DocketNumber: No. 11599-03
Citation Numbers: 2005 T.C. Memo. 20, 2005 Tax Ct. Memo LEXIS 19
Judges: "Haines, Harry A."
Filed Date: 2/8/2005
Status: Non-Precedential
Modified Date: 11/20/2020
Judgment entered for respondent.
MEMORANDUM OPINION
HAINES, Judge: Respondent determined a liability of $ 170,000 plus interest for petitioner as transferee of assets in the Federal estate tax of the Estate of Mary Kabbash (the estate). After concessions, the issue to be decided is whether petitioner is liable for interest on a $ 170,000 liability as a transferee of the property from the due date of the estate tax return.
Unless otherwise noted, section references are to the applicable version of the Internal Revenue Code, and Rule references are to the Tax Court Rules of Practice and Procedure. Amounts are rounded to the nearest dollar.
Background
The parties submitted this case fully stipulated pursuant to
Petitioner is the daughter of Mary Kabbash (decedent), and she is the sister of William Kabbash, Samuel Kabbash, and Joyce Samaha. In early 1989, decedent gave William Kabbash a general power of attorney to*20 make gifts to her children on her behalf.
As power of attorney for decedent, William Kabbash gifted the following to petitioner:
Date Amount
Aug. 27, 1989 $ 10,000
Sept. 28, 1989 10,000
Nov. 10, 1989 150,000
Petitioner received an additional $ 115,000 from decedent or the estate from January 1989 to September 1992.
Decedent died on November 15, 1989. At the time of her death, decedent had a will that controlled the disposition of her assets and that named William Kabbash and Samuel Kabbash as coexecutors of the estate. The estate had a value in excess of $ 4 million at the date of her death.
Form 706, United States Estate Tax Return (estate tax return), for decedent was due on August 15, 1990, 9 months from the date of death. The coexecutors failed to file an estate tax return and to make any payments for estate taxes. On or about July 26, 1993, respondent filed a substitute for return for the estate.
On March 7, 1994, petitioner received a summons from respondent dated February 25, 1994, for testimony and records regarding*21 the estate tax return. Petitioner did not appear or respond to the summons. In 1996, petitioner received a call from respondent informing her that the estate tax return had not been filed and that the estate taxes had not been paid. Petitioner responded that the call was the first time that she was made aware that the estate taxes had not been paid.
On August 2, 1996, respondent issued a notice of deficiency to the estate. On October 24, 1996, the estate filed a petition to redetermine the deficiency.
On December 2, 1997, Mary Tom was appointed to serve as Administratix of the estate. In January 1999, Mary Tom instituted a suit against William Kabbash and Samuel Kabbash for alleged waste and mismanagement of the estate. On February 3, 2000, the complaint filed by Mary Tom was amended to add petitioner as a defendant as the recipient of $ 285,000 of alleged improper payments from the estate from January 1989 to September 1992. Judgments were entered against William Kabbash and Samuel Kabbash, but Mary Tom recovered only $ 866 on behalf of the estate.
On March 20, 2002, pursuant to an agreement of the parties, we entered a decision that the estate owed a deficiency of $ 1,987,249. *22 The deficiency was assessed on May 20, 2002. The period of limitation for assessment of the estate tax liability was set to expire on November 15, 2002.
There are no assets remaining in the estate from which the estate tax liability may be satisfied. As of June 2004, an estate tax liability in excess of $ 8,219,795 remains unpaid.
On April 29, 2003, respondent sent petitioner a notice of transferee liability, in which respondent determined that petitioner owed $ 170,000, plus interest as transferee, trustee, and beneficiary of the property of the estate. On July 18, 2003, petitioner filed a timely petition with the Court disputing this notice of transferee liability.
Discussion
In a transferee liability case, the burden of proof is on respondent to show that petitioner is liable as a transferee of property of a taxpayer, but not to show that the taxpayer was liable for the tax.
Petitioner concedes that she is liable for the $ 170,000 determined in the notice of transferee liability, as transferee, trustee, and beneficiary of property of the estate. The only issue remaining is whether petitioner is liable, as transferee of property of the estate, for*23 interest on the $ 170,000 liability from the due date of the estate tax return.
Petitioner argues that she is liable for no interest, or, alternatively, that interest should begin to run when petitioner was notified of the liability by the notice of transferee liability in 2003. Petitioner further argues that we should follow precedent in the U.S. Court of Appeals for the Third Circuit because all events, pertinent to her case, occurred in New Jersey.
Respondent argues that petitioner, similar to the transferee in the case of
If the estate tax imposed by chapter 11 is not paid when due,
then the * * * transferee * * *, who receives, or has on the
date of the decedent's death, property included in the gross
estate under
the value, at the time of the decedent's death, of such
property, shall be personally liable for such tax. * * *
That is, if an estate tax is unpaid when due, then certain transferees, who receive property includable in the gross estate under
Further,
Petitioner argues that, because all of the operative facts took place in New Jersey and this case would be appealable to the Third Circuit had she resided in New Jersey rather than in Florida when she filed her petition, fairness compels the use of Third Circuit precedent. We disagree. We generally follow a decision squarely on point of a circuit to which a case is appealable. See
In
*27 The issue in the case was whether the taxpayers were liable for interest on the amount of their personal liabilities for unpaid estate tax from the due date of the estate tax return.
On the appeal of our decision in
Further, the Court of Appeals concluded that
This result comports with economic reality. The limitation
of
being liable for the estate taxes of another beyond the benefit
he received from the estate. In the case of the disputed
interest, however, Baptiste has had the use and enjoyment of the
$ 50,000 from the time he received it until the present. There is
no unfairness in requiring him to pay for this use, and the
denial of its use to the government. Baptiste has had the
opportunity to invest and earn a return on the $ 50,000 similar
to that which he is now obligated to pay the government, and the
government has been refused that opportunity. To hold otherwise
would create a system which encourages transferees to retain
assets of the estate, at the expense of the government, for as
long as possible with no adverse consequences.
The facts in the instant case mirror the facts in
In reaching our holding herein, we have considered all arguments made, and, to the extent not mentioned above, we conclude that they are moot, irrelevant, or without merit.
To reflect the foregoing,
Decision will be entered for respondent.
1.
2. At the time of the filing of the petitions, one taxpayer resided in Lincoln, Neb., and the other taxpayer resided in Fort Pierce, Fla.
3. Our decision was also appealed to the U.S. Court of Appeals for the Eighth Circuit, which reversed it in part. See
Baptiste v. Commissioner , 100 T.C. 252 ( 1993 )
Jack E. Golsen and Sylvia H. Golsen v. Commissioner of ... , 445 F.2d 985 ( 1971 )
Gabriel J. Baptiste, Jr., Transferee v. Commissioner of ... , 29 F.3d 433 ( 1994 )
Richard M. Baptiste, Transferee v. Commissioner of Internal ... , 29 F.3d 1533 ( 1994 )