Estate of Liftin v. United States
2014 U.S. App. LEXIS 10709
Fed. Cir.2014Background
- Estate of Morton Liftin filed Form 706 late; defendant IRS levied a mandatory 25% late-filing penalty under 26 U.S.C. § 6651(a)(1).
- Extended filing deadline was June 2, 2004 (six-month automatic extension); no further extension beyond that period.
- Two uncertainties influenced filing: whether Mrs. Liftin would become a U.S. citizen for the spousal-marital deduction and unresolved ancillary litigation with the widow.
- Specialist counsel advised filing could wait past the citizenship decision and ancillary matters; no explicit explaining of the latter delay to the executor.
- Mrs. Liftin became a U.S. citizen August 3, 2005; the estate filed the return May 9, 2006, 9 months after citizenship and 23 months after the extended deadline.
- IRS initially assessed $169,643.06, later reduced to $135,714.45 (25% of tax due); district court granted summary judgment for government; estate appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether reliance on counsel constitutes reasonable cause for late filing. | Liftin argues advice gave reasonable cause to delay filing. | United States contends advice was not reasonably based and not sufficient. | No reasonable cause; reliance on unexplained counsel advice inadequate. |
| Whether the nine-month post-citizenship delay was reasonable. | Liftin argues delays after citizenship were justified by ancillary matters. | United States contends delay after citizenship lacked reasonable cause. | Nine-month post-citizenship delay not reasonable; penalty affirmed. |
Key Cases Cited
- Boyle v. United States, 469 U.S. 241 (Supreme Court 1985) (reasonable cause standards for penalties; emphasis on objective reasonableness)
- Stobie Creek Invs. LLC v. United States, 608 F.3d 1366 (Fed. Cir. 2010) (objective test for reasonableness of reliance on counsel)
- Knappe v. United States, 713 F.3d 1164 (9th Cir. 2013) (confirms objective-reasonableness standard for reliance on tax professional advice)
- Gould v. Gould, 245 U.S. 151 (Supreme Court 1917) (tax statutes construed in citizen-friendly, strict manner)