Deceased father leaves 2 children and spouse an apartment building in trust approximating $2 million. The entire appreciation in the building, originally purchased far below market value escapes taxation on the transfer. Our clients, the recipients of the trust, bring us prior tax returns and trust documents to review and prepare current year tax returns. No recipient of the trust had previously claimed any income or loss from the trust.
In reviewing the tax returns filed, it was determined that there were prior tax losses resulting primarily from depreciation deductions never taken on the tax returns, and that all of these losses could be passed to the heirs of the trust resulting in significant tax refunds while avoiding taxation on future appreciation.
The combined refunds resulting from amending the prior tax returns far exceeded the approximately $3,000 in professional fees to amend 3 years of trust tax returns and individual income tax returns needed.