DocketNumber： No. 8194-97
Citation Numbers： 79 T.C.M. 53707, 2000 Tax Ct. Memo LEXIS 42, 2000 T.C. Memo. 6
Judges： "Chabot, Herbert L."
Filed Date： 1/6/2000
Status： Non-Precedential
Modified Date： 4/18/2021
Decision will be entered under Rule 155.
When decedent (D) died on May 4, 1992, she owned
several parcels of real property located in California. H, the
executor of D's estate, employed C, "the family attorney", to
"do the federal estate tax return." H knew the estate tax return
was due Feb. 4, 1993, 9 months from the date of D's death.
Before the estate tax return was due, C told H that an extension
for the time to file the estate tax return could be obtained. C
timely filed a request for a 5-month, 27-day extension of the
time to file and a 10-month, 27-day extension of the time to pay
the estate tax. Under
extension available for filing an estate tax return is 6 months
and under
paying the estate tax is 1 year. R approved a 6-month extension
for the time to file and a 1-year extension for the time to pay
the estate tax. The extended due date for filing the return was
Aug. 4, 1993, and for the payment of the tax liability was Feb.
4, 1994. After the extension request was filed, H did not
contact C or inquire into the status of the extension or the tax
return. 2000 Tax Ct. Memo LEXIS 42">*43 After the extended filing due date had passed, C
contacted H to get the necessary real property appraisals. The
estate tax return was filed on Feb. 4, 1994, 6 months after the
extended filing due date.
On the untimely filed estate tax return, the estate elected
under
tax related to certain of D's real estate interests. R
tentatively allowed the
months later, R notified H that the
election was denied because it was made on an untimely filed tax
return.
1. Held: Fair market values of the properties determined.
2. Held, further, P is liable for an addition to tax for
failure to timely file the estate tax return.
3. Held, further, P is not liable for an addition to tax
for failure to timely pay the estate tax liability shown on P's
estate tax return.
MEMORANDUM FINDINGS 2000 Tax Ct. Memo LEXIS 42">*44 OF FACT AND OPINION
CHABOT, JUDGE: Respondent determined a deficiency in Federal estate tax and additions to tax under
(3) whether petitioner is liable for an addition to tax
under
FINDINGS OF FACT
In General
Some of the facts have been stipulated; the stipulations and the stipulated exhibits are incorporated herein by this reference. 2000 Tax Ct. Memo LEXIS 42">*46 around Santa Clara, California.
In her holographic will, dated November 29, 1991, decedent named her son, Lester F. Hinz, Jr. (hereinafter sometimes referred to as Hinz), as sole heir and executor of her estate. This was about the time that decendent's daughter died. Hinz and decedent's daughter were decedent's only children. In May 1992, Hinz engaged William R. Christy (hereinafter sometimes referred to as Christy) to represent the estate and, as part of that representation, to "do the federal estate tax return". Christy had been "the family attorney" for about 40 years. When Hinz hired Christy, Hinz knew the estate tax return was due 9 months from the date of decedent's death.
Christy had been licensed to practice law in California since 1949 -- he had considerable experience handling probate and estate matters, but had filed only 12 to 15 Federal estate tax returns. The record does not indicate whether Christy had done any work in connection with the estates of decedent's husband, who died in 1960, or decedent's daughter.
On June 11, 1992, Christy filed with the Superior Court for Santa Clara County a petition on Hinz's behalf for the probate of decedent's estate. The petition for 2000 Tax Ct. Memo LEXIS 42">*47 probate listed seven real properties 2000 Tax Ct. Memo LEXIS 42">*48 1993, because of difficultly in gathering information
necessary to identify and appraise decedent's real properties.
It is anticipated from work already done by counsel, probate
appraisers, and title company, that appraisals will be done and
an accurate return filed by July 1, 1993.
The estate's real properties appear to consist of 7 parcels [see
supra note 4] in Santa Clara County, California. Deferred
maintenance and hidden defects affecting market value need to be
explored.
On February 11, 1993, respondent approved a 6-month extension for filing, to August 4, 1993, and a 1-year extension for paying, to February 4, 1994. Table 1 shows the original due dates, the extended due dates requested by Christy, and the extended due dates approved by respondent.
TABLE 1
Original Requested Approved
________ _________ ________
Tax return due date 02/04/93 07/31/93 08/04/93
Payment due date 02/04/93 12/31/93 02/04/94
On the Form 4768 Christy had caused to be typed in the "Extension date requested" boxes of part II (extension for filing) and part III (extension for paying) "7-31-93" and "12-31-93", respectively. 2000 Tax Ct. Memo LEXIS 42">*49 On the returned Form 4768 in light red ink (1) lines were drawn through "7" and "31" in part II and these numbers were replaced by "8" and "4", respectively, and (2) lines were drawn through "12", "31", and "93" in part III and these numbers were replaced by "2", "4" and "94", respectively. Also, on the returned Form 4768, part V, (1) item 1 (extension for filing) is shown as approved and there is penciled in "080493", and (2) item 2 (extension for paying) is shown as approved and there is penciled in "020494". The heading of part V is printed in boldface type as follows: "Notice to Applicant--To be completed by Internal Revenue Service". Finally, on the returned Form 4768, part V, item 1 (extension for filing), there is stamped in faint blue ink the following: THE MAXIMUM EXTENSION ALLOWED FOR FILING IS 6 MONTHS. On the Form 4768, part II (extension for filing), there are not any marks on the "93" that Christy had typed in as part of the "7-31-93" requested extension.
Christy interpreted the returned Form 4768 as having extended the due date for filing to February 4, 1994. In late 1993 (after August 4, 1993) or early 1994 Christy told Hinz that he had received an extension of time 2000 Tax Ct. Memo LEXIS 42">*50 until February 4, 1994, to file the estate tax return, and reminded Hinz that appraisals were needed for the real estate. This was the first time that Hinz learned what Christy thought was the extended due date for the tax return. Hinz had not asked Christy what the extended due date was. By then, Hinz and Christy decided that they had little choice but to use the probate referee's figures. However, Christy and Hinz thought those amounts were too high, so Christy reduced the probate referee's figures by 25 percent. See infra table 2, line 1, for the values shown on the estate tax return. At Christy's suggestion, Hinz agreed to elect under
Hinz and Christy executed the estate tax return on February 1, 1994. Neither the returned Form 4768 nor a copy thereof was attached to the tax return when Hinz signed it. Hinz first saw the returned Form 4768 or a copy thereof at sometime after Hinz executed the tax return. At the time the estate tax return was filed, Christy and Hinz believed that this tax return was timely.
The estate tax return, showing a net estate tax and 2000 Tax Ct. Memo LEXIS 42">*51 balance due of $ 3,880,270.19, was filed on February 4, 1994, 21 months after decedent's death and 6 months after the August 4, 1993, extended due date. This tax return includes an election under
By letter dated March 30, 1994, and addressed to Hinz at his home address, respondent tentatively allowed petitioner's
By letter dated February 6, 1995, and addressed to Hinz at his home address, respondent states that petitioner did not meet the requirements of
By letter dated March 8, 1995, respondent informed Christy that decedent's estate tax return was being examined. This letter asks Christy to send numerous records 2000 Tax Ct. Memo LEXIS 42">*52 of the estate to respondent. Sometime after Christy received the March 8, 1995, letter, the agent who was conducting the examination of decedent's estate tax return told Christy that decedent's estate tax return was filed late. Notwithstanding the February 6, 1995, letter to Hinz, this was the first time that Christy learned that decedent's estate tax return may have been filed late. At the suggestion of this agent, on November 25, 1996, Christy wrote a letter to the District Director explaining that because Christy's "eyesight is not what it used to be", Christy misread the extension and inadvertently filed decedent's estate tax return late. Christy later found out that he was suffering from an eye condition called macular degeneration and suspects that this had already begun to affect his eyesight by early 1993.
On February 3, 1997, respondent issued a notice of deficiency determining a tax liability of $ 5,612,618, almost 45 percent more than the amount reported on the filed estate tax return.
On February 6, 1997, an amended estate tax return was submitted to respondent. 2000 Tax Ct. Memo LEXIS 42">*53 on the filed estate tax return.
Hinz delegated to Christy the duty of timely filing the tax return.
The Properties
Among the properties included in decedent's gross estate, the values of which are reported on decedent's estate tax return, are four real properties located in Santa Clara County, California, as follows:
(1) 14521 Quito Road, Saratoga, hereinafter sometimes
referred to as the Quito Property;
(2) 2201 and 2215 Lafayette Street, Santa Clara,
hereinafter sometimes referred to as 2000 Tax Ct. Memo LEXIS 42">*54 the Lafayette Property; 2. THE QUITO PROPERTY The Quito Property is 11.23 acres, about 489,178 square feet. Access to the Quito Property 2000 Tax Ct. Memo LEXIS 42">*55 is available from Quito Road on the east and from Vessing Drive on the south. The Quito Property is on a slope; its eastern border closely follows a creek. The eastern and western sides of the Quito Property are irregular, the east-west distance varying from about 640 feet at the north end to about 380 feet at the south end. The Quito Property is located in east Saratoga, in a residential neighborhood about 2-3 miles from downtown Saratoga. The Quito Property is zoned residential single family with a minimum size lot requirement of 40,000 square feet. The Quito Property's neighborhood was typified by 1-acre lots, but many lots were of various sizes up to 2.7 acres. During 1992, homes within a 1-mile radius of the Quito Property sold at prices from $ 506,000 to $ 1,175,000. The Quito Property is in the Campbell Union School District and not the Saratoga School District. Homes located in the Saratoga School District historically received a location premium of 10 percent, compared to homes in the Campbell Union School District. Public schools and commercial services are within 5 minutes of the Quito Property. The Quito Property is improved by a wood frame and stucco residence, in which 2000 Tax Ct. Memo LEXIS 42">*56 Hinz was living at decedent's death. Hinz planned to continue to use the Quito Property as his residence. By the time of decedent's death, the roof over one bedroom wing and the patio area had collapsed. The highest and best use of the Quito Property is for residential subdivision development. Development of the Quito Property would require the removal of the existing house. Although the Quito Property is large enough for 11 or 12 minimum-size lots, because of the slope of the property and lot limitations on sloped properties, the Quito Property has the potential to be subdivided into only eight lots. 3. THE LAFAYETTE PROPERTY The Lafayette Property is 10.72 acres, about 467,000 square feet. The Lafayette Property is on level land; it fronts on Lafayette Street and on Mathew Street. It consists of two adjoining parcels, each of which is oddly shaped. In 1992, the Lafayette Property was zoned heavy industrial, which allowed manufacturing, assembling, research, wholesale, or storage uses. Other uses permitted on the Lafayette Property included light manufacturing, warehouses, laboratories, offices, and incidental retail sales. All utilities were available to the Lafayette Property. The Lafayette 2000 Tax Ct. Memo LEXIS 42">*57 Street frontage was improved with concrete curbs and gutters, street lights, and sidewalks. The Mathew Street frontage was partially improved with concrete curbs and gutters. Building improvements on the Lafayette Property included an industrial metal building on a concrete slab foundation. 2000 Tax Ct. Memo LEXIS 42">*58 The building included 11 grade-level metal rollup truck doors and a 23- foot-wide metal canopy over a concrete apron. The building was used primarily for vehicle and equipment maintenance, but it also had office space. 2000 Tax Ct. Memo LEXIS 42">*59 the ground contamination and adjusted the sales price of the Lafayette Property downward by about $ 100,000 because of cleanup concerns. At decedent's death, the highest and best use for the Lafayette Property was for heavy industrial usage. 4. THE PARKER PROPERTY The Parker Property is 2.93 acres, about 127,631 square feet. The Parker Property is on level land; it fronts on Parker Street, Lafayette Street, and Grant Street, and it adjoins the Lafayette Property on the south. It is flag-shaped. In 1992, the Parker Property was zoned heavy industrial, which allowed manufacturing, assembling, research wholesale, or storage uses. Other permitted uses included light manufacturing, warehouses, laboratories, offices, and incidental retail sales. All utilities were available to the Parker Property. The Parker Street frontage was partially improved with curbs, gutters, and streetlights, and the Lafayette Street frontage was improved with curbs, gutters, sidewalks, and streetlights. The Parker Property was improved with buildings that provided office space, storage space, and shop space. 2000 Tax Ct. Memo LEXIS 42">*60 At decedent's death, the Parker Property was leased to Pacific Coast Building Products, Inc. (hereinafter sometimes referred to as Pacific), a roofing company, 2000 Tax Ct. Memo LEXIS 42">*61 for $ 1,500 per month. The original lease was for 10 years and expired on May 31, 1990. At the expiration of the lease's initial term and at decedent's death, Pacific was holding over on a 5-year extension, at the same rate. In 1995, at the end of the first extension, Hinz and Pacific discussed another 5-year extension. Hinz' final rental offer was $ 6,000 per month, which Pacific rejected. The Parker Property then remained vacant for about 7 months. In 1984, groundwater monitoring wells were installed on the Parker Property to monitor a 1,000-gallon diesel storage tank and an 8,000-gallon gasoline storage tank. In 1985, the 1,000-gallon tank was removed. Tests of soil at the 1984 installation of the monitor well near the 1,000-gallon tank, and at the 1985 removal of the 1,000-gallon tank, did not show substantial contamination. However, tests of water samples collected in August 1993 from that monitoring well showed substantial contamination around the former diesel tank. Remediation work was performed in the latter half of 1995. No significant contamination was found near the 8,000-gallon tank, which was removed in August 1994. At decedent's death, there was soil and groundwater contamination adjacent to the former location of the 1,000-gallon tank, while the 8,000-gallon tank remained on the Parker Property with no known contamination associated with it. On May 4, 1992, a reasonable buyer would 2000 Tax Ct. Memo LEXIS 42">*62 have discovered the groundwater contamination and adjusted the sales price of the Parker Property downward. At decedent's death, the highest and best use for the Parker Property was for heavy industrial usage. 5. THE RICHARD PROPERTY The Richard Property is about .459 acres, 20,000 square feet. The Richard Property is on level land; it fronts on Richard Avenue; and it is about one block north and one block west of the Lafayette Property. The Richard Property is rectangular. The City of Santa Clara had an easement for the purpose of ingress and egress, and the installation and maintenance of sanitary and storm sewer mains and appurtenances. In 1992, the Richard Property was zoned heavy industrial, which allowed manufacturing, assembling, research, wholesale, or storage uses. Other permitted uses included light manufacturing, warehouses, laboratories, offices, and incidental retail sales. All utilities were available to the Richard Property. The frontage was improved with curbs, gutters, and streetlights. The Richard Property was improved with a machine shop building, 2000 Tax Ct. Memo LEXIS 42">*63 a 300-square-foot office building, and miscellaneous storage buildings. The Richard Property was not subject to a lease at decedent's death, and did not produce any income in 1992. At some point in 1993 the Richard Property was leased to S.B. Machine Works and began to be used as a machine shop. For several years thereafter, the rental was $ 1,500 per month. At decedent's death, the highest and best use of the Richard Property was for heavy industrial usage. 6. OTHER PROPERTIES The estate includes two real properties on Lafayette Street in Santa Clara, in addition to the Subject Properties. On the estate tax return, these additional properties are shown as having an aggregate date-of-death value of $ 230,000. In the notice of deficiency, respondent determined an aggregate value of $ 290,000. In the amended estate tax return, the aggregate value is again shown as $ 230,000. The parties have stipulated that the aggregate value of these additional properties is $ 220,000. 7. 2000 Tax Ct. Memo LEXIS 42">*64 VALUATION CONCLUSIONS Table 2 shows the positions of the parties, of their expert witnesses, and of the Court as to the fair market values of the subject properties on the date of decedent's death. TABLE 2 Property Petitioner: Quito Lafayette Parker __________ _____ _________ ______ 1. Estate tax return $ 2,750,000 $ 3,720,000 $ 1,115,000 2. Amended tax return 1,315,000 2,170,000 500,000 3. Petition 1,315,000 2,170,000 500,000 4. Expert -- Atkinson 1,750,000 2,850,000 600,000 5. Experts -- Kidder, Kirby - 2,800,000 940,000 to to 3,100,000 955,500 6. Briefs 1,750,000 2,850,000 2000 Tax Ct. Memo LEXIS 42">*66 600,000 Respondent: 7. Notice of deficiency 3,250,000 4,948,000 1,484,000 8. Expert -- Hulberg 2,300,000 3,417,000 1,240,000 9. Expert -- Hulberg (revised) 2,300,000 3,960,000 1,460,000 10. Briefs 2,300,000 3,960,000 1,460,000 Court: 11. Ultimate findings of fact 2,200,000 3,700,000 1,200,000 [table continued] Property Total value of Petitioner: 2000 Tax Ct. Memo LEXIS 42">*65 Richard Subject Properties 1. Estate tax return $ 300,000 $ 7,885,000 2. Amended tax return 225,000 4,210,000 3. Petition 225,000 4,210,000 4. Expert -- Atkinson 200,000 5,400,000 5. Experts -- Kidder, Kirby - 6. Briefs 200,000 Respondent: 7. Notice of deficiency 400,000 10,082,000 8. Expert -- Hulberg 320,000 7,277,000 9. Expert -- Hulberg (revised) 320,000 8,040,000 10. Briefs 320,000 8,040,000 Court: 11. Ultimate findings of fact 250,000 7,350,000 OPINION The value of decedent's gross estate includes the fair market value of the real property that decedent owned at her death. See The parties have not agreed on the fair market value of decedent's real property, and so we have to find the fair market value. See Generally, the fair market value of property is the price at which a willing buyer will purchase the property from a willing seller, when neither is acting under compulsion and both are fully informed of the relevant facts and circumstances. See, e.g., It is well settled that the valuation of an asset in a tax return is an admission by the taxpayer when that valuation is inconsistent with a later position 2000 Tax Ct. Memo LEXIS 42">*68 taken by the taxpayer. See At trial, both sides presented the testimony of expert witnesses to establish the fair market values of the Subject Properties. It would not serve any useful purpose to make a detailed analysis of the testimony of these experts to explain item by item the extent to which we agree or disagree with their analysis. Valuation is not a precise science, and the determination of the fair market value of property 2000 Tax Ct. Memo LEXIS 42">*69 as of a given day is a question of fact (see Before we proceed to our analyses of the values of the Subject Properties, it may be appropriate to briefly discuss the expert witnesses. Petitioner's primary expert witness is Noel K. Atkinson, hereinafter sometimes referred to as Atkinson. He has been a real estate appraiser since the early 1950's. When the instant case was tried, about half of Atkinson's work was testifying in Court. Atkinson appropriately used the comparable sales approach as a major element in valuing the land portion of each of the Subject Properties. 2000 Tax Ct. Memo LEXIS 42">*71 Under the comparable sales approach, if a comparable property has an element of a lesser quality than the property 2000 Tax Ct. Memo LEXIS 42">*70 being appraised, then the comparable property's sale price is adjusted upward, and vice versa. Atkinson appropriately compared several different elements of the properties and generally used four to six comparables. He displayed the adjustments in a matrix, and also briefly explained why he adjusted the comparable property's sale price up or down. Unfortunately, in many instances Atkinson stated that an element of a comparable property was of a lesser quality than the property being valued and then did not adjust for that lesser quality or adjusted downward. In at least one instance, the mere correction of the directions of the adjustments in Atkinson's matrix so that they conformed to Atkinson's textual descriptions resulted in increasing the resulting value by about 50 percent. Also, in some instances, the textual descriptions of properties in Atkinson's written report did not match the properties listed in the accompanying matrix. It was as though Atkinson had revised parts of a draft of his report but inadvertently kept parts of former drafts that no longer fit the revised draft. Another matter that gives us concern about how carefully Atkinson reads the expert witness reports that he issues relates to the following statement which appears in each of his valuations of the Subject Properties. "This appraisal meets the certification requirements of the As a result of the obvious errors in Atkinson's expert witness report, we are hesitant to rely on Atkinson's judgment even as to those matters that do not involve obvious errors. Respondent's expert witness in Norman C. Hulberg, hereinafter sometimes referred to as Hulberg. He has been a real estate appraiser since 1975. He has testified as an expert witness "on over 50 occasions" in Federal District Courts in the San Francisco area and in Las Vegas, Nevada. Hulberg also used the comparable sales approach on, or in connection with, his valuations. (See, e.g., infra B. Lafayette Property, 2000 Tax Ct. Memo LEXIS 42">*73 in which Hulberg used the comparable sales method only to determine the reversionary value element of the discounted-cash-flow method). Hulberg avoided the disconnects between textual analysis and valuation adjustments that plague Atkinson's expert witness report. He did so by (1) the simple expedient of abbreviating the textual analysis of the comparable properties, and (2) the even simpler expedient of omitting altogether the property-by-property matrix of adjustments to the comparable property sale prices. By thus failing to reveal the details of his analysis, Hulberg protects against the pitfalls that Atkinson fell into, but at the same time he vastly diminished the weight to be given to his conclusions. The expert witness helps the trier of fact primarily by explaining so that the trier of fact follows and understands. 2000 Tax Ct. Memo LEXIS 42">*84 The expert who issues pronouncements without detailing the supporting analysis does not properly satisfy this obligation and so is generally not a persuasive expert witness. As 2000 Tax Ct. Memo LEXIS 42">*75 a result of the foregoing, we have qualms about relying on Hulberg's judgments even as to those matters that do not involve obvious errors. Petitioner also presented the testimony of W. Jack Kidder, hereinafter sometimes referred to as Kidder, and John J. Kirby, hereinafter sometimes referred to as Kirby. Kidder and Kirby are hereinafter sometimes referred to jointly as Kidder/Kirby. Kidder has 37 years of experience valuing real property, and Kirby has more than 25 years of experience valuing real property. Kidder's and Kirby's testimony and report were introduced for the sole purpose of rebutting Hulberg's report and testimony with regard to the Lafayette and Parker Properties. Both Atkinson and Hulberg valued the Quito Property using both the comparable sales approach and a second approach, which Hulberg calls the land development approach and Atkinson calls the cost approach. Table 3 shows Atkinson's and Hulberg's conclusions as to the fair market value of the Quito Property under the different approaches. TABLE 3 Comparable Land Development Expert Sales or Cost Conclusion ______ __________ ________________ __________ Atkinson 2000 Tax Ct. Memo LEXIS 42">*76 (P) $ 2,009,855 $ 1,497,000 $ 1,750,000 Hulberg (R) 2,365,000 2,210,000 2,300,000 Atkinson and Hulberg agree that the highest and best use of the Quito Property is for residential subdivision development, that the Quito Property should be treated as being potentially divisible into eight lots, and that any such development would require removal of the existing house on the Quito Property. Hulberg "considered both approaches equally * * * and will reconcile toward the middle of the indicated range." Atkinson concluded that "The Cost and Sales Comparison Approaches are very close in final value"; he, too, struck a final valuation midway between the values of his two approaches. Hulberg's comparable sales approach value was only 7 percent higher than his land development approach value. Atkinson's comparable sales approach value was 34 percent higher than his cost approach value. See supra table 3. We do not understand the standards of judgment that prompted Atkinson to conclude that a 34-percent differential is "very close". Comparable Sales Analysis For his comparable sales analysis, Atkinson selected five sales of other properties, sold between June 1989 and December 2000 Tax Ct. Memo LEXIS 42">*77 1990, and presented a matrix showing sale-by-sale, item-by-item adjustments. His descriptions of these sales were scattered in his expert witness report, requiring some search. These brief descriptions do not include explanations of the adjustments made in the matrix. After adjusting the sale prices on account of location, topography, etc., Atkinson arrived at an average fair market value per acre of $ 178,972. He multiplied that amount by 11.23 acres and arrived at an indicated value of $ 2,009,855 for the Quito Property. For his comparable sales analysis, Hulberg selected six sales of other properties, sold between March 1988 and November 1995. Although Hulberg stated in his report that in making his adjustments to the comparable properties' sale prices, he "considered access, site influences, school district attendance areas, site development costs, favorable financing and overall neighborhood aesthetics", he did not favor us with information as to how much of an adjustment he made to any comparable property's sale price, and why. He chose to compute price per lot, rather than per acre. Hulberg was "inclined to value the subject at the lower end of the indicated valuation range" 2000 Tax Ct. Memo LEXIS 42">*78 and informed us that this inclination led him to a value of $ 300,000 per lot. Because the Quito Property could be subdivided into eight lots, Hulberg came to a valuation of $ 2.4 million. From this, he subtracted $ 35,000 to demolish the building on the Quito Property, resulting in a net comparable sales approach value of $ 2,365,000. Neither expert used a comparable sale that the other one did. Neither expert gave us a cogent reason to conclude that his selection of comparable properties' sales was better than the other's, that his adjustments were better than the other's, or that a per-lot computation, was better than a per-acre computation, or vice versa. Cost or Land Development Analysis As best we can tell, what Atkinson describes as the "Cost Approach" is essentially similar to what Hulberg describes as the "Land Development Approach". Both Atkinson and Hulberg used, in their cost or land development analysis, sets of comparable property sales that were different from the comparable property sales they used in the basic comparable sales analysis. Atkinson's expert witness report states that I have selected $ 400,000 per lot for eight lots [the number of residential lots 2000 Tax Ct. Memo LEXIS 42">*79 that both sides agree the Quito Property would probably be subdivided into] as being a reasonable retail lot value due to the location and the 18 to 24 months it would take to have the lots ready to sell. Atkinson's expert witness report then goes on to state that the indicated value by this approach is $ 1,497,000. Atkinson's expert witness report does not explain, or even briefly describe, the process by which he moved from $ 3,200,000 ($ 400,000 per lot for eight lots) to an indicated value of $ 1,497,000. At trial, on direct examination, Atkinson attacked Hulberg's valuation of the Quito Property and contrasted it with his choice of $ 400,000 per lot. However, the next morning, on redirect examination, Atkinson testified that $ 400,000 per lot was "a typographical error." Prompted by petitioner's counsel, Atkinson then testified that the value should have been $ 300,000 per lot. The Court then received into evidence Atkinson's notes that show how he moved from $ 2,400,000 ($ 300,000 per lot for eight lots) to an indicated value of $ 1,208,000. Atkinson's notes as so admitted conclude with the following: "13. I arbitrarily selected a higher cost figure as I felt lots would sell 2000 Tax Ct. Memo LEXIS 42">*80 at a higher Price." Atkinson's flip-flops and self-confessed arbitrariness convince us that we should not give any weight to his conclusion that the Quito Property's indicated value under the cost approach is $ 1,497,000; they also seriously undermine our willingness to pay attention to his valuations of any of the Subject Properties. We also view with some concern petitioner's counsel's presentation of Atkinson's expert witness report with the $ 400,000-per-lot analysis, petitioner's counsel's supportive questioning regarding Atkinson's direct examination's defense of $ 400,000 per lot, and then Atkinson's overnight conversion being prompted by petitioner's counsel. Hulberg's land development approach has some similarities to, and some differences from, Atkinson's cost approach. Hulberg concluded that the eight lots into which a developer would subdivide the Quito Property would be sellable by the developer for $ 500,000 per lot. Both Atkinson and Hulberg concluded that the prospective developer would expect to make a $ 50,000 profit per lot, or $ 400,000 for the entire Quito Property. In his admitted notes, Atkinson lists various costs that the developer might be expected to incur, 2000 Tax Ct. Memo LEXIS 42">*81 in addition to the expected profit; these costs, which include several items calculated as a percentage of gross, aggregate 33 percent of the $ 300,000 per lot gross. Hulberg, in his expert report, has a similar but more sophisticated elaboration of developer costs, which aggregate 34- Hulberg also does not set out the adjustment process; however, he provides information about the terrains of the comparable properties. His comparable properties average $ 587,000 per lot. When we make adjustments based on his terrain descriptions, we arrive at an average of about $ 500,000 per lot, the amount that Hulberg used. The Quito Property is in the Campbell Union School District and not the Saratoga School District. Atkinson and Hulberg agree that homes in the Saratoga School District command a market premium compared to homes in the Campbell Union School District. Accordingly, if any of the comparables are in the Saratoga School District, then their sale prices should be adjusted downward. However, we have not found, and petitioner has not directed our attention to, anything in the record that shows that any of the Hulberg's comparables were in the Saratoga School District or in any other school 2000 Tax Ct. Memo LEXIS 42">*82 district where residential property prices were higher than the Campbell Union School District. Neither side has presented to the Court cogent reasons why the Court should disregard any of the comparable properties presented by Atkinson or by Hulberg. We note that two of the comparable properties appear on both Atkinson's and Hulberg's lists -- the property at 15425 Monte Vista Dr., which was sold in May 1992 for $ 675,000, and the 1.16-acre property at lot 16, Sobey Oaks Court, which was sold in July 1991 for $ 550,000. We note further that Atkinson shows the Monte Vista Dr. property as being 2.9 acres, Hulberg shows this Monte Vista Dr. property as being 2.0 acres. Neither side pointed out the discrepancy at trial or on brief, and neither expert witness' report provides information from which we could come to a conclusion as to what is the area of this Monte Vista Dr. property. Conclusion Doing the best we can on the basis of the record made by the parties, taking into account our above-expressed reactions to Atkinson's cost analysis, we conclude, and we have found, that the date-of-death fair market value of the Quito Property is $ 2.2 million. Atkinson valued the 2000 Tax Ct. Memo LEXIS 42">*83 Lafayette Property using three approaches: (1) The comparable sales approach, (2) the income approach, and (3) the cost approach. Under the latter two approaches, Atkinson valued the land component of the Lafayette Property using the comparable sales approach. Hulberg and Kidder/Kirby valued the Lafayette Property using the discounted cash-flow approach. In determining the reversionary value element of the discounted cash-flow approach, Hulberg and Kidder/Kirby used the comparable sales approach. Table 4 shows Atkinson's, Hulberg's, and Kidder/Kirby's valuations of the Lafayette Property under their respective approaches. TABLE 4 Expert Approach -- Amount Conclusion ______ __________________ __________ Atkinson (P) Comparable sales $ 2,892,000 Income 2,822,000 Cost 3,023,000 $ 2,850,000 Hulberg (R) Discounted cash-flow 3,960,000 n Atkinson values the Lafayette Property as a fee, ignoring the then-existing lease. Hulberg and Kidder/Kirby value the Lafayette Property subject to the lease, a circumstance that pushes them toward the discounted cash-flow approach. Each expert uses a comparable sales approach at some point in his analysis. Atkinson and Hulberg reduce their valuations to take into account environment contamination considerations. In his comparable sales analysis, Atkinson separately valued (1) "the structure and its minimum site" TABLE 5 Item Value Improvements with 67,000 sq. ft. site area, 2000 Tax Ct. Memo LEXIS 42">*85 per sq. ft. 2,640,000 Contamination considerations (132,000) _________ 2,892,000 In his analysis of the excess land, Atkinson selected six sales of other properties, briefly described these other properties, and presented a matrix showing adjustments up or down in order to reflect differences between the other properties and their sales, on the one hand, and the Lafayette Property and its status on the date of decedent's death, on the other hand. He made adjustments for differences on account of location, size, accessibility to rail facilities, traffic exposure, street improvements, and parking and utilities. Unlike the corresponding portion of his report as to the Quito Property, see supra, Atkinson provided a brief explanation of why he made each of the matrix adjustments to the Lafayette Property comparable sales. Atkinson's matrix contains 36 entries, of which 25 are other than zero. In the case of 14 of these nonzero entries, Atkinson stated that the comparable 2000 Tax Ct. Memo LEXIS 42">*86 property is inferior to the Lafayette Property but he made a downward adjustment to the comparable property's sale price. Atkinson used the "excess land fair market value" of $ 2,640,000 directly in his income approach and the "land value from market analysis" of $ 3,082,200 ($ 6.6 TABLE 6 Approach Atkinson's Report Amount Corrected Comparable Sales $ 2,892,000 $ 3,932,000 Income 2000 Tax Ct. Memo LEXIS 42">*87 2,822,000 3,862,000 Cost 3,023,000 4,465,200 A significant defect in all of Atkinson's approaches is that he did not give adequate consideration to the fact that the then-present lease term had 3 years to run. As a result, the property should have been valued as a leased fee. Hulberg and Kidder/Kirby agreed that leased fee was the proper status of the Lafayette Property. They agreed that the discounted cash-flow approach was the best way to value the Lafayette Property. With the then-current lease apparently being at below-market rates, the discounted cash-flow approach overlay on Atkinson's work would lead to a valuation less than the $ 4 million or more that might have been supported by the corrections embodied supra in table 6. Hulberg broke the Lafayette Property into its two original components. See supra note 4. He valued the fee interest in one portion, based on comparable sales, at $ 10.50 per square foot, and the other portion (the portion with the building) at $ 11.50 per square foot. Hulberg totaled the two portions and arrived at a fee interest value of $ 5,188,000. 2000 Tax Ct. Memo LEXIS 42">*88 were of properties smaller than the Lafayette Property. Hulberg's expert witness report makes a downward adjustment in each comparable property's sales price (in an amount that Hulberg failed to disclose) to account for the phenomenon that, at those sizes in that market, smaller properties were worth more per square foot than otherwise equivalent larger properties. At trial, Hulberg presented adequate rebuttals to the Kidder/Kirby attacks on many of the elements of Hulberg's analysis. However, we remain troubled by Hulberg's failure to guide us through his decision-making process, as described in the opinion text at supra note 14. Also, we are unwilling to accept Hulberg's explanation at trial that his shift from $ 3,417,000 and $ 3,618,000 valuation conclusions to his final valuation of $ 3,960,000 was entirely the result of his shifting view of the impact of environmental concerns. We have not found in the record anything that would lead us to believe that Hulberg really thought that environmental concerns would drive the value of the Lafayette 2000 Tax Ct. Memo LEXIS 42">*89 Property down in the market by $ 600,000. 2000 Tax Ct. Memo LEXIS 42">*90 Kidder/Kirby valued the Parker Property using the discounted cash-flow approach. In determining the reversionary value element of the discounted cash-flow approach, Kidder/Kirby used the comparable sales approach. Table 7 shows Atkinson's, Hulberg's, and Kidder/Kirby's valuation of the Parker Property under their respective approaches. TABLE 7 Approach Atkinson Hulberg Kidder/Kirby Comparable sales $ 665,300 $ 1,468,000 -- Income 462,000 1,448,000 -- Cost 2000 Tax Ct. Memo LEXIS 42">*91 803,500 -- -- Discounted cash-flow -- -- $ 940,000 to 995,500 Conclusion 600,000 1,460,000 940,000 to 995,000 Atkinson made many of the same errors in valuing the Parker Property as he did with the Lafayette Property. Hulberg relied on one such error. In his income approach, Hulberg treated the tenant on the Parker Property as "holding over on a month-to-month tenancy." He based this on Atkinson's report, which does indeed make this statement. The lease, attached to Atkinson's report, provides that "Any holding over after the expiration of the said terms, [May 31, 1990] with the consent of the Lessor, shall be construed to be a tenancy from month to month". Accordingly, Hulberg ignored the then- existing tenancy, proceeded to determine market rentals and lessor's expenses, and concluded that the market would have produced a net operating income of $ 101,346 per year. He capitalized this at 7 percent and came to a valuation of $ 1,448,000 by the income approach. However, the lease on the Parker Property also provides that the lessee has two options to renew for consecutive 5-year terms, at rentals 2000 Tax Ct. Memo LEXIS 42">*92 to be agreed upon by lessee and lessor. Hinz testified that the first option to renew had been exercised and the lessee was still paying $ 1,500 per month at decedent's death. At the end of this renewal term (May 31, 1995), the tenant balked at Hinz's proposal to increase the monthly rental to $ 6,000, and moved out. Hinz's testimony is believable, is supported by evidence of actual receipts from the Parker Property for 1992 through 1997, and was not contradicted by any evidence of record. We have so found. Thus, at decedent's death, the Parker Property was going to produce no more than $ 18,000 per year ($ 1,500 per month) for the next three years, notwithstanding Hulberg's estimate of market net operating income of $ 101,346 per year. If Hulberg's estimates as to other elements of value are correct, then his conclusion as to date-of-death value should be reduced by about $ 250,000 to reflect the expectation of 3 years (decedent died on May 4, 1992; the lease renewal term expired on May 31, 1995) of below-market rental income. The Parker Property immediately adjoins the Lafayette Property. In substantially all respects, the Parker Property's value indicia are the same as those of 2000 Tax Ct. Memo LEXIS 42">*93 the Lafayette Property. Compare our findings of fact as to the Lafayette Property with those as to the Parker Property supra. The Parker Property is about 27.3 percent the size of the Lafayette Property. Because smaller properties in that area were worth more per square foot than larger properties, we conclude that the Parker Property was worth more than 27.3 percent of the value of the Lafayette Property. The then-current rent under the Parker Property lease was about 40 percent as much as the then- current rent under the Lafayette Property lease, another factor nudging upward the value of the Parker Property. Also, the building improvements on the Parker Property were about as large as those on the Lafayette Property. Under these circumstances, we believe it is not fruitful to set forth in any greater detail the concerns we have as to the experts' presentations. We conclude, and we have found, that the fair market value of the Parker Property on the date of decedent's death was $ 1.2 million. Atkinson valued the Richard Property using three approaches: (1) The comparable sales approach, (2) the income approach, and (3) the cost approach. Under the cost approach, 2000 Tax Ct. Memo LEXIS 42">*94 Atkinson valued the land component of the Richard Property using the comparable sales approach. Hulberg valued the Richard Property using the comparable sales approach and the income approach. He considered, but rejected, the cost approach for the same reasons he gave with respect to the Parker Property. See supra note 19. Table 8 shows Atkinson's and Hulberg's valuations of the Richard Property under their respective approaches. TABLE 8 Approach Atkinson Hulberg Comparable sales $ 223,860 $ 321,000 Income 190,000 301,000 Cost 221,000 -- Conclusion 200,000 320,000 In 2000 Tax Ct. Memo LEXIS 42">*95 their comparable sales approaches both Atkinson and Hulberg valued the Richard Property solely by reference to the floor area of the machine shop building, and not by reference to the total area of the property. Atkinson concluded that the Richard Property should be valued at $ 39 per square foot of floor area in the machine shop building; Hulberg concluded $ 65 per square foot. Atkinson also valued the Richard Property by reference to its total lot area ($ 8 per square foot), but only as one element in his cost approach. Again, Atkinson's expert witness report descriptions of his comparable properties conflict with the matrices that he presents in order to quantify his observations. Again, Hulberg avoided Atkinson's error by not presenting any adjustment matrix. Hulberg makes the following point: In correlating these comparable sales to the subject property, the primary characteristic difference requiring consideration is the floor area ratio of the comparables in relation to that of the subject. Floor area ratio (FAR) is the ratio of building area to site size. It is calculated by dividing the building size by the site size. The subject property has a floor area ratio 2000 Tax Ct. Memo LEXIS 42">*96 of 25 percent. The floor area ratios exhibited by the comparable sales vary widely between 18 percent and 69 percent. Typically, an inverse relationship exists between floor area ratio and the overall value of the property expressed as a price per square foot of building area. Intuitively, we agree with Hulberg's observation. Obviously, all other matters being equal, we would expect that the Richard Property (20,000 sq. ft.) would be worth more if the machine shop building stood on a 1-acre lot and would be worth less if the building stood on a quarter-acre lot. Curiously, both Atkinson and Hulberg focused on comparable properties where the floor area ratio was 2 to 3 times that of the Richard Property. Hulberg states that the floor area ratio is "The primary characteristic difference dominating the adjustments made to these comparables". Atkinson appears to have ignored this matter. Although we are persuaded that the prices of all five of Atkinson's comparable properties and of four of Hulberg's five comparable properties should be adjusted upward because of the floor area ratio, neither side's expert helps us to decide the magnitude of this adjustment. The income method valuations 2000 Tax Ct. Memo LEXIS 42">*97 of the Richard Property constitute another setting in which the state of the record makes our task difficult. Hulberg states that the Richard Property was leased to a tenant as of the valuation date. Hulberg states that he asked for, but did not receive, a copy of the lease. Accordingly, Hulberg says, he valued the Richard Property without regard to the lease, but warned that The value of the leased fee interest in the property could be the same, greater than, or less than the value of the fee simple interest, depending on the terms of the lease in effect as of the date of our valuation. Atkinson says that "Although [the] lease had expired the rental had been extended on a month to month basis for the same rent." On brief, petitioner asks us to find as follows: d. VALUATION OF RICHARD AVENUE PROPERTY. This property was subject to a legally enforceable lease with S.B. Machine Works (Transcript, p. 42) and the rent it yielded was $ 1,500 and any valuation by capitalization of income should reflect this income figure. (Petitioner's Exihibit [sic] 18). The reference to transcript, p. 42, is to Hinz's testimony, as follows: Q [Doyle] And how -- and was -- at the time 2000 Tax Ct. Memo LEXIS 42">*98 of your mother's death, was it rented to someone? A [Hinz] Yes, sir. Q And who was it rented to? A S.B. Machine Works. Q Okay. And how much rent did S.B. Machine Works pay? A At that time? Q Yes. A Five hundred and fifty dollars a month. Q Okay. And did they have a lease? A I'm a little hazy on that. Their lease expired somewhere in '92 or '93. They were on month to month for a period of time, and just when that happened, the best -- the best record I have of that is that they paid $ 550 a month for the month of September '93 or August '93, somewhere in there, and the next month they paid 1500. On brief, petitioner also relies on Exhibit 18. That exhibit shows that the Richard Property did not produce any income at all in 1992, the year of decedent's death. Finally, neither side produced any lease for the Richard Property, and neither side called any witness who could give us any evidence about any lease that was clearer than Hinz' "hazy" recollection. The sources petitioner relies on convince us, and we have found, that the facts are just the opposite of what petitioner asks us to find. In that portion of his expert witness report that 2000 Tax Ct. Memo LEXIS 42">*99 deals with the income approach to valuing the Richard Property, Hulberg presents a map showing the locations of the Richard Property and the six rental comparable properties. The map shows that comparable property 6 is far closer to the Richard Property than is any of the other five rental comparable properties. However, Hulberg's chart and other descriptive materials do not refer to property 6. Hulberg does not enlighten us as to the characteristics of property 6 or why he shows it on the map, given that he does not take property 6 into account in this evaluation. Hulberg concluded that a prospective buyer of the Richard Property would be able to lease it for a gross rental of $ 26,676 per year, with net operating income of $ 24,075 per year. As we have noted, petitioner and decedent did not receive any 1992 rental income from the Richard Property. The Richard Property produced for 1993 $ 10,400 income and $ 3,851 expenses; for 1994 $ 18,000 income and $ 2,186 expenses. Application of Hulberg's capitalization analysis to petitioner's actual rental results for these 2 years would lead to an income approach fair market value of about $ 200,000, essentially similar to Atkinson's income 2000 Tax Ct. Memo LEXIS 42">*100 approach's $ 190,000. See supra table 8. As noted, Hulberg rejected the cost approach for the Richard Property. Although Atkinson used the cost approach, he gave little weight to it because the other approaches "are the most reliable as they represent verifiable market data." As the foregoing shows, the work of the experts in the instant case does not give us confidence in their analyses and also does not lead us to any clear conclusion. We are satisfied that the fair market value of the Richard Property is significantly more than Atkinson's $ 200,000 and significantly less than Hulberg's $ 320,000. Doing the best we can with the record presented by the parties in the instant case, we conclude, and we have found, that the date-of-death fair market value of the Richard Property was $ 250,000. As table 2 supra shows, we conclude that the aggregate fair market value of the four disputed properties is $ 7,350,000. This is $ 535,000 less than petitioner reported on the estate tax return, $ 2,732,000 less than respondent determined in the notice of deficiency, and $ 3,140,000 more than petitioner asserted in the petition. Based on our conclusions, the Christy-Hinz initial slap- dash 2000 Tax Ct. Memo LEXIS 42">*101 valuations were far better than the work product that anyone -- whether party or expert witness -- produced once the parties got into their confrontational mode. We now proceed to consider the additions to tax. The estate tax return was due by February 4, 1993. Petitioner requested an extension to July 31, 1993. Respondent granted an extension to August 4, 1993. See supra table 1. The tax return was received by respondent on February 4, 1994. Thus, the tax return was not timely filed. At the time of filing the tax return, both Hinz and Christy thought that petitioner had been granted a filing extension to February 4, 1994, and that the filing was timely. Petitioner contends that its failure to timely file the tax return was due to reasonable cause and not due to willful neglect because (1) Hinz, as executor, relied on Christy's erroneous advice that respondent had extended the filing period to February 4, 1994, and (2) the late filing was due to extraordinary circumstances -- confusing and illegible extension dates by respondent combined with Christy's then-unsuspected eye disease. 2000 Tax Ct. Memo LEXIS 42">*102 Respondent maintains that Hinz relied on Christy to file the tax return on time, that this was an attempt to delegate a nondelegable duty, and that this does not constitute reasonable cause for failing to timely file the tax return. Respondent contends that, "additionally, it was not reasonable for Mr. Christy to believe that the estate had been granted an extension to file the Federal estate tax return until February 4, 1994". Both sides rely on the opinion of the Supreme Court in We agree with respondent's conclusion and with some of respondent's analysis. Petitioner has the burden of proving error in respondent's determination that this addition to tax should be imposed against the estate. See A taxpayer's failure to file timely is due to "reasonable cause" if the taxpayer exercised ordinary business care and prudence and was nevertheless unable to file the return within the prescribed time. See We conclude that petitioner is liable for an addition to tax for failure to timely file the tax return, for 2000 Tax Ct. Memo LEXIS 42">*106 two reasons. (1) By the time Christy told Hinz that the tax return due date was February 4, 1994, the true due date (Aug. 4, 1983) had already passed. (2) Hinz did not merely retain Christy to give legal advice as to the due date of the tax return, but rather attempted to delegate to Christy the task of filing a timely tax return. Each of these reasons is by itself sufficient to require a holding for respondent on this issue. Under Petitioner maintains that the "reasonable cause" is Christy's advice to Hinz that the tax return's filing due date was February 4, 1994. Hinz testified that Christy first told him of the February 4, 1994, due date when Christy "kind of hustled me up as far as getting appraisals". By that time, Hinz testified they "had very little choice but to use the probate referee's figures". From this we conclude that, when Christy gave his erroneous advice to Hinz, relatively little time remained before 2000 Tax Ct. Memo LEXIS 42">*107 February 4, 1994, and thus, that August 4, 1993, had already passed. We have so found. It follows that Hinz's failure to timely file the tax return by August 4, 1993, was not "due to" Christy's misinforming Hinz. Because (a) both of petitioner's reasonable cause contentions are based on Christy's misinforming Hinz, and (b) we have concluded that petitioner's failure to timely file the tax return was not due to Christy's misinforming Hinz, we conclude that (c) petitioner's failure to timely file the tax return was not due to reasonable cause. In contacted Keyser a number of times during the spring and summer of 1979 to inquire about the progress of the proceedings and the preparation of the tax return; they were assured that they would be notified when the return was 2000 Tax Ct. Memo LEXIS 42">*108 due and that the return would be filed "in plenty of time." App. 39. When respondent called Keyser on September 6, 1979, he learned for the first time that the return was by then overdue. Apparently, Keyser had overlooked the matter because of a clerical oversight in omitting the filing date from Keyser's master calendar. Respondent met with Keyser on September 11, and the return was filed on September 13, three months late. In Boyle, the Supreme Court focused on the language of Court of Appeals is reversed. In In the instant case, we note that Hinz did not ask Christy whether the requested extension was approved and what was the new due date. Hinz merely let time pass until Christy finally got in touch with him. Christy did not understand that his task was merely that of legal adviser--he did not promptly notify Hinz, and, when he did get around to notifying Hinz, he did not bother to send a copy of the returned Form 4768 to Hinz. The foregoing leads us to conclude, and we have found, that Hinz delegated to Christy the task of filing a timely tax return, precisely the wrong side of the Boyle "bright line". We have examined the original Form 4768 in light of petitioner's contention, and Christy's testimony, that Christy's misunderstanding of the due date was due to the combination of respondent's alleged sloppiness and Christy's diminishing eyesight. We can see why Christy might well have been puzzled by certain of the notations on the returned 2000 Tax Ct. Memo LEXIS 42">*112 Form 4768, some of the notations being quite faint or otherwise unclear. However, we do not see how any reasonable interpretation of the notations would lead anyone to conclude that (1) the approved extended due dates were the same for both filing and paying, or (2) the approved extended due date for filing was in 1994. Apparently, petitioner means to suggest that Hinz's failure to file timely should be excused because respondent contributed to Christy's misunderstanding, and so Christy's misunderstanding was reasonable. We do not believe that Christy's misunderstanding was reasonable. We do not believe that respondent's failure to respond more clearly and legibly 2000 Tax Ct. Memo LEXIS 42">*113 contributed to Christy's misunderstanding. And we do not believe petitioner's failure to timely file the tax return was due to reasonable cause. We hold for respondent on this issue. 2000 Tax Ct. Memo LEXIS 42">*114 See supra note 21. Respondent granted an extension of the payment due date until February 4, 1994. See supra table 1. The estate tax return, which was filed on February 4, 1994, included an election to pay the estate taxes in installments as described in We consider first the validity of petitioner's Petitioner contends that it "properly elected We agree with petitioner's conclusion that we have jurisdiction in the instant case to determine the validity of petitioner's (1) JURISDICTION A predicate for imposition of the addition to tax under Under 2000 Tax Ct. Memo LEXIS 42">*116 Thus, in order for us to exercise our jurisdiction to determine the payment due date, for purposes of Because our determination as to whether petitioner made a valid Respondent's reliance on We hold, for petitioner, that we have jurisdiction in the instant case to determine the validity of petitioner's (2) TIMELINESS Petitioner demonstrated "reasonable cause" for the late filing of the Return, and therefore his IRC '6166 election to pay the Estate taxes in installments was timely and valid. Later in that brief, petitioner stated that this Court had ruled in return which was not timely filed. We hold, for respondent, that petitioner did not make a valid The amount of any addition to tax under Nevertheless, the parties have presented the issues in such a way as to lead us to conclude that they believe that (1) if the Petitioner contends that its failure to timely pay the estate tax liability shown on its tax return was due to reasonable cause and not due to willful neglect because (1) illiquidity of the estate's assets meant that prompt payment would have resulted in "undue hardship", relying on Petitioner did not receive any information that there were any concerns with the filing of the return until he received a letter from the IRS on March 8, 1995, more than a year after the return was filed. In addition, the IRS did not inform petitioner until September 30, 1996, that the going to be honored by the IRS. Respondent maintains that petitioner did not have reasonable cause for the failure to pay on time because (1) the invalidity of the We agree with petitioner's conclusion. Before we analyze the We have found that, by letter dated March 30, 1994, respondent informed Hinz that respondent was tentatively allowing petitioner's We proceed to the merits. A taxpayer's failure to pay the tax shown on the return is due to reasonable cause if the taxpayer exercised ordinary business care and prudence and was nevertheless unable to pay the tax within the prescribed time. See The Court dealt with this question and reached opposite results in In the instant case petitioner's executor, Hinz, at the time the estate tax was required to be paid reasonably believed that the We hold for petitioner on this issue. To take account of the parties' concessions and of our determinations as to the valuations of several assets, and the effect of these concessions and determinations on the calculations of the amounts of the Decision will be entered under Rule 155.
relied on Keyser for instruction and guidance. He cooperated
fully with his attorney and provided Keyser with all relevant
information and records. Respondent [i.e., Boyle] and his wife
It requires no special training or effort to ascertain a
deadline and make sure that it is met. The failure to make a
timely filing of a tax return is not excused by the taxpayer's
reliance on an agent, and such reliance is not "reasonable
cause" for a late filing under '6651(a)(1). The judgment of the
On 2000 Tax Ct. Memo LEXIS 42">*121 answering brief, petitioner states that
Petitioner did not timely pay the estate tax shown on the
return because it elected to defer payment under
The
1. Unless indicated otherwise, all section references are to sections of the Internal Revenue Code of 1986 as in effect for the date of decedent's death.↩
2. In the notice of deficiency, the amount of the addition to tax under
Unless indicated otherwise, all Rule references are to the Tax Court Rules of Practice and Procedure.↩
3. At trial, respondent raised certain relevance objections to petitioner's Exhibits 5 through 8 and 10 through 18. The Court overruled these objections, ruling that these exhibits are admissible for all purposes and that respondent had a standing objection as to the expressed relevance concerns. The Court also gave respondent the right to renew these objections on opening brief, but only if respondent's counsel gave appropriate notice to petitioner's counsel of an intent to renew the objections on brief. Respondent has not renewed these relevance objections on brief.↩
4. The parties have stipulated to the fair market values of two of these seven properties. Two of the remaining five parcels are dealt with as one property, infra, the Lafayette Property. As a result, the parties have presented the valuations issue as dealing with four properties.↩
5. On opening brief, respondent asks us to find that this amended estate tax return was "filed" on Feb. 6, 1997. Petitioner does not object to this proposed finding. However, the parties stipulate as follows:
This Amended Form 706 Federal Estate tax return has been
submitted to the Internal Revenue Service on February 6, 1997,
but has not been filed pending resolution of the issues between
the estate and the Internal Revenue Service on the original Form
706 Federal estate tax return.
We have not found anything in the record to indicate that the parties' stipulation was incorrect. Our findings are in accord with the parties' stipulation and not the parties' proposed findings of fact.↩
6. The Lafayette Property consists of two contiguous properties that the parties treat as one property for valuation purposes in the instant case. See supra note 4.↩
7. We assumed that the parties could agree on such matters as the size of the building. However, petitioner's expert shows the building's site area variously as 13,200 sq. ft., 12,800 sq. ft., and 12,866 sq. ft., while respondent's expert shows it as 10,800 sq. ft. Neither side has explained the difference.
8. Petitioner's expert states that "Office and restroom area" was 1,638 sq. ft. Respondent's expert states that "Office build-out within the structure is estimated at 2,250 square feet". Neither side has explained the difference.↩
9. Petitioner's expert witness report discusses an office building (4,854 sq. ft.), a machine shop (7,200 sq. ft.), and lumber storage buildings (1,200 sq. ft.), for a total of 13,254 square feet of building improvements. Respondent's expert witness report discusses an office building (3,058 sq. ft.) and a storage shed (5,662 sq. ft.), for a total of 8,720 square feet of building improvements. Neither side has favored us with a reconciliation of these widely divergent descriptions or an attempt to show why that side's description is more accurate than the other side's description.
10. Petitioner's expert witness report states that the Parker Property was "leased to a trucking company." Our finding that the Parker Property was leased to a roofing company is contrary to this statement in the expert witness report and is based on (1) Hinz' testimony and (2) a copy of the lease attached to the same expert witness report.
11. Petitioner's expert witness report gives the area of this building as 5,470 square feet at one point and 5,440 square feet at three other points. Respondent's expert witness report gives the area of this building as 4,940 square feet. Neither side favors us with commentary on this 10-percent discrepancy in building size.
1. At three points in petitioner's opening brief, petitioner contends that the Parker Property was worth $ 940,000. At one of these points, petitioner shows the total for the Subject Properties as $ 5,725,000. The latter amount is evidently an arithmetic error, the sum of the individual amounts contended for at that point in petitioner's brief being $ 5,740,000. However, at one point in petitioner's opening brief and at two points in petitioner's answering brief, petitioner contends that the Parker Property was worth $ 600,000. The latter valuation for the Parker Property would bring petitioner's total for the Subject Properties down to $ 5,400,000.
12.
(a) General.--The value of the gross estate of the decedent
shall be determined by including to the extent provided for in
this part, the value at the time of his death of all property,
real or personal, tangible or intangible, wherever situated.↩
13. The comparable sales approach involves locating parcels of land which were as physically similar as possible to the subject property, and which had been sold within a reasonable time of decedent's death. Since no two sales and no two parcels are identical, the actual sales price in each case is then to be adjusted up or down to reflect the differences between the subject property and the comparable property. The estimated values of the comparable properties as so adjusted provide an indication of the value of the subject property on the relevant date. Like most valuation techniques, this method is far from an exact science. However, it is based upon the common sense approach of taking the actual sales prices of properties similar to the subject properties and then relating the prices to the subject properties. This Court has often used or approved the use of this valuation method. See
14.
If scientific, technical, or other specialized knowledge
will assist the trier of fact to understand the evidence or to
determine a fact in issue, a witness qualified as an expert by
knowledge, skill, experience, training, or education, may
testify thereto in the form of an opinion or otherwise.
[Emphasis added.]
In his expert witness report, Hulberg states his conclusion at different places as (1) $ 3,417,000, (2) $ 3,960,000, and (3) $ 3,618,000. Hulberg's analysis goes only to the $ 3,960,000. It appears that the other numbers are the remains of earlier drafts, which Hulberg neglected to conform to the results of his later analyses.
16. Atkinson does not explain his concept of "minimum site" and his choice of 67,000 square feet. However, our examination of the assessor plat map in his expert witness report suggests that 67,000 square feet may be the approximate area of that part of the Lafayette Property from the frontage on Mathew Street to the rear of the building.↩
1. The value is calculated as the product of the building area and the price per square foot; it is not affected by the 67,000- square-foot site area.↩
17. As explained in the text at supra note 13, if the comparable property has an element that is inferior to the property being appraised, then the comparable property's sale price is to be ADJUSTED UPWARD.↩
18. First portion: 179,903 sq. ft. x $ 10.50 per sq. ft. = $ 1,889,000. Second portion: 286,886 sq. ft. x $ 11.50 per sq. ft. = $ 3,299.000.↩
19. Hulberg valued the Lafayette Property at $ 4,020,000. He then subtracted $ 60,000 for environmental concerns to arrive at his final valuation of $ 3,960,000. To go from $ 4,020,000 to his earlier- stated final valuation of $ 3,417,000, he would have had to attribute $ 603,000 to environmental concerns. Atkinson's estimate of the impact of environmental concerns was only $ 132,000.↩
20. Hulberg gives the following reasoning for rejecting the cost approach for the Parker Property.
The cost approach is not considered to be an applicable approach
for older buildings such as the subject property. This is due to
a number of factors, the most important being the lack of
support for a detailed estimate of the depreciation, and lack of
knowledge of the exact condition of the property as of our
valuation date. In addition, potential purchasers of older
properties rarely, if ever, estimate the value of potential
purchases utilizing the depreciated cost method; purchasers for
similar properties typically consider only the market and income
approaches. When the cost approach is used, it is typically used
to ascertain the feasibility of new construction.↩
21. Petitioner does not contend, in the alternative, that the amount of any addition to tax for failure to timely file the estate tax return should be less than 25 percent because the tax return was not filed more than 4 months late or because of the interplay of paragraphs (1) and (2) of
22.
(a) Addition to the Tax. -- In case of failure -- (1) to
file any return required under authority of subchapter A of
chapter 61 * * * on the date prescribed therefor (determined
with regard to any extension of time for filing), unless it is
shown that such failure is due to reasonable cause and not due
to willful neglect, there shall be added to the amount required
to be shown as tax on such return 5 percent of the amount of
such tax if the failure is for not more than 1 month, with an
additional 5 percent for each additional month or fraction
thereof during which such failure continues, not exceeding 25
percent in the aggregate;
(2) to pay the amount shown as tax on any return specified
in paragraph (1) on or before the date prescribed for payment of
such tax (determined with regard to any extension of time for
payment), unless it is shown that such failure is due to
reasonable cause and not due to willful neglect, there shall be
added to the amount shown as tax on such return 0.5 percent of
the amount of such tax if the failure is for not more than 1
month, with an additional 0.5 percent for each additional month
or fraction thereof during which such failure continues, not
exceeding 25 percent in the aggregate;
23. On opening brief respondent states in two places that "the Form 4768 is CLEARLY stamped in blue ink 'The Maximum Extension Allowed for Filing is Six Months.'" (Emphasis added). Respondent makes substantially the same statement on answering brief. As we have found, the stamped legend is faint on the original. The exhibit the parties initially offered is a photocopy of the estate tax return. The Form 4768 that is part of that exhibit is a photocopy of the original Form 4768. On that photocopy the stamped legend is TOTALLY ILLEGIBLE. Until the Court insisted that the original Form 4768 be made part of the record, the parties' respective counsels apparently were content to allow the Court to proceed on the basis of the illegible photocopy.
24. Because we hold that petitioner did not have reasonable cause for the failure to file income tax returns, we do not need to address the question of whether the failure to file was also caused by willful neglect. See
25.
ESTATE CONSISTS LARGELY OF INTEREST IN CLOSELY HELD BUSINESS.
(a) 5-year Deferral; 10-year Installment Payment.--
(1) In general. -- If the value of an interest in a
closely held business which is included in determining the
gross estate of a decedent who was (at the date of his
death) a citizen or resident of the United States exceeds
35 percent of the adjusted gross estate, the executor may
elect to pay part or all of the tax imposed by
in 2 or more (but not exceeding 10) equal installments.
* * * * *
(d) Election. -- Any election under subsection (a) shall be
made not later than the time prescribed by
filing the return of tax imposed by
extensions thereof), and shall be made in such a manner as the
Secretary shall by regulations prescribe. If an election under
subsection (a) is made, the provisions of this subtitle shall
apply as though the Secretary were extending the time for
payment of the tax.↩
26. See
27. The enactment of sec. 7479 (relating to declaratory judgment jurisdiction over certain
28. Our holding that petitioner's
estate-of-laura-v-bell-deceased-laurel-v-bell-cahill-estate-of-charles , 928 F.2d 901 ( 1991 )
Buffalo Tool & Die Mfg. Co. v. Commissioner , 74 T.C. 441 ( 1980 )
Estate of Baumgardner v. Commissioner , 85 T.C. 445 ( 1985 )
United States v. Cartwright , 93 S. Ct. 1713 ( 1973 )
Estate of Sherrod v. Commissioner , 82 T.C. 523 ( 1984 )
Winn-Dixie Stores v. Commissioner , 110 T.C. 291 ( 1998 )
United States v. Boyle , 105 S. Ct. 687 ( 1985 )
Gerald C. Funk and Judith M. Funk v. Commissioner of ... , 687 F.2d 264 ( 1982 )
Fred M. Waring and Virginia Waring v. Commissioner of ... , 412 F.2d 800 ( 1969 )
John Jackson, Yvonne Jackson, Gregory M. Barrow and Timsey ... , 864 F.2d 1521 ( 1989 )
Timothy S. Heffley, as of the Estate of Opal P. Heffley, ... , 884 F.2d 279 ( 1989 )
Welch v. Helvering , 54 S. Ct. 8 ( 1933 )
Wendland v. Commissioner , 79 T.C. 355 ( 1982 )
McShain v. Commissioner , 71 T.C. 998 ( 1979 )
Estate of H. Floyd Sherrod, H. Floyd Sherrod, Jr. And ... , 774 F.2d 1057 ( 1985 )
Ralph Penn v. Commissioner of Internal Revenue, Albert Penn ... , 219 F.2d 18 ( 1955 )
Russell Redhouse, Jr. v. Commissioner of Internal Revenue , 728 F.2d 1249 ( 1984 )
Wolfsen Land & Cattle Co. v. Commissioner , 72 T.C. 1 ( 1979 )
Kessler v. Commissioner , 87 T.C. 1285 ( 1986 )