Baccei v. United States
2011 U.S. App. LEXIS 3005
| 9th Cir. | 2011Background
- Baccei, as trustee of the Pucci 2004 Revocable Trust, sought a refund of a late-payment penalty and interest after the estate tax was not paid by the June 19, 2006 deadline.
- Pucci estate’s Form 4768 extension request was filed by Bagley but Part III (Extension of Time to Pay) was left blank and no extension date was requested.
- Bagley submitted a supplemental June 16, 2006 letter asking for an extension to pay and stating funds were available but blocked by the bank due to letters testamentary delays.
- The IRS assessed a $58,954.28 penalty plus $69,801 interest on the estate tax for late payment.
- Baccei paid $128,755.28 on February 22, 2007 and sought a refund arguing a timely payment-extension request was filed.
- The district court granted summary judgment for the United States, holding the substantial-compliance doctrine inapplicable, no equitable estoppel, and no reasonable-cause abatement; on appeal, the Ninth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether substantial compliance applies to payment-extension regulations | Baccei argues substantial compliance should apply | United States argues extension rules are substantive, not procedural | Substantial compliance does not apply |
| Whether equitable estoppel bars penalties | IRS failure to notify of deficiency constitutes misconduct | No affirmative misconduct; inaction cannot estop | Estoppel not applicable |
| Whether late payment penalty is abated for reasonable cause | Reliance on CPA constitutes reasonable cause; lack of funds could justify | Reliance on an agent does not constitute reasonable cause; due date ascertainable | Penalty not abated for reasonable cause |
Key Cases Cited
- Sawyer v. Sonoma County, 719 F.2d 1001 (9th Cir. 1983) (substantial compliance may apply to procedural requirements)
- Shotgun Delivery, Inc. v. United States, 269 F.3d 969 (9th Cir. 2001) (regulatory purposes; substantial compliance limitations)
- Germantown Trust Co. v. Commissioner, 309 U.S. 304 (Supreme Court 1940) (complete return; essential information to calculate tax owed)
- United States v. Boyle, 469 U.S. 241 (U.S. 1985) (reliance on an agent does not excuse failure to timely file or pay)
- Conklin Bros. of Santa Rosa, Inc. v. United States, 986 F.2d 315 (9th Cir. 1993) (taxpayer cannot delegate nondelegable tax duties; reasonable cause limits)