Agent Negligent Misrepresentation
Utilizing the services of Agent, Taxpayer acquired a property in 2000 in a 1031 exchange. In 2010 using Agent to sell the property, Taxpayer asked Agent whether they could avoid the capital gain tax. Agent advised that this was not possible due to the previous exchange. After getting a $75k tax bill Taxpayer sued Agent. The court dismissed most claims against Agent but let stand a claim of “negligent misrepresentation.” The court stated that where an agent, experienced in a specific type of transaction, makes a representation to the taxpayer, the taxpayer is not unreasonable in relying upon the representation. Coon v. Wood, 2014 WL 4647713 (USDC DC) (Sept. 18, 2014)
We continue to monitor activity in Congress related to 1031.