Estate of Jane H. Gudie, Mary Helen Norberg v. Commissioner ( 2011 )

ESTATE OF JANE H. GUDIE, DECEASED, MARY HELEN
NORBERG, EXECUTOR, PETITIONER v. COMMISSIONER
OF INTERNAL REVENUE, RESPONDENT
Docket No. 4089–10. Filed November 30, 2011.
E was never appointed executrix over D’s estate by a State
probate court, but she signed D’s estate’s Federal estate tax
return as executor. R determined a deficiency in estate tax
and a sec. 6662(a), I.R.C., accuracy-related penalty and issued
a notice of deficiency listing E as executor. E filed a petition
165
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166 137 UNITED STATES TAX COURT REPORTS (165)
with this Court for redetermination. E subsequently filed a
motion to dismiss for lack of subject matter jurisdiction,
arguing this Court lacked jurisdiction because she was never
appointed executrix by a State probate court and accordingly
the notice of deficiency had been sent to the wrong person. R
objected, arguing that because E was in possession of property
of D, she was a statutory executor within the purview of sec.
2203, I.R.C., and the proper person to receive the notice of
deficiency. Held: E is a statutory executor within the purview
of sec. 2203, I.R.C. R properly issued E a notice of deficiency.
E timely petitioned this Court, and therefore this Court has
jurisdiction.
Edward O.C. Ord and Robert P. Hess, for petitioner.
R. Malone Camp, Jr., and Donna F. Herbert, for
respondent.
OPINION
WHERRY, Judge: The sole issue before this Court is
whether we have subject matter jurisdiction. Petitioner
argues we do not; respondent argues we do. We agree with
respondent.
Background
The following recitation of facts is drawn primarily from
Mary Helen Norberg’s (Ms. Norberg) motion to dismiss for
lack of subject matter jurisdiction (motion to dismiss) and
responses filed by both parties. We note that our recitation
of ‘‘facts’’ is solely for the purpose of ruling on the motion to
dismiss and is not a finding of facts.
Jane H. Gudie (decedent), a resident of California, died on
June 14, 2006. Decedent had no children but was survived by
two nieces, Ms. Norberg and Patricia Ann Lane (Ms. Lane).
Decedent’s will did not nominate either niece as her execu-
trix.
Part of decedent’s estate consisted of property held in the
‘‘Jane Henger Gudie Living Trust’’ (decedent’s trust), created
July 17, 1991. The trust document originally named Ms. Nor-
berg and Ms. Lane (the nieces) as the remainder bene-
ficiaries. Decedent retained for her life the right to revoke or
amend the trust in whole or in part.
On April 1, 1995, the terms of decedent’s trust were
amended to name the nieces as the primary beneficiaries. On
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(165) ESTATE OF GUDIE v. COMMISSIONER 167
January 19, 1999, the terms of decedent’s trust were
amended to appoint Ms. Norberg cotrustee and the nieces as
successor cotrustees upon decedent’s death.
On February 9, 1999, decedent and the nieces entered into
a transaction where, in form, the nieces each agreed to pay
decedent an annuity of $937,483 per year, with the first pay-
ment due in 4 years. In return, decedent, as trustee, issued
a note to each niece, due in 4 years or upon decedent’s death,
in the face amount of $3 million with 6 percent interest,
secured by the assets of decedent’s trust. Neither note was
recorded, and no payments were made. On February 9, 2003,
the unpaid annuity amounts were rolled over into new annu-
ities and the annuity commencement date and the due date
of the notes deferred for another 4 years. Again, no payments
were made.
On or about March 14, 2007, a Form 706, United States
Estate (and Generation-Skipping Transfer) Tax Return, was
filed for decedent’s estate (estate tax return). At the time the
estate tax return was filed, no one was formally appointed,
qualified, or acting as executor or administrator of decedent’s
estate. Ms. Norberg signed the estate tax return as executor
but refuses to be formally appointed executrix of decedent’s
estate under California law.
The estate tax return reported a total gross estate less
exclusion of zero and estate taxes owed of zero. Schedule G,
Transfers During Decedent’s Life, attached to the estate tax
return listed assets including real estate totaling $1,890,000,
furniture and furnishings totaling $100,000, and securities
and bank accounts totaling $5,080,515. The real estate, secu-
rities, and bank accounts were titled in the name of
decedent’s trust. The assets of decedent’s trust were listed
subject to the outstanding debt owed to the nieces ($6 million
principal plus $2,643,300 accrued interest). As a result, the
estate tax return reported total assets transferred during
decedent’s life of negative $1,572,785.
As the sole beneficiaries of decedent’s trust, the nieces
received equal shares of the trust property. According to cor-
respondence between the nieces, Ms. Norberg’s husband, and
Robert P. Hess (Mr. Hess), decedent’s estate planner, the
nieces each received $3,404,343.63 upon decedent’s death.
Respondent audited the estate tax return, determining (1)
decedent had made $2,983,437 of adjusted taxable gifts in
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168 137 UNITED STATES TAX COURT REPORTS (165)
1992 that were not reflected on the estate tax return; (2)
claimed gifts of $279,000 decedent made in 2005 and 2006
were invalid for estate and gift tax purposes; and (3) the
deduction of $8,643,300 claimed on Schedule G is not deduct-
ible because it was not a bona fide loan and was not for full
and adequate consideration.
On January 11, 2010, respondent issued a notice of defi-
ciency to ‘‘Estate of Jane H. Gudie, c/o Mary Helen Norberg,
Executor’’, showing a deficiency in estate tax of $3,833,157.92
and a section 6662(a) accuracy-related penalty of
$766,631.58. 1 On February 17, 2010, a petition was filed
with this Court by Mr. Hess, who is an attorney admitted to
practice before this Court, on behalf of ‘‘Jane H. Gudie,
Deceased; Mary Helen Norberg, Executor’’. At the time the
petition was filed, Ms. Norberg resided in California. In the
petition, Ms. Norberg alleged that respondent
erred in determining that the decedent did not receive full and adequate
consideration in money or money’s worth for promissory notes that rep-
resented bona fide claims against decedent’s living trust dated September
16, 1981. There was no evidence that gifts made in 2005 and 2006 were
not valid for Estate and Gift Tax purposes.
Respondent filed his answer on April 8, 2010. On January
3, 2011, respondent’s motion for leave to file amendment to
answer, filed December 23, 2010, was granted. In the motion
respondent alleged that the gifts made in 1992 were made to
‘‘skip persons’’ under section 2613 and accordingly were sub-
ject to the generation-skipping transfer tax under section
2601. The motion asserted an increased deficiency in estate
tax of $4,972,876.30 and an increased section 6662(a)
accuracy-related penalty of $994,575.26.
On June 9, 2011, Ms. Norberg filed a motion to dismiss.
On June 17, 2011, respondent was ordered to file any
response to the motion to dismiss on or before July 25, 2011.
Respondent’s objection to the motion to dismiss was filed on
July 22, 2011, with six exhibits, denominated A through F,
attached. On August 26, 2011, Ms. Norberg filed two docu-
ments: (1) A reply memorandum in support of objections to
respondent’s objections to motion to dismiss and (2) Mary
1 All section references are to the Internal Revenue Code of 1986, as amended and in effect
for the date of decedent’s death. All Rule references are to the Tax Court Rules of Practice and
Procedure.
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(165) ESTATE OF GUDIE v. COMMISSIONER 169
Helen Norberg’s evidentiary objections to respondent’s objec-
tions to motion to dismiss.
Discussion
I. Evidentiary Objections
Ms. Norberg asserts that ‘‘In ruling on a motion for sum-
mary adjudication, a trial court can only consider admissible
evidence’’ and that because respondent’s ‘‘factual allegations
and exhibits in support of * * * [respondent’s objection]’’ are
inadmissible, they ‘‘must be stricken’’, citing rule 56(e) of the
Federal Rules of Civil Procedure, Orr v. Bank of Am., 285
F.3d 764, 773 (9th Cir. 2002), and Beyene v. Coleman Sec.
Servs., Inc., 854 F.2d 1179, 1181 (9th Cir. 1988), as her
authorities.
In Orr v. Bank of Am., supra at 773, the Court of Appeals
for the Ninth Circuit, the court to which this case is appeal-
able absent stipulation to the contrary, stated: ‘‘A trial court
can only consider admissible evidence in ruling on a motion
for summary judgment.’’ Beyene v. Coleman Sec. Servs., Inc.,
supra at 1181, and rule 56(e) of the Federal Rules of Civil
Procedure stand for the same proposition. But we are not
ruling on a motion for summary judgment. We are ruling on
a motion to dismiss for lack of subject matter jurisdiction. 2
The U.S. Supreme Court has held where, as here, ‘‘there is
no statutory direction for procedure upon an issue of jurisdic-
tion, the mode of its determination is left to the trial court.’’
Gibbs v. Buck, 307 U.S. 66, 71–72 (1939). When an issue of
jurisdiction is raised, either by a party or on our own initia-
tive, we ‘‘may inquire by affidavits or otherwise, into the
facts as they exist.’’ Land v. Dollar, 330 U.S. 731, 735 n.4
(1947), overruled by implication on other grounds by Larson
v. Domestic & Foreign Commerce Corp., 337 U.S. 682 (1949);
see also Stevens v. Redwing, 146 F.3d 538 (8th Cir. 1998).
2 Ms. Norberg, in her objection, states:
This Court should treat this motion as a motion for summary judgment seeking an order ruling
that this Court lacks subject matter jurisdiction, pursuant to Tax Court Rules 40 and 121. This
is due to the fact that the motion to dismiss is supported by a declaration under penalty of per-
jury under 28 U.S.C. 1746, which authorizes declarations in lieu of affidavits.
We view Ms. Norberg’s position as an attempt to circumvent established precedent and bring
evidentiary rules not applicable in jurisdictional questions into play. In deciding whether we
have jurisdiction, we are not bound by evidentiary rules applicable in deciding motions for sum-
mary judgment.
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170 137 UNITED STATES TAX COURT REPORTS (165)
None of respondent’s exhibits will be stricken, and the
Court will examine all the facts before us in determining
whether we have jurisdiction over this case.
II. Subject Matter Jurisdiction
A. Introduction
The Tax Court is a court of limited jurisdiction and may
exercise jurisdiction only to the extent authorized by Con-
gress. Adkison v. Commissioner, 592 F.3d 1050, 1052 (9th
Cir. 2010), affg. on other grounds 129 T.C. 97 (2007). Our
jurisdiction to redetermine a deficiency depends upon the
issuance of a valid notice of deficiency and a timely filed peti-
tion. Rule 13(a), (c); Monge v. Commissioner, 93 T.C. 22, 27
(1989).
Section 6212(a) expressly authorizes the Commissioner,
after determining a deficiency, to send a notice of deficiency
to the taxpayer. In the instance of an estate tax deficiency,
once the Commissioner is notified of the existence of a fidu-
ciary relationship, the fiduciary steps into the shoes of the
taxpayer for tax purposes, and the notice of deficiency is to
be sent to the fiduciary. Sec. 6212(b)(3); Rule 60(a); Estate of
McElroy v. Commissioner, 82 T.C. 509, 512 (1984); Estate of
Kisling v. Commissioner, T.C. Memo. 1993–119; sec.
301.6212–1(b)(3), Proced. & Admin. Regs. The taxpayer (or
fiduciary) in turn has 90 days from the date the notice of
deficiency is mailed (150 days if the notice is mailed to a tax-
payer outside of the United States) to file a petition in this
Court for a redetermination of the deficiency. Sec. 6213(a);
Rule 60(a); Estate of Moffat v. Commissioner, 46 T.C. 499,
501 (1966).
B. Ms. Norberg’s Argument
Ms. Norberg, relying on Hulburd v. Commissioner, 296
U.S. 300 (1935), argues that ‘‘the notice was issued and
mailed to the wrong taxpayer’’. 3 Although unclear, we sur-
mise Ms. Norberg’s argument is that she was not a fiduciary
within the meaning of section 6212(b)(3). She states that she
3 Hulburd v. Commissioner, 296 U.S. 300 (1935), did not involve the validity of a deficiency
notice, but rather the personal liability of the executor and legatee of a shareholder in a dis-
solved corporation. Thus, contrary to Ms. Norberg’s assertion, Hulburd has little, if any, rel-
evance to the case at hand.
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(165) ESTATE OF GUDIE v. COMMISSIONER 171
was never appointed executrix of decedent’s estate by a Cali-
fornia probate court and no action of any kind seeking her
appointment as executrix will be taken. According to Ms.
Norberg, the notice of deficiency should have been addressed
to ‘‘Jane Henger Gudie Living Trust dated July 17, 1991,
Mary Helen Norberg and Patricia Ann Lane successor co-
trustees, or to Norberg as a transferee’’.
C. Respondent’s Argument
Respondent argues that Ms. Norberg was in actual or
constructive receipt of property of decedent and thus ‘‘as
statutory executor within the meaning of section 2203, was
the proper person to whom to issue the notice of deficiency
pursuant to section 6212(b)(3) and the proper party to bring
the instant case pursuant to Tax Court Rule 60(a)’’.
D. Analysis
Our conclusion, explained below, is that Ms. Norberg,
because she was in actual or constructive possession of prop-
erty of decedent, was a statutory executor. As such, she had
the responsibility and authority to file the estate tax return.
By filing the estate tax return, she notified respondent of a
fiduciary relationship and was the proper person to receive
the notice of deficiency.
Section 2203 defines ‘‘executor’’ for purposes of the Federal
estate tax as ‘‘the executor or administrator of the decedent,
or, if there is no executor or administrator appointed, quali-
fied, and acting within the United States, then any person in
actual or constructive possession of any property of the
decedent.’’ In her objection, Ms. Norberg states she ‘‘was
never in possession of any assets of the probate estate of
Jane H. Gudie, or of other estates, with respect to any and
all times relevant to our motion to dismiss.’’ Ms. Norberg
attached to her objection the signed declaration of Mr. Hess,
who also states that ‘‘Norberg was not ever in possession of
any assets of the probate estate of Jane H. Gudie’’. Ms. Nor-
berg and Mr. Hess carefully confine their statements to the
‘‘probate estate’’. The fact that the property Ms. Norberg
received did not pass through probate is immaterial to this
discussion. This Court has previously held in situations like
this that ‘‘the fact that * * * property interests passed * * *
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172 137 UNITED STATES TAX COURT REPORTS (165)
directly rather than as part of decedent’s probate estate is
immaterial.’’ Estate of Guida v. Commissioner, 69 T.C. 811,
813 (1978); see also Estate of Wilson v. Commissioner, 2 T.C.
1059, 1083–1084 (1943) (stating that if taxpayers could
distinguish between probate and nonprobate property to
defeat the estate tax, ‘‘the law would soon be a nullity’’).
On the facts before us, Ms. Norberg was in actual or
constructive possession of decedent’s property at the time the
estate tax return was filed. 4 At the time the estate tax
return was filed, there was no one appointed, qualified, or
acting as executor or administrator of decedent’s estate.
Therefore Ms. Norberg qualified as a statutory executor of
decedent’s estate for purposes of the Federal estate tax. 5 See
sec. 2203; Huddleston v. Commissioner, 100 T.C. 17, 30–31
(1993); Estate of Guida v. Commissioner, supra at 813; New
York Trust Co. v. Commissioner, 26 T.C. 257, 261–262 (1956);
Allen v. Commissioner, T.C. Memo. 1999–385.
Section 6018(a)(1) directs the executor in cases where the
decedent’s gross estate exceeds the applicable exclusion
amount to file an estate tax return. See also sec. 20.6018–2,
Estate Tax Regs. Therefore, as statutory executor, Ms. Nor-
berg had the responsibility and authority to file the estate
tax return.
Section 6036 provides in part: ‘‘every executor (as defined
in section 2203), shall give notice of his qualification as such
to the Secretary in such manner and at such time as may be
required by regulations of the Secretary.’’ Section 6903(a)
provides:
SEC. 6903(a). RIGHTS AND OBLIGATIONS OF FIDUCIARY.—Upon notice to
the Secretary that any person is acting for another person in a fiduciary
capacity, such fiduciary shall assume the powers, rights, duties, and privi-
leges of such other person in respect of a tax imposed by this title (except
as otherwise specifically provided and except that the tax shall be collected
4 Decedent was considered the owner of the trust property pursuant to sec. 676(a), which pro-
vides: ‘‘The grantor shall be treated as the owner of any portion of a trust, whether or not he
is treated as such owner under any other provision of this part, where at any time the power
to revest in the grantor title to such portion is exercisable by the grantor or a nonadverse party,
or both.’’
5 We are not appointing Ms. Norberg executor for purposes of State law or providing her the
authority that comes with being appointed executor under State law. Nor are we concluding that
Ms. Norberg is potentially liable for the entire deficiency. This Court has previously stated: ‘‘It
is clear that a determination of deficiency against an estate, even though the executor or per-
sonal representative is named as the person to receive the notice, is not a determination of defi-
ciency against the executor or personal representative in his or her personal capacity.’’ Estate
of Walker v. Commissioner, 90 T.C. 253, 257 (1988).
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(165) ESTATE OF GUDIE v. COMMISSIONER 173
from the estate of such other person), until notice is given that the fidu-
ciary capacity has terminated.
Ms. Norberg’s filing of the estate tax return gave
respondent notice for purposes of sections 6036 and 6903
that she was to be treated as the executor and fiduciary of
decedent’s estate. Section 20.6036–2, Estate Tax Regs., pro-
vides in relevant part: ‘‘The requirement of section 6036 for
notification of qualification as executor of an estate shall be
satisfied by the filing of the estate tax return required by
section 6018’’. Section 301.6036–1(c), Proced. & Admin. Regs.,
provides: ‘‘When a notice is required under § 301.6903–1 of
a person acting in fiduciary capacity and is also required of
such person under this section, notice given in accordance
with the provisions of this section shall be considered as com-
plying with both sections.’’ Hence, filing the estate tax return
as executor was adequate notice for purposes of both sections
6036 and 6903. 6
Ms. Norberg never gave respondent a notice of termi-
nation. Therefore she was never relieved of her powers,
rights, duties, and privileges as a fiduciary of decedent’s
estate for Federal estate tax purposes. She was the proper
individual to receive the notice of deficiency under section
6212 and had the capacity to contest the notice of deficiency
upon which this case is based. See Rule 60(a)(1); Huddleston
v. Commissioner, supra at 30–31; Estate of Sivyer v. Commis-
sioner, 64 T.C. 581 (1975); Allen v. Commissioner, supra; see
also Estate of Kisling v. Commissioner, T.C. Memo. 1993–119
(stating that the fiduciary of the estate was required to look
after its interests). Respondent properly mailed a notice of
deficiency to ‘‘Estate of Jane H. Gudie, c/o Mary Helen Nor-
berg, Executor’’, and Ms. Norberg’s timely petition gave this
Court jurisdiction. See also Estate of Callahan v. Commis-
sioner, T.C. Memo. 1981–357 (stating: ‘‘The function of a
6 Ms. Norberg argues that ‘‘the filing of an estate tax return does not constitute notice for li-
ability purposes’’ or apparently in Ms. Norberg’s views, to the Commissioner of a fiduciary rela-
tionship entitling the filer of the estate tax return to act for the estate pursuant to sec. 6903(a).
She argues Form 56, Notice Concerning Fiduciary Relationship, is necessary for adequate notice.
We disagree.
The instructions on Form 56 state: ‘‘You must notify the IRS of the creation or termination
of a fiduciary relationship under section 6903 and give notice of qualification under section 6036.
You may use Form 56 to provide this notice to the IRS’’. While filing a Form 56 provides ade-
quate notice, as explained above, it is not the exclusive method by which a person can inform
the IRS that he or she is acting in a fiduciary capacity. Sec. 301.6036–1(c), Proced. & Admin.
Regs.; sec. 20.6036–2, Estate Tax Regs.
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174 137 UNITED STATES TAX COURT REPORTS (165)
statutory notice of deficiency is to afford * * * [the taxpayer]
a full and fair opportunity to present its case in this Court.’’).
In conclusion, the notice of deficiency was appropriately
addressed to Ms. Norberg and she had the authority to file
the petition in this case. Her timely petition in response to
the valid notice of deficiency gives this Court jurisdiction.
III. Statute of Limitations
Although the argument is unclear, in her motion to dismiss
Ms. Norberg appears to argue that the period of limitations
on assessment has expired. In her objection to respondent’s
objection, Ms. Norberg states she ‘‘did not and is not
asserting in this motion any issue regarding statute of
limitations’’ and asks us not to rule on this issue. We need
not analyze this issue here but do note two things. First,
pursuant to sections 6503(a)(1) and 6213(a), the period of
limitations on assessment, if open when a notice of deficiency
was sent, would generally be suspended if a timely petition
was filed until such time as the Secretary is no longer
prohibited from assessing the tax. Second, the statute of
limitations is an affirmative defense, not a jurisdictional
matter. See Rule 39; Freytag v. Commissioner, 110 T.C. 35,
41 (1998).
To reflect the foregoing,
An appropriate order will be issued
denying petitioner’s motion to dismiss for
lack of subject matter jurisdiction.
f
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