trusts and estates in the application of passive activity rules. The panel will analyze the tax court’s groundbreaking holding in Aragona Trust v. Comm'r and provide their perspectives on MP issues that Aragona did not address or provide specific guidance on structuring trust holdings. The panel will outline practical approaches consistent with Aragona and Service rulings to minimize the impact of the net investment income tax (NIIT) for trusts and estates.
Outline
- IRC 469 passive activity definitions
- Previous standards
- Carter Trust v. United States
- TAM 200733023
- PLR 201029014
- PLR 201317010
- Aragona standard—employee participation
- State law fiduciary considerations
- Remaining questions regarding material participation rules after Aragona
Benefits
The panel will discuss these and other critical questions:
- What are the evolving standards for determining whether a trust has MP in a trade or business activity?
- What is the current IRS audit position on MP in a trade or business for trusts and fiduciaries?
- What are the NIIT consequences of the passive vs. active classification for trusts?
- What questions were not settled by Aragona regarding MP in trust holdings?
Faculty
Michael T. Donovan
Member
Lewis Rice
Mr. Donovan is Chairman of his firm's Tax Department. He has significant experience in all aspects of tax planning... | Read More
Mr. Donovan is Chairman of his firm's Tax Department. He has significant experience in all aspects of tax planning for partnerships and LLCs, corporations, real estate, REITs, and funds. He regularly advises clients in connection with M&A transactions, real estate projects, and complex partnership issues. He also counsels exempt organizations on issues relating to tax-exempt status, intermediate sanctions, and joint ventures with for-profit entities. He has spoken and written extensively on a variety of tax topics, including a recent article for the Journal of Taxation on the complex FATCA final regulations.
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Keith K. Grissom
Partner
Armstrong Teasdale
Mr. Grissom focuses his practice on tax and estate planning, closely held business succession planning and asset... | Read More
Mr. Grissom focuses his practice on tax and estate planning, closely held business succession planning and asset protection. He counsels both businesses and individuals on tax matters including addressing income, estate, gift and generation-skipping transfer tax issues related to estate planning and trust administration. Mr. Grissom frequently works with business owners as well as with multi-generational families on preserving their wealth and the transition of businesses to the next generation. He is also experienced in business entity formation, mergers and acquisitions, and real estate and other tax issues, including tax structuring and controversies. In addition to probate and trust administration, Mr. Grissom advises clients on the formation and funding of private foundations and other tax-exempt entities. He also provides counsel regarding international planning.
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