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With the record rise in residential and commercial real estate over the past few years their has been a great deal of profit for real estate partnerships. Now a former IRS agent and specialist in partnership taxation says  that billions are going unreported to the government.

Either through the inaccurate reporting on the 1231 exchange tax form of capital gains or just plain failure to report income on a sale, some real estate investors are looking to bypass Uncle Sam and not give the devil government it’s due.

Now I am all for working hard to minimize ones tax bill, but my advice is to make sure that you do it legally. If you have claimed depreciation for 15 years on a property, report it. It is one thing to use every legal trick in the book to maximize your return. I applaud you. But if you end up being one of the 1 in 356 real estate partnerships that get audited, have your ducks in a row.

“Nationally, in 2005, at least $20 billion of gain from real estate tax shelters was unreported,” he said, “and in New York State, the epicenter of the business, the figure may be as high as $5 billion.”
Those figures suggest that the federal government was shorted $5 billion and New York State about $385 million from real estate tax shelter partnerships.
Just one form of real estate partner income, known as a 1231 gain after a section of the tax code, totaled $181.3 billion in 2005, up 87 percent over 2004. The actual gain, Mr. Curnutt said, was at least $232 billion and probably much more.via The New York Times.

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