Carleton

This case presents the question whether a real estate broker had a duty to advise her client that the client’s real estate transactions could have adverse tax consequences.

Plaintiff Ernest Carleton, an experienced real estate investor, employed defendant Mary Tortosa, a real estate broker, in the sale of two residential rental properties and the purchase of two residential rental properties. Plaintiff executed listing agreements, real estate disclosure statements, and real estate purchase contracts which advised him that defendant’s responsibilities as a broker did not include giving advice on tax consequences of the transactions. After the transactions were completed, plaintiff was informed by his accountant that plaintiff incurred a tax liability of approximately $34,000 because the transactions were not structured to qualify as tax-deferred exchanges under Internal Revenue Code section 1031. ( 26 U.S.C. § 1031 ; hereafter section 1031.)

Plaintiff then brought this professional negligence action, alleging in substance that defendant “failed to exercise reasonable care and skill in undertaking her duties as a broker” by neglecting to warn plaintiff his transactions…