S.E.C. Real Estate Observer

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Editor’s Note: This article first appeared in the April 1972 Issue of the Real Estate Observer.

WHAT ABOUT TAXES? The famous case of Judge Learned Hand on the subject of Federal Taxes set forth in the decision that “Taxes are a forced extraction, not a voluntary contribution.” The judge further went on to say that in effect that since the above quote was true, that any citizen of this country had a right to do anything he could to avoid the payment of federal tax. Naturally, by saying “anything he could” should also incorporate the thought that he could do anything that was legal to avoid, but most certainly could not evade, the payment of taxes.

Real estate counselors who have the welfare of their clients sincerely in mind make it a point if taxes are a consideration, that all thinking and planning of the tax items will be well in advance of anything being written toward making a transaction. Since real estate counselors are not tax advisors, the client, of course, should have his own tax counsel and if necessary legal counsel in addition to the real estate counselor. The real estate counselor then, of course, should work very closely with tax and legal counsel of the client so that all understand mutually what is trying to be accomplished and all strategy should be thoroughly thought out and agreed to before any action is taken on the part of the real estate counselor to make a proposal or an offer. Once a written proposal or offer is made without consideration being given to the tax features that are necessary it may be too late to back up and change the strategy.

One must remember that insofar as the Internal Revenue Service is concerned often the “intent” is what the IRS representatives look for, and for that reason any tax strategy, use of the formula, or any maneuver that is done for the benefit, tax wise, of a client, must always be resolved before the real estate counselor starts anything. Often clients don’t realize that there are many things that can be done for him tax wise, and of course a real estate counselor has to be extremely careful inasmuch as he cannot legally give tax advice unless he also happens to be licensed to do so.

This means that often while a real estate counselor himself recognizes that his client is trying to do something which is not good for him tax wise, that the only way he can get the client to recognize this is to have the client retain tax counsel; either a Certified Public Accountant or a lawyer who specializes in taxation. The best in the field of tax counsel in the writer’s opinion is a CPA who specializes in real estate tax information. Often it is hard to find such a person in some parts of our country. However, good ones do exist and you will find them in this magazine. There will be authors who will be publishing articles, authors who are competent and well versed in real estate taxation problems. It is always well that a real estate counselor retain the most competent tax counsel he can find; the one that specializes in real estate taxation problems.