When we see a business start up and close rapidly, we often wonder how could this happen.  When we see a shuttered restaurant we wonder how one entrepreneur’s dream could go so wrong.  Here, in Wo Yee Hing Realty Corp. v. Stern, Supreme Court, New York County, Justice Debra James we guess at three things:

a.  This real estate transaction was for millions of dollars;

b.  The sellers had absolutely no idea how to go about selling and buying a like-kind building, and lost $ 4 million dollars in unnecessary tax;

c.  Hired a solo practitioner, who (we guess) had no legal malpractice insurance, did so without a retainer agreement, and did so without any written communications between them.

Result? 

"This is an action seeking damages for alleged legal malpractice with respect to the sale of property, in which plaintiffs claim that they were unable to take advantage of the Internal Revenue Code (IRC) § 1031 like-kind exchange tax deferral because of defendant’s actions. The corporate plaintiff is the owner of the subject property, and the individual plaintiffs are principals of the corporate plaintiff . Defendant is an attorney who alleges that, in 2006, plaintiff Chun Wo Yung (Chun Wo) approached him regarding the Check One: sale of a building that Chun Wo and his  family had owned since  1979. In November, 2006, Chun Wo called defendant to let him
know that he was ready to have a contract drafted regarding the sale of the building, and Chun Wo faxed defendant a letter that Chun Wo had received from a real estate broker who was representing the purchaser. "

"Defendant maintains that throughout the entire process, he constantly informed plaintiffs that he had no experience with 1031 like-kind exchanges, and that they always told him that they would take care of it.

In his EBT, Chun Wo stated, in contrast to defendant’s testimony, that he was unfamiliar with how a 1031 like-kind exchange worked, and that he had never heard of a qualified intermediary. In his affidavit, Chun Wo avers that the corporate plaintiff paid approximately $3,400,000 in federal taxes and approximately $1,700,000 in local taxes.