'Aragona Trust’ New Weapon in Section 1411 Tax Fight

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Tax advisers have moved one step closer to a resolution of what constitutes material participation for trusts and estates with the U.S. Tax Court's decision in the Frank Aragona Trust case, an opinion practitioners said will give them new ammunition in fighting the net investment income tax under Section 1411 (Frank Aragona Trust v. Commissioner, T.C., No. 15392-11, 142 T.C. No. 9, 2014 BL 85221, 3/27/14).
The case gives trustees, who have been suffering for decades from a lack of Internal Revenue Service guidance on material participation, another arrow in their quiver to say that a trust or estate can materially participate in a business—and that it isn't only the fiduciary acting solely in the fiduciary capacity that counts in making that determination.