Legal Question in Real Estate Law in Maryland

Re: Real Estate Office Property Files

You should maintain agency and sales agreements in accordance with the following:

1. Because a net operating loss can be carried back 2 years and carried forward 20 years, it is important to keep tax records until all net operating losses are used to offset taxable income and the carry forward term expires, plus the three-year statute of limitations on any tax return using the specifically identified carry forward.

2. The statute of limitations is extended to six years if the IRS finds that gross income on your tax return was understated by more than 25%. This is a general guideline.

3. In cases where a fraudulent tax return can be shown, or no tax return has been filed with the IRS, an assessment may be made by the IRS any time. Fraud must be proven for the IRS to recover under this provision.

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Re: Real Estate Office Property Files

The same question came up at a Montgomery County Bar Association event this week. The answer (for attorneys in Montgomery County anyway) was: (1) 5 years for documents concerning any property interest of a client; (2) Or any additional period of time required by your malpractice carrier.