DocketNumber： Docket No. 29433-81
Citation Numbers： 47 T.C.M. 324, 1983 Tax Ct. Memo LEXIS 103, 1983 T.C. Memo. 686
Filed Date： 11/17/1983
Status： Non-Precedential
Modified Date： 11/21/2020
MEMORANDUM FINDINGS OF FACT AND OPINION
DAWSON,
| Addition to Tax | |
| Deficiency | Section 6651(a)(1) 1 |
| $190,300 | $61,019 |
*108 After concessions by respondent, the principal issue for decision is whether the decedent's estate tax return was timely filed. If we answer this question in the affirmative, respondent agrees that petitioners are entitled to value the decedent's Texas ranch (the includibility of which in the gross estate is not disputed) at its special use value rather than at its fair market value. 2 On the other hand, if we answer this question in the negative, we must then decide whether the failure to timely file the estate tax return was due to reasonable cause and not due to willful neglect. Secondary issues which we must address include (1) whether respondent is entitled to the presumption of correctness because of his alleged failure to expressly determine in the statutory notice the ultimate fact on which the deficiency and late-filing addition are predicated; (2) whether respondent should be extopped from determining the late-filing addition; and (3) whether respondent or petitioners bear the burden of proof in respect of that addition.
*109 FINDINGS OF FACT
Some of the facts have been stipulated and are found accordingly.
The decedent, Seth Edward Young, Jr., died on March 9, 1977 at the age of 32. He was survived by his wife Kathy Young, a minor son, his parents, and two sisters. At the time of his death the decedent was a resident and domiciliary of the State of Texas.
Hayden Haby, Sr. and Seth Edward Young, Sr., the petitioners and the decedent's brother-in-law and father, respectively, resided in Rock Springs, Texas at the time that they filed the petition in this case. Petitioners were named co-independent executors in the decedent's will. On April 25, 1977 they were so appointed by the County Court of Uvalde County, Texas. Petitioners filed a Federal estate tax return (Form 706) on behalf of the decedent with the Internal Revenue Service Center in Austin, Texas. Whether that return was timely filed is the principal issue which we must decide.
Under section 6075(a) the decedent's estate tax return was due December 9, 1977. On December 5, 1977 petitioners, acting through Robert Coleman, their CPA, filed Form 4768 ("Application for Extension of Time*110 to File U.S. Estate Tax Return and/or Pay Estate Tax") with the Austin Service Center. In their application petitioners requested an extension of time to file under section 6081 and an extension of time to pay under section 6161. In both cases the extension date requested was June 9, 1978. Petitioners attached the following written statement in support of their application:
An Extension of time to file the Federal Estate Tax Return of Seth Edward Young, Jr. is hereby requested because we are unable to file a reasonably complete return before the due date for the following reasons:
1. The size and complexity of the Estate.
2. Part of the assets of the Estate are located outside of the United States.
3. One of the Co-Independent Executors of the Estate resides in another county.
4. The Co-Independent Executor, living in Uvalde, has undergone surgery and only recently been able to resume normal activity.
An Extension of time to pay the Federal Estate tax is hereby requested due to the reasons as stated above on the application for Extension of time to file. We have not been able to assemble sufficient*111 accounting information to determine what the tax liability may be, if any.
On January 19, 1978 respondent approved the requested extension of time to file and the requested extension of time to pay.
Neither petitioner Hayden Haby nor petitioner Seth Edward Young, Sr. was abroad on December 9, 1977, the date on which the estate tax return was due under section 6075(a).
On or about June 6, 1978 petitioners, again acting through Mr. Coleman, filed another Form 4768 with the Austin Service Center. In their application petitioners requested a second extension of time to file and a second extension of time to pay. In both cases the extension date requested was September 9, 1978. Petitioners attached the following written statement in support of their application:
A ninety-day additional extension of time to September 9, 1978 is respectfully requested for filing the Federal Estate Tax Return of Seth Edward Young, Jr. Date of Death March 9, 1977, original extension granted to June 9, 1978.
An additional extension of time is necessary in order for us to file a complete and accurate return for the following reasons:
1. The size and complexity*112 of the estate.
2. Some of the assets of a material amount, are located in Australia.
3. One of the Co-Executors of the estate left the United States to go to Australia on June 1, 1978 and will of necessity be there for some time. The purpose of the trip, in addition to the usual supervision that may be required, an attempt is being made to dispose and liquidate some of the Australian Assets, in order to pay a portion of the debts, expenses and taxes of the estate. [Sic].
An Extension of time to pay the Federal Estate tax is hereby requested due to the reasons as stated above on the application for Extension of time to file. We have not been able to assemble sufficient accounting information to determine what the tax liability may be, if any.
On June 13, 1978 respondent approved the requested extension of time to pay. However, the requested extension of time to file was not approved for the stated reason that "extensions of time to file are limited to a maximum of 6 months." That part of the Form 4768 used by respondent to approve the extension of time to pay (Part IV, line 2) was signed by one of his agents. However, that part*113 of the form used by respondent to disapprove the extension of time to file (Part IV, line 1) was not signed.
Mr. Coleman received the Form 4768, as completed by respondent, in mid-June 1978 and saw that the application for extension of time to file hnad not been approved. No inquiry was made concerning the disapproval.
On Friday, September 8, 1978 petitioners executed decedent's estate tax return and mailed it to the Austin Service Center on the following day. The return was received by the service center on Monday, September 11, 1978. Petitioners attached to the return an election to value the decedent's Taxas ranch at its special use value under
The delinquency in filing the estate tax return of Seth Edward Young, Jr., date of death March 9, 1977, in excess of extensions of time granted to June 9, 1978, was due to one of the Co-Executors was in Australia gathering records and settling Estate matters. The size and complexity of the estate and the fact that some of the records as well as some of the assets are*114 and were located in Australia, thereby making it difficult to obtain the necessary information to file a complete and timely return.
We, the undersigned, co-executors, believe that this constitutes reasonable cause, and respectfully request that any penalties that may be assessed because of the delinquency be waived.
During the course of the examination of the decedent's estate tax return, technical advice was requested from respondent's National Office concerning the June 1978 application for extension of time to file. A technical advice Memorandum was issued on January 13, 1981. It provided in pertinent part as follows:
Whether the estate's request for an additional extension of time to file the estate tax return should have been granted due to the absence of one of the Co-Executors from the United States.
* * *
Since the Co-Executors were not out of the country on the due date of the return, they do not fall within the exception provided in section 6081(a) concerning taxpayers who are abroad. Accordingly it was not within the director's authority to grant an additional extension of time to file the estate tax return.
A copy of the*115 technical advice memorandum was furnished to Mr. Coleman in January 1981.
Petitioners subsequently appealed their case to respondent's Appeals Office in Houston. Again acting through Mr. Coleman, they submitted an "amended application" on Form 4768 to an appeals officer in May or early June 1981. In this document they requested an extension of time to file and an extension of time to pay. In both cases the extension date requested was September 9, 1978. This document was intended to amend the June 1978 application which respondent had previously denied in part and approved in part. (Recall that in June 1978 respondent approved petitioners' application for extension of time to pay to September 9, 1978 but denied their application for extension of time to file.) However, it did not reference the prior application or the action taken in respect thereto, and did not set forth any reason for the requested extensions. In addition, Mr. Coleman did not sign and verify the amended application, unlike the December 1977 and June 1978 applications.
On June 23, 1981 one of respondent's agents "approved" petitioners' amended application for extension of time to file and wrote as follows*116 on the Form 4768: "This is to amend your previous extension dated 6-13-78 which was previously denied in error." However, one week later, on June 30, 1981, the Chief of the Collection Branch of the Austin Service Center wrote Mr. Coleman the following letter:
Our approval dated June 23, 1981 of your request for extension of time to file the estate tax return of Seth Edward Young, Jr. is not valid. Since our National Office previously ruled on the estate's request in Letter Ruling 8116019, this office lacks authority under the law to approve such a request.
Shortly after the decedent's death, petitioners retained Robert Coleman to prepare all necessary tax returns, specifically including the Federal estate tax return, and to furnish other accounting services for the decedent's estate. Petitioners retained a professional tax consultant because neither had previously administered an estate or filed an estate tax return. They specifically retained Mr. Coleman because he had formerly been the decedent's accountant. Petitioners cooperated with Mr. Coleman throughout the administration of the decedent's estate.
Petitioners*117 had some business experience. For example, petitioner Hayden Haby had worked for six years as a vocational agriculture teacher and for 21 years as a county extension agent. He was also involved in the ranching business.
Petitioners knew that an estate tax return was required to be filed. However, they did not know when it was due nor did they inquire. Petitioners gave Mr. Coleman blanket authority to prepare and file the return. They also gave him blanket authority to obtain extensions of time. Thus, for example, they were not aware of the application for extension which Mr. Coleman filed in June 1978 until some time after the fact.
At the time of his death the decedent owned certain property in Australia. In early May 1977, immediately after they were appointed executors by the Uvalde County Court, petitioners began to correspond with banks and other third parties in Australia in order to obtain information necessary for the preparation of the decedent's estate tax return and the orderly administration of his estate. In June 1977 petitioner Seth Edward Young, Sr. traveled to Australia to ascertain the extent of the decedent's property interests there and to make arrangements*118 for their continued management. As we shall see, petitioner Hayden Haby also traveled to Australia on behalf of the estate at a later time.
Among the decedent's property interests in Australia were three pastoral (or grazing homestead) leases known as Athol, Homebush, and Milton Park. All three had been obtained from the State of Queensland. Athol had been obtained in 1972 and Homebush about four months prior to the decedent's death; Milton Park was in the process of closing when the decedent died.
The decedent owned 58 percent of Athol, which interest was titled in his name. (The remaining 42 percent was owned by the decedent's sisters.) Because of Australian land restrictions, all of Homebush and one-third of Milton Park were titled in the name of Kathy Young, the decedent's wife. (The remaining two-thirds of Milton Park was also owned by the decedent's sisters.) All three properties were operated as a partnership known as Young Ranches of Australia.
The decedent executed a will in 1971 in which he provided for the disposition of all his property. He named his wife as one of the specific beneficiaries as well as the residuary beneficiary. No later than January 1978*119 the decedent's wife elected to take under the will rather than under the marital property laws of the State of Texas. At about this same time the decedent's wife claimed that she owned all of Homebush and one-third of Milton Park. Petitioners opposed her claim and maintained instead that she was merely the decedent's nominee. After protracted negotiations, the matter was resolved by an agreement which was executed on June 1, 1978. The agreement stipulated that the monetary interest of the decedent's wife in the residuary estate was $70,000 and provided that such amount would be paid to her upon the sale of Homebush and Milton Park. The agreement also provided that she would execute a general power of attorney to petitioner Hayden Haby "who will, this date, leave for Australia for the express purpose of selling Homebush and Milton Park." Finally, the agreement provided that the proceeds of sale would be used to satisfy Australian estate taxes, the wife's interest in the residuary estate, and certain specific debts and obligations of the estate.
On June 1, 1978 petitioner Hayden Haby left the United States for Australia in order to consummate the sale of Homebush and Milton Park. *120 (Negotiations for their sale had previously begun.) Haby arrived in Australia on June 3, successfully completed his business, and departed for Hawaii on June 23. He returned to Texas on July 2, 1978.
Petitioners filed an estate duty return with the Australian Taxation Office on May 5, 1978. In that return they included the decedent's interest in Athol. That interest was valued consistently with an appraisal which petitioners had obtained from a firm of registered valuers in June 1977. Neither Homebush nor Milton Park was reported on the Australian estate duty return.
On May 23, 1978 Mr. Coleman completed a draft of the decedent's Federal estate tax return. Compared with the gross estate reported on the filed return, the gross estate scheduled on this draft return was as follows:
| Draft Return | Filed Return | |
| Real estate (Schedule A) | $ 501,187.50 | $482,513.75 |
| Stocks and bonds (Schedule B) | 4,000.00 | 4,000.00 |
| Mortgages, notes, and | ||
| cash (Schedule C) | 205,939.96 | 205,939.96 |
| Other miscellaneous | ||
| property (Schedule F) | 300,424.76 | 277,986.13 |
| Total gross estate | $1,011,552.22 | $970,439.84 |
The draft return included the following items among "other miscellaneous*121 property":
| Item | Amount |
| Account receivable from Young Ranches | |
| for advance to purchase Homebush | |
| Ranch | $128,774.23 |
| Account receivable from Young Ranches | |
| for advance to purchase Milton Park | |
| Ranch | 35,250.00 |
| 58% interest in Young Ranches [Athol] | 58,369.03 |
| $222,393.26 |
The filed return reported the following item among "other miscellaneous property":
| Equity in Young Ranches of Australia, | |
| a Partnership | |
| Homebush | $117,052.02 |
| Milton Park | 35,250.00 |
| Athol | 32,157.38 |
| $184,459.40 |
ULTIMATE FINDINGS OF FACT
The decedent's estate tax return was not timely filed.
Petitioners' failure to file the estate tax return on time was not due to reasonable cause.
OPINION
For estate tax purposes, the value of property includible in a decedent's gross estate is generally its fair market value at date of death.Section 2031; section 20.2031-1(b), Estate Tax Regs. See section 2032. The regulations define "fair market value" as "the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts." Section 20.2031-1(b), *122 Estate Tax Regs. See also
Because valuation on the basis of highest and best use, rather than actual use, can lead to substantially higher estate taxes and thereby discourage the continuation of farming or other closely-held business activities, Congress enacted
the executor may elect to value real property included in the decedent's estate which is devoted to farming or closely*123 held business use on the basis of that property's value as a farm or in the closely held business, rather than its fair market value determined on the basis of its highest and best use. However, this special use valuation can not reduce the decedent's gross estate by more than $500,000. 3 [Joint Committee on Taxation, 94th Cong., 2d Sess. (1976), General Explanation of the Tax Reform Act of 1976, 1976-3 (Vol. 2)
See S. Rept. No. 94-938 (Part 2) (1976), 1976-3 (Vol. 3)
In order to value qualifying real property at its special use value rather than at its fair market value,*124 the executor must elect the application of
On Schedule A of the decedent's estate tax return petitioners reported real estate with an aggregate date-of-death value of $482,513.75. This amount reflects a decrease under
Petitioners appear to recognize that "A statutory notice ordinarily carries with it a presumption of correctness that, except where provided in the Internal Revenue Code or the Tax Court Rules of Practice and Procedure, places the burden of proof and the burden of going forward with the evidence on [them]."
We reject petitioners' contention because its factual predicate is faulty. 5 In adjusting the decedent's taxable estate to reflect the fair market value of the ranch, the notice of deficiency states as follows:
It is determined that the decedent's share of the fair market value of property reported on the estate tax return as real estate is $982,513.75 rather than $482,513.75, since the
In our opinion the statutory notice flatly contradicts petitioners' assertion that respondent never made any determination that the estate tax return was not timely filed. 6
*127 We turn now to the principal issue before us, namely, whether the decedent's estate tax return was timely filed. For the reasons which we shall develop, we agree with respondent that the return was not timely filed.
Section 20.6075-1, Estate Tax Regs., provides that the due date for an estate tax return is "the date on or before which the return is required to be filed in accordance with the provisions of section 6075(a) or the last day of the period covered by an extension of time" under section 6081(a) and section 20.6081-1, Estate Tax Regs.
The decedent died on March 9, 1977. Under section 6075(a) 7 the estate tax return was due nine months later, or December 9, 1977. Shortly before that date, on December 5, 1977, petitioners filed an application for an extension, requesting an additional six months (to June 9, 1978) within which to file the estate tax return.Respondent granted this application. On or about June 6, 1978 petitioners filed a second application, requesting an additional three months (to September 9, 1978) within which to file. On June 13, 1978 respondent denied this application and notified petitioners' representative shortly thereafter.Nevertheless, petitioners*128 did not actually file the estate tax return until September 11, 1978.
At this point one might conclude that the estate tax return was not timely filed. However, petitioners contend to the contrary, maintaining that the return was filed within the period requested in their second application for extension. 8 In this regard they argue that respondent abused his discretion by refusing to approve their second application and that the due date for the estate tax return was therefore September 9, 1978, rather than June 9, 1978. We disagree.
At the outset we note that petitioners' contention is predicated on two assumptions. *129 First, they assume that the Commissioner's authority to grant extensions of time for filing returns is reviewable for an abuse of discretion. Second, they also assume that if we substitute our judgment for respondent's, we would necessarily conclude that a three-month extension from June 9, 1978, rather than (for example) a two-month extension, would have been appropriate. Respondent does not challenge either assumption but maintains instead that there was, in fact, no abuse of discretion in this case.
We turn now to section 6081, the section which governs extensions of time for filing returns. Subsection (a) of that section provides as follows:
The Secretary may grant a reasonable extension of time for filing any return, declaration, statement, or other document required by this title or by regulations.
Respondent maintains that this section does not authorize extensions which
We find it unnecessary to definitively construe section 6081(a). Suffice it to say that we think respondent's interpretation neither violates the plain meaning of the section nor is unreasonable, arbitrary, or capricious. 9 Unlike petitioners, we do not think section 6081(a)
Petitioners advance a number of other arguments in support of their position that the estate tax return was timely filed. Although we*132 find none of these arguments persuasive, we shall briefly discuss the principal ones.
(1) Petitioners contend that respondent did not validly disapprove their second application for extension because an IRS official did not actually sign the document (Part IV of Form 4768) which denied their request. 10 However, petitioners cite no authority whatsoever in support of their position. Neither the statute nor the regulation specifies the manner in which the Commissioner shall approve or disapprove an application for extension. In our opinion his failure to execute the applicable form does not affect the validity of his action. Cf.
(2) Petitioners also contend that section 6081(a) should be construed in pari materia with section 6161(a)(1) 11 relating to extensions of time for*133 paying tax:
Since the time for payment of the tax as shown on the teturn almost invariably coincides with the time specified for the filing of the return, it would appear that the efficient administration of the procedural rules relating to the filing of returns and the assessment and collection of taxes should be read and construed together so that there will not be one set of rules relating to extensions of time to pay the tax and another set of rules relating to extensions of time to file the return.
We suspect, however, that the real motivation behind this contention is the fact that respondent approved petitioners' second application for extension of time to pay to September 9, 1978 but disapproved their second application for extension of time to file to that same date. In any event, petitioners' contention must fail.
*134 We begin by noting that the organization of the Internal Revenue Code does not lend itself to construing section 6081 and 6161 in pari materia. The former is part of Subchapter A ("Returns and Records") of Chapter 61 ("Information and Returns") whereas the latter is included in Subchapter B ("Extensions of Time for Payment") of Chapter 62 ("Time and Place for Paying Tax"). The greater technical complexity that generally surrounds extensions of time to pay is evidenced by the fact that section 6161 is but one of several sections in Chapter 62 which relate to that matter, whereas section 6081 is the only section in Chapter 61 which relates to extensions of time to file. Furthermore, there are substantive differences between section 6081(a) and section 6161(a)(1).For example, the period for an extension under section 6161(a)(1) is 12 months in the case of estate tax but only 6 months (except in the case of taxpayers who are abroad) under section 6081(a). This difference undoubtedly accounts for the fact that respondent was willing to grant petitioners' second application for extension of time to pay to September 9, 1978. More fundamentally, the exception under section 6081(a) for*135 taxpayers who are abroad does not apply under section 6161(a)(1) in the case of estate tax. See section 20.6161-1(a), Estate Tax Regs. Cf. section 6161(a)(2);
(3) Petitioners also contend that respondent retroactively approved their second application for extension of time of file. In this regard they rely on their "amended application" which was filed in May or early June 1981, nearly three years
(4) Lastly, petitioners contend that
In view of the foregoing we hold that petitioners did not timely file the estate tax return and, for that reason, are not entitled to report the real property in question at its special use value. Respondent is sustained on this issue.
We turn now to the question whether petitioners' failure to file the estate tax return on time was due to reasonable cause and not due to willful neglect. If so, the addition to tax under section 6651(a)(1) is avoided. See section 301.6651-1(c)(1), Proced. & Admin. Regs. However, reasonable cause will not cure petitioners' failure to timely elect special use valuation under
*139 Petitioners raise a preliminary issue concerning the burden of proof. However, this is not much of an issue because the matter is so well settled. As we have repeatedly held, the burden of proof is on the taxpayer to establish not only the absence of willful neglect but also the existence of reasonable cause.
On brief*140 petitioners advance two arguments in support of their position that their failure to timely file the estate tax return was due to reasonable cause. We shall discuss each of these arguments in turn.
First, petitioners invoke the doctrine of estoppel. In this regard they maintain that respondent's "approval" on June 23, 1981 of their "amended application" for extension of time to file constituted a concession of the reasonable cause issue and that having once conceded this issue respondent should be estopped from raising it again.
In our opinion petitioners' contention borders on the frivolous. Accordingly, we shall not undertake a lengthy discussion of the doctrine of estoppel as applied by this and other Federal courts. Instead, see
Second, petitioners seek to shift responsibility for their failure to timely file the estate tax return to Mr. Coleman, their accountant. Petitioners maintain that they are ranchers and had never before administered an estate or filed a Form 706; accordingly, they "invested Mr. Coleman with blanket authority to handle extensions and do whatever was necessary to attend to the filing of the Estate Tax Return." Because of such reliance, petitioners conclude that reasonable cause*142 exists in this case. We disagree.
Whether reasonable cause exists is, of course, primarily a question of fact to be determined from all of the facts and circumstances in a particular case.
It is clear that reasonable cause is a function of ordinary business care and prudence. Section 301.6651-1(c)(1), Proced. & Admin. Regs. It is also clear that a personal representative has a positive duty to ascertain the nature of his or her responsibilities as the fiduciary of the estate and that "This duty is not satisfactorily discharged by delegating the entire responsiblity for filing the estate tax return to the attorney for the estate."
In the present case petitioners knew that a Federal estate tax return was required to be filed. However, there is nothing in the record to suggest that they ever bothered to ascertain its due date. To the contrary, the record demonstrates that they invested Mr. Coleman, their accountant, with blanket authority to prepare and file the return. This general delegation of responsibility is readily evident from the testimony of petitioner Hayden Haby on redirect examination:
Q: But the point I am getting to is, you turned this preparation and filing of the estate tax return over to Mr. Coleman and expected him to handle it.
A: Yes.
Q: You gave him the information and you did everything that you could possibly do to furnish him with the information to prepare the return.
A: Yes.
Q: And as I understand it, he had blanket authority to handle the extensions and do whatever was necessary to get the return filed.Is that correct?
A: Yes.
Thus, we have no reason to think that*145 at the time he left for Australia, Haby appreciated the imminence of the filing deadline. We do know that he did not consult with Mr. Coleman at that time about the need to either file the estate tax return or apply for an extension of time. In our view petitioners' general delegation of responsibility to their accountant to prepare and file the estate tax return can be viewed as an abdication of their duties as the co-executors of the estate. See
We recognize that petitioners cooperated with Mr. Coleman by marshaling information needed for the preparation of the estate tax return and furnishing it to him. However, we do not think that such cooperation is sufficient to discharge their duties relative to the estate tax return. See
This is not a case involving a complicated area of tax law where a layman could not reasonably be expected to know whether a tax return is required. See
Petitioners cite and rely on only one case,
In
an inexperienced taxpayer wholly unaware of the time requirements for filing a Federal estate tax return selected a competent tax expert, supplied him with all the necessary and relevant information, requested him to prepare all necessary documents including tax returns, relied upon his doing so, but nevertheless maintained contact with him from time to time during the administration of the estate. *147 [
One of the determinative factors in
*148 Apart from the foregoing, we question whether
On brief petitioners confine their argument to reliance on their accountant, a defense which we have rejected under the fact*150 of this case. We are not yet finished with the reasonable cause issue, however, because petitioners imply (without expressly contending) that their delinquency is execused by the circumstances surrounding petitioner Hayden Haby's trip to Australia in June 1978. We disagree for the following reasons.
First, any such contention ignores petitioners' duty to ascertain the due date of the estate tax return and to take appropriate steps to insure that their accountant prepares and files it on time. We have already decided that petitioners did not satisfy these duties. Second, the June 1978 trip to Australia was undertaken for the purpose of consummating the sale of Homebush and Milton Park. Such sale did not affect the preparation of the decedent's estate tax return. Third, if petitioners were uncertain about the includibility of Homebush and Milton Park in the decedent's gross estate, as they claim they were prior to June 1, 1978, 18 they could have filed the return, reported just Athol, and expressly noted the controversy involving the other two pastoral leases. When that issue was resolved, they could have filed supplemental information.See section 20.6081-1(c), Estate Tax Regs. *151 , quoted
*152 Finally, we think it significant that petitioners' accountant had prepared Form 706 in draft form by May 23, 1978. Although petitioners emphasize the differences between this draft and the return that was actually filed, the two are strikingly similar. In any event, as laudable a goal as perfection may be, the regulations clearly provide that the return must be filed within the allotted time, even if imperfect:
A return as complete as possible must be filed before the expiration of the extension period granted.* * * [T]he return cannot be amended after the expiration of the extension period although supplemental information may subsequently be filed that may result in a finally determined tax different from the amount shown as the tax by the executor on the return. [Section 20.6081-1(c), Estate Tax Regs.]
In view of the foregoing we hold that petitioners' failure to file the estate tax return on time was not due to reasonable cause.
Because of concessions by respondent,
*153
1. Unless otherwise indicated, all section references are to the Internal Revenue Code of 1954, as amended ans in effect at the time of the decedent's death (March 9, 1977).
In the notice of deficiency respondent also determined an addition to tax for late payment under section 6651(a)(2). However, in
2. Respondent also agrees that petitioners would be entitled to the alternate extension of time for payment of estate tax under section 6166. However, this matter does not affect the determination of either the deficiency or the late-filing addition before us.↩
3. The Economic Recovery Tax Act of 1981 ("ERTA") increased the $500,000 limitation in the case of decedents dying after December 31, 1980.
4. ERTA eliminated the requirement that the election be made on a timely-filed estate tax return by amending
5. We should not be understood to imply that we would otherwise agree with petitioners' contention. The degree of specificity required in a notice of deficiency is discussed in detail in
6. In the statutory notice respondent also determined an addition to tax for late filing under section 6651(a)(1). If there could be any conceivable question concerning the basis for this determination, the notice clearly provides the answer, stating that "your Estate tax return for the period ending March 9, 1977 was not filed within the time prescribed by law and you have not shown that the failure to file on time was due to reasonable cause." Given this explanation, as well as the one set forth above in the text, we fail to comprehend how petitioners can assert that respondent never made any determination that the estate tax return was not timely filed.↩
7. SEC. 6075. TIME FOR FILING ESTATE AND GIFT TAX RETURNS.
(a) ESTATE TAX RETURNS.--Returns made under section 6018(a) (relating to estate taxes) shall be filed within 9 months after the date of the decedent's death.↩
8. As will be recalled, the extension date requested by petitioners in their second application was September 9, 1978. That date was a Saturday. Thus, if the second requested extension date is applicable, the due date would be September 11, 1978, the date on which the return was actually filed. See section 7503. Cf. section 7502.↩
9. At the risk of repeating ourselves we hasten to emphasize that we do not necessarily agree with respondent's interpretation.↩
10. We find it curious that petitioners make this argument given the fact that neither they nor their accountant signed or verified their June 1981 "amended application" (discussed
11. SEC. 6161. EXTENSION OF TIME FOR PAYING TAX.
(a) AMOUNT DETERMINED BY TAXPAYER ON RETURN.--
(1) GENERAL RULE.--The Secretary, except as otherwise provided in this title, may extend the time for payment of the amount of the tax shown, or required to be shown, on any return or declaration required under authority of this title (or any installment thereof), for a reasonable period not to exceed 6 months (
The date fixed for payment of estate tax is the date fixed for filing the estate tax return, determined
12. Section 20.6081-1, Estate Tax Regs., does not directly address this matter. However, subsection (b) of the regulation provides that an application for extension "should be made before the expiration of the time within which the return otherwise must be filed * * *." ↩
13. Section 20.6081-1(a), Estate Tax Regs., authorizes the district director or the director of a service center to grant extensions of time for filing returns. Such authority has been redelegated. See Commissioner's Delegation Order No. 116 (Rev. 4),
14. Petitioners' reliance on
15. The justification for the late-filing addition set forth in the statutory notice is limited to petitioners' failure to establish reasonable cause. Respondent must therefore be satisfied that the delinquency was not due to willful neglect. Accordingly, we shall only focus on the question of reasonable cause.↩
16. Although not directly relevant to the estoppel issue, we still think it noteworthy that petitioners attached to the decedent's estate tax return a "reasonable cause" affidavit in an effort to avoid the addition to tax for late filing.↩
17. In an earlier case the Seventh Circuit stated that "Any layman with the barest modicum of business experience knows that there is a deadline for the filing of returns and knows that he must sign the return before it is filed."
18. We note, however, that petitioners always maintained that those properties belonged to the decedent. ↩
19. On brief petitioners state that "Once the Settlement Agreement was concluded on June 1, 1978, the Executors were for the first time in a position to file an accurate and complete Estate Tax Return." ↩
20. We doubt that valuation could have been the problem given the fact that Athol was appraised by a firm of registered valuers in June 1977 and Homebush and Milton Park were purchased shortly before the decedent's death.↩
21. We think the Rule 155 phase of this case will proceed more smoothly if the parties calculate the amount of the addition to tax for late filing by taking into consideration the jurisdiction conferred on this Court by section 6659(b)(1) to redetermine that addition.See and compare
Ben Perlmutter and Bernice Perlmutter v. Commissioner of ... , 373 F.2d 45 ( 1967 )
estate-of-henry-p-lammerts-deceased-and-cross-appellants-v-commissioner , 456 F.2d 681 ( 1972 )
Estate of Frank Duttenhofer, Deceased, Albert J. Uhlenbrock ... , 410 F.2d 302 ( 1969 )
Millette & Associates, Inc. v. Commissioner of Internal ... , 594 F.2d 121 ( 1979 )
Morris G. Underwood and Jackie Underwood, Individuals v. ... , 535 F.2d 309 ( 1976 )
Raul Llorente v. Commissioner of Internal Revenue , 649 F.2d 152 ( 1981 )
william-r-boeving-leo-boeving-and-charles-m-cable-trustees-of-the , 650 F.2d 493 ( 1981 )
Robert W. Boyle, of the Estate of Myra W. Boyle, Deceased, ... , 710 F.2d 1251 ( 1983 )
United States v. Richard L. Kroll, of the Estate of ... , 547 F.2d 393 ( 1977 )
Estate of Anthony Geraci, Deceased, Norma Geraci v. ... , 502 F.2d 1148 ( 1974 )
C. Rosemary Crouse and June M. Brown, Administrators of the ... , 711 F.2d 102 ( 1983 )
Merian Rohrabaugh, Administratrix of the Estate of John T. ... , 611 F.2d 211 ( 1979 )
Estate of Clarence I. Lillehei, Deceased. James P. Lillehei ... , 638 F.2d 65 ( 1981 )
John B. Fleming, Personal Representative of the Estate of ... , 648 F.2d 1122 ( 1981 )
marguerite-ferrando-and-fred-ferrando-co-executors-of-the-last-will-and , 245 F.2d 582 ( 1957 )
Estate of Daisy F. Christ, Deceased, Robert Johnson Christ ... , 480 F.2d 171 ( 1973 )
John Manocchio v. Commissioner of Internal Revenue , 710 F.2d 1400 ( 1983 )
melba-schuster-formerly-melba-d-baker-v-commissioner-of-internal , 312 F.2d 311 ( 1962 )
Welch v. Helvering , 54 S. Ct. 8 ( 1933 )
John J. Smith, Personal Representative of the Estate of Ann ... , 702 F.2d 741 ( 1983 )