*1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY ESTATE OF AGNES R. SKEBA, Civil Action No. 17-cv-10231 (PGS)(TJB)
Plainttj; V. SUPERSEDING UNITED STATES OF AMERICA, MEMORANDUM
AND ORDER Defendant.
This matter comes before the Court on a motion for reconsideration (ECF No. 22) by the Defendant United States of America (“Government” or “Defendant”). In short, the government asserts that the de novo standard of review is appropriate for assessing the issue of whether Plaintiff Estate of Agnes R. Skeba (“Estate” or “Plaintiff’) demonstrated reasonable cause and not willful neglect in failing to timely file its estate tax return; whereas the Court’s original memorandum used the arbitrary and capricious standard (see Memorandum at 13, ECF No. 21). By this order, the Court vacates its prior memorandum (ECF No. 21) and files this superseding memorandum in its stead.
Originally, this matter came before the Court on cross-motions for summary judgment brought by Plaintiff (ECF No. 12) and by Defendant (ECF No. 13). More specifically, Plaintiff seeks to set aside $450,959 in penalties assessed by the Internal Revenue Service (“IRS”) for the alleged late filing of an estate tax return. (Plaintiff’s Statement
On June 10, 2013, Agnes R. Skeba (“Skeba” or “Decedent”) died. of Undisputed Facts in Support of Motion for Summary Judgment (“Plaintiffs SUF”) J 1, ECF No. 12-2). Per the IRS Code, the initial date for the Estate to file a federal estate tax return was (Id. ¶ 2). nine months after said death (March 10, 2014).
On or about March 6, 2014, Plaintiff, through its counsel, George White, Esq., filed an IRS form entitled “Application for Extension of Time to File a Return and/or Pay U.S. Estate... Taxes” (IRS Form 4768) with a partial payment of the estate tax in the amount of $725,000, along with a cover letter explaining the reasons for the application. (Id. ¶ 3).
Mr. White’s letter to the IRS stated that he was paying all of the liquid assets ($1 .475 million) of the Estate to the State of New Jersey, Commonwealth of Pennsylvania, and the United States in payment of state and federal estate taxes. Mr. White furthered that the Estate was negotiating a mortgage on a commercial property to satisfy the remainder the estate tax it owed to the federal government; but this would require additional time. More specifically, Mr. White’s letter states:
Our office is representing Stanley L. Skeba, Jr. as the Executor of the Estate of Agnes Skeba. Enclosed herewith is a completed “Form 4768 — Application for Extension of Time to File a Return and/or Pay U.S. Estate Taxes” along with estimated payment in the amount of $725,000 made payable to “The United States Treasury” for the above referenced Estate Tax.
Additionally, we are requesting a six (6) month extension of time to make full payment of the amount due. Despite the best efforts of this office and the Executor, the Estate had limited liquid assets at the time of the decedent’s death. Accordingly, we have been working to secure a mortgage on a substantial commercial property owned by the Estate in order to make timely payment of the balance of the Estate Tax anticipated to be due.
Currently, we have liquid assets in the amount of $1.475 million and the estimated value of the total estate is $14.7 million. Accordingly, we have submitted payments in the amount of $575,000 to the State of New Jersey, Division of Revenue, for State estate taxes payable and in the amount of $250,000 to the Pennsylvania Department of Revenue for State inheritance taxes payable. We are hereby submitting the balance of available funds to you, in the amount of $725,000, as partial payment of the expected U.S. Estate Taxes for the Estate.
We are in the process of securing a mortgage, which was supposed *3 to close prior to the taxes being due, in the amount of $3.5 million that would have permitted us to make full payment of the taxes timely. Due to circumstances previously unknown and unavoidable by the Executor, the lender has not been able to comply with the closing deadline of March 7, 2014. It is anticipated that the lender will be clear to close within fourteen (14) days and then we will remit the balance of the estimated U.S. Estate Taxes payable.
Additionally, there has been delays in securing all of the necessary valuations and appraisals due to administrative delays caused by contested estate litigation currently pending in Middlesex County, New Jersey.
(Certification of Joseph M. Hayes, Esquire in Support of Plaintiffs Motion for Summary Judgment (“Hayes Cert.), Ex. C., ECF No. 12-2).
At the time, the Estate was valued at approximately $13.1 million of which $10.2 million consisted of real estate (much of it was farmland) and farming machinery. (Plaintiffs SUF ¶ 6). As a result, there were delays in securing all of the necessary valuations and appraisals, and there was ongoing contested estate litigation pending in Middlesex County, New Jersey. (Id. ¶. 7).
As anticipated within the letter, Plaintiff refinanced its real estate, and made a second payment to the IRS in the amount of $2,745,000 around March 18, 2014, only eight days after the original due date for payment. (Id. ¶ 11). This amount plus the prior payment ($725,000) totaled $3,470,000 in estate taxes having been paid to the IRS.
On or about June 25, 2014, D. Owens of the IRS approved Plaintiffs application to extend the time to file the estate tax return from March 10, 2014 until September 10, 2014. (Hayes Cert., Ex. E). Mr. Owens’ letter noted that any extension of time was subject to the caveat that the extension was “granted on a year by year basis only.” (Id.). The letter reads, in pertinent part:
Any extension will be granted on a year by year basis only. In granting an extension of time to pay the estate tax or an installment *4 f o r a p r e v i s pp r ov e d e x t e n s i , t h e I n t e r n l R e v e nu n r e qu r e a p e rf o r m n ce bond , und e r S ti on 6161 ( nd 6165 o f t e I n t e n l R e v e nu e C od e h a f ace v u e o f up t o doub e t h e m oun t b e ng d e f e rr e . I n t e e e n e I n t e n R e v e nu e S e v e n e you r e x t e n s on e qu e s t , you r p y e n t o f t x du e upon p t o f t e e n e d e x t e n s .
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O n o ound un P ff f d d by D L nd V K P ub c cc oun “ P ” ho e d by E W o p po $2 , , d p $3 , , ub x fr d p n ov $941 , ee H .,
O ugu S pond P ff’ ff’ F ¶ O acc oun j $941 , it i *5 was a penalty assessed due to the Estate’s failure to file in the amount of $450,959.50 and a net “Overpayment” of $488,719.34, which was refunded to Plaintiff. (Id.). The IRS Notice stated that the “failure to file” penalty was 25% of the “unpaid amount” of $1,803,838. (See Hayes Cert., Ex. I). The IRS calculated the amount due on March 10, 2014 was $2,528,838 minus $750,000 paid, equaling an amount due of $1,803,838. The IRS then imposed a 25% penalty on that amount. (Id.).
On August 17, 2015, Mr. White, on behalf of Plaintiff and in response to the IRS’s action, sent a letter to the IRS requesting abatement of penalties in the amount of $450,959.50. (Hayes Cert., Ex. J).
In his letter, Mr. White set forth various reasons for the delay in filing Plaintiff’s federal estate tax return. This includes a reference to a conversation that White had with “representatives of the IRS” in which he states that “we were informed that so long as the payment was made in full, then the filing of the return beyond the extension deadline was permissible and would not subject the estate to any penalty.” (Id. at 2). Further, Mr. White’s letter set forth additional information concerning why Plaintiff did not file a timely estate tax return:
*6 Beyond September 10, 2014, the Estate continued to have delays in filing due to the pending and anticipated completion of the litigation over the validity of the decedent’s Will, which would impact the Estate’s ability to complete the filing and the executor’s capacity to proceed. Initially, it, was anticipated that the trial of this matter would be heard before Judge Frank M. Ciuffani in the Superior Court of New Jersey in Middlesex County, Chancery Division-Probate Part in July of 2014. Due to health concerns on behalf of the Plaintiff, Joseph M. Skeba, the Judge delayed these proceedings multiple times through the end of 2014, each time giving us a new anticipation of the completion of the trial to permit the estate tax return to be filed. Upon the Plaintiffs improved health, the Judge finally scheduled a trial for July 7, 2015, which was expected to allow our completion in filing the return. [*] [*] [*] Accordingly, this litigation, which was causing us reason to delay in the filing, gave rise to the estate’s inability to file the return. Finally, in May of 2015 we were notified of the Estate’s litigation attorney, Thomas Walsh of the law firm of Hoagland Longo Moran Dunst & Doukas, LLP, that he was diagnosed with cancer that would possibly cause him to delay this matter from proceeding as scheduled. In early June, we were notified by Mr. Walsh’s office that his prognosis had worsened and he would be prevented from further handling the litigation of this matter, so new counsel within his firm would be assisting in carrying this matter through trial. Due to the change in counsel, it was deemed that the anticipated trial was no longer predictable in scheduling, so the Estate chose to file the return as it stood at such time.
(Jd. at 2-3).
On or around November 5, 2015, the IRS responded to Mr. White’s letter in which it stated that the reasons within Mr. White’s letter do not “establish reasonable cause or show due diligence.” (Hayes Cert., Ex. K).
In response to this letter, on December 8, 2015, Mark R. Aumack, Mr. Skeba’s personal accountant, filed an appeal of the IRS determination. Plaintiff never received a reply to this letter. (Hayes Cert., Ex. L). Mr. Aumack’s letter of appeal reiterated the same points as Mr. White’s August 17, 2015 letter, and it also highlighted one additional reason that was not fully articulated in Mr. White’s letter:
I do not believe the IRS had knowledge of the extension in place at the time the penalty was assessed, nor did they have a record of the additional payment of $2,745,000. The IRS listed the unpaid tax as $1,803,838 and charged the maximum 25% to arrive at the penalty of $450,959.50. The estate not only paid the entire tax the estate owed by the due date to pay but also had an overpayment. Section 6651(b) bars a penalty for late filing when estimated taxes are paid. (Id.).
Mr. Aumack sent another letter to the same address on January 12, 2016. (Hayes Cert., *7 E x . M ) . o d a t e I R S pp l s h a s t r e pond e d t o e it h e l e e r .
F r h r M r . W h it e ti f d h a t h e h a d a onv e r a ti on w it h a r e p r e e a ti v e t h e I R S a bou t h s on s w it h P l a ti ff s a e liti a ti on a nd a k d h e I R S p a ti v e a bou t t h p li ca ti w a iti ng un til a f h e liti a ti on w a on ud d f il e h e f d a a e a x h e I R S p ti v e w it h w m h e pok e d h und nd ng h a t b eca e ll d b ee e d e d p e w ou d b e no p li ca ti on r f ili H ., E x . N : - : 19
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D S op d bou ac k ca l k n by ff il M k littl kno dg f e e d d nd pu U F ” ¶ 14, F ) M k M W d b il (I ¶ 15). M ov M W d h acc oun o p bu mm un W o p *8 i n f o r m on r qu s d by t f i r i c h p r v n it fr o m f ng r u r n on a m o r ti m y (I d . ¶ J - 20 ) . s i s
II S u mm y j udg m n t i s op r i und r F d . R . C i v . . ( c m ov i ng p r y d m on t t i s no g nu i n i ss u o m i l f ac t nd v i d n ce e li s m ov i ng p ’ n titl m n t t j udg m n t a m . C C . V. C , 477 U . , - 23 ( ) . A ac l i pu i g nu i i a ea j u y c ou u a d i c t f r non - ov it i i l i und ub it ff ec t t ou c f . nd on v. L i L obby c ., 477 U . . 248 ( ) c i i ng a on mm j udg a i i c y no t i ilit y d i ng g i ny gh ng o i ce ; i non - ov i ng p i ce “ i o b ll j o b n h vo . ” no v. ndu . C ng C ., 358 F . 3d 241 247 ( 3d C . ) ( quo nd 477 U . . )
O ce ov ng p y h s s l bu y oppo on t g nu ss e a a l ac . C . P & L gh C . v. L ace ., 772 F . 2d 1103 1109 3d C . T y oppo mm y j udg nno ll g ac l a ss ac 477 U . ; l v. rr ., F . 3d 1125 1 3d C “ [ ] uppo nd p ff mm j udg v. F F B ., 912 2d 654 3d ; ee a F ) (r ng non ov ng p c s s nu ” y d pu ov r f gh it und r *9 gov e r n i ng l a w w ill p r ec l ud t e e n t r y o f s u mm a r y j udg e n t . A e r s on , 477 U . s . a 247 - 48 . If a c ou r d r n s , “a r d r a i ng a ll i n e r e n s i n a vo r f [ non - ov i ng p a r t y ] , a nd a k i ng ll c r d b ilit y d r n a on s in s a vo r . . . no r ea s on b l j u r c ou l nd s u mm j udg n is op . ” l s v. T op n , 226 F. A pp ’ x 222 , 227 ( 3d C r . 2007 ) .
III T l ong - s li s d p c p l in p ng x s u is t t rr l y c on u . G l dv . G ou l , 245 U . . 151 , 153 ( 1917 . G ou l d ea on : “ [I J is e e li s d u l no t t o nd r [ x ] p ov on , by p ca on , yond e c l po f l ngu e u , op s s o o ace tt p ec ca y po d ou . ” I 153 I n f gu C p hou d b e “c u ong y t t gov nd n vo e c iti ze . ” n dd iti n x t i po lti ce “ u o b e c u d c tl ’ [a xp r] ‘ o b ub j ec a lt y un ss e po . ” C mm ‘r v. 361 U . 87 9 1 ( 1959 ) ( itt G d p n ub j ee F dd F C v. D on o . J 3 - 85 ( D w vo d kno dg bu in it s d o y bu ss ce it il a U v. B oy . ) ( quo ng 26 C F R § . )( ) ( )) B oy B dd a xp r’ ce o e a tit ‘r ’ und § 665 1 )( l nu od o d y p rr d b eca a ili cc o 26 R )( r f w *10 exercised ordinary business care and prudence and was nevertheless unable to file the return within the prescribed time. Id. at 243. Chief Justice Burger reasoned there was an administrative need for strict filing requirements. He wrote:
The time has come for a rule with as ‘bright’ a line as can be drawn consistent with the statute and implementing regulations. Deadlines are inherently arbitrary; fixed dates, however, are often essential to accomplish necessary results. The Government has millions of taxpayers to monitor, and our system of self-assessment in the initial calculation of a tax simply cannot work on any basis other than one of strict filing standards. Any less rigid standard would risk encouraging a lax attitude toward filing dates. Prompt payment of taxes is imperative to the Government, which should not have to assume the burden of unnecessary ad hoc determinations.
Id. at 248-49. Accordingly, Chief Justice Burger differentiated between a taxpayer’s reliance on advice from an attorney or accountant as reasonable care, but he found that “a taxpayer does not have to be a tax expert to know that tax returns having filing dates and taxes must be paid when due.” Id. at 251. As such, simple reliance on one’s attorney or accountant does not meet the reasonable care standard.
In the Court’s view, the resolution of this matter hinges on an interpretation of a section of the IRS Code (26 C.F.R. 6651) called “Failure to file tax return or to pay tax.” This provision has several sections, and each shall be addressed.
Generally, § addresses the assessment of penalties for late filing of a return, and late payment of taxes due. More specifically, the penalty under 6651 (a)(1) addresses the failure to file a timely return:
In case of failure (1) to file any return 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 *11 an additional 5 percent for each additional month or fraction thereof during which such failure continues, not exceeding 25 percent in the aggregate.
26 U.S.C. § 665 1(a)(1).
On the other hand, the penalty for failure to timely pay the tax is set forth in § 6651 (a)(2). This section reads:
In case of failure. (2) to pay the amount shown as tax on any return specified in paragraph (I) 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.
§ 665 1(a)(2).
The calculation of the penalty imposed for failure to timely file a return (subsection (a)(1)) and failure to timely pay the tax (subsection (a)(2)) is clarified in § 665 1(b). It declares:
(b) Penalty imposed on net amount due. For purposes of-- (1) subsection (a)(l), the amount of tax required to be shown on the return shall be reduced by the amount of any part of the tax which is paid on or before the date prescribed for payment of the tax and by the amount of any credit against the tax which may be claimed on the return,
(2) subsection (a)(2), the amount of tax shown on the return shall, for purposes of computing the addition for any month, be reduced by the amount of any part of the tax which is paid on or before the beginning of such month and by the amount of any credit against the tax which may be claimed on the return[.] § 6651(b).
The parties disagree on how to construe these provisions. Plaintiff proffers two arguments in support of its position. First, Plaintiff argues that § 6651(a)(1) should be read together (inpari materia) with 665 l(b)(l). In reading these subsections together, Plaintiff *12 concludes that the late filing penalty is calculated by using the formula set forth in subsection (a)(l), incorporating the “net amount due” on the “the date prescribed for payment” as set forth in subsection (b)(1). Since the estate tax was overpaid on March 18, 2014 and the extension ran until September 10, 2014, there was no net amount due on the September deadline; and hence, no penalty may be imposed.
Secondly, and in the alternative, Plaintiff argues that the phrase “such failure is due to reasonable cause not due to willful neglect” in subsection (a)(1) protects the taxpayer from a penalty if the return was filed late due to a reasonable cause.
The Government disagrees with the taxpayer’s arguments. The Government proffers that the requirements of § 665 1(a)(1) and (b) must be construed with another statute (26 US.C. § 6151) entitled “Time and place for paying taxes shown on returns.” § 6151 states: “[T]he date filed for payment of such tax shall be deemed a reference to the last day fixed for such payment (determined without regard to any extension of time for paying the tax).” More specifically, §
6151 reads in pertinent part:
(a) General rule. Except as otherwise provided in this subchapter [26 USCS 6151 et seq.] when a return of tax is required under this title or regulations, the person required to make such return shall, without assessment or notice and demand from the Secretary, pay such tax to the internal revenue officer with whom the return is filed, and shall pay such tax at the time and place fixed for filing the return (determined without regard to any extension of time for filing the return).
[***] (c) Date fixed for payment of tax. In any case in which a tax is required to be paid on or before a certain date, or within a certain period, any reference in this title to the date fixed for payment of such tax shall be deemed a reference to the last day fixed for such payment (determined without regard to any extension of time for paying the tax).
Id. Based on § 6151, the Government cleverly reasons that the last day for payment was nine months after the death of Agnes Skeba—March 10, 2014; because no return was filed by that date a penalty may be assessed. Applying the rationale to the facts, the Government contends only $750,000 was paid on or before March 10, 2014, when $2,528,838 was due on that date. Referring back to § 665 1(a)(1), a 25% penalty on the difference may therefore be assessed because it was not paid by March 10, 2014. As such, the full payment of the estate tax on March 18, 2014 is of no avail because the “last date fixed” was March 10, 2014. Accordingly, the Government argues that the imposition of a penalty in the amount of $450,959.00 is appropriate.
The IRS’s arguments miss the mark. First, both § 665 1(a)(1) and (a)(2) designate the
specific day on which penalties will be assessed for both late filing and payment of the estate tax
return. Both paragraphs specify that the “date prescribed” is to “be determined with regard to
any extension of time for filing.” The language of the statute in dispute is the one which is
given precedence over a more generic statute like 6151. See La Vallee Northside Civic Asso.
v. Vi Coastal Zone Mgrnt. Corn.,
The Government puts forth a valid point that there is an administrative need to complete and close tax matters. Here, the Estate had nine months to file the return, the extension added six months, and Defendant unilaterally added another nine months to file the return. Although there was the timely payment of the estate taxes, the matter, in the Government’s view, lingered and the administrative objective to timely close the file was not met. See generally Boyle, 469 U.S. at 251. There may be a need for some other penalty for failure to timely file a return, but Congress must enact same.
Finally, another issue in this case is whether Plaintiff demonstrated reasonable cause and not willful neglect in allegedly failing to timely file its estate tax return. Although the Court has already determined that the penalty at issue was not properly imposed pursuant to the Government’s flawed statutory rationale, it will review this issue for completeness.
As previously stated, under 26 U.S.C. 6651(a), no penalty for the failure to timely file a
tax return may be assessed if “it is shown that such failure is due to reasonable cause and not due
to willful neglect.” Id. “Whether the penalty should be excused [due to reasonable causel is
determined de novo without deference to the decision of the IRS.” Rae. Wallboard & Plaster
Co. v. United States,
In this case, Mr. White submitted his August 17, 2015 letter explaining the rationale for not filing. (See supra at pp. 5-6). For example, in Mr. White’s letter, he indicated that certain estate litigation was delayed due to health conditions suffered by the executor. (Id.). Additionally, Mr. White refers to the Hoagland law firm and one of the attorneys assigned to the case as having been diagnosed with cancer. (Id.). The Hoagland firm is a very prestigious and
Further, under the de novo standard, “the court does not sit in judgment of the [IRS]; the court
places itself in the shoes of the [IRS].” Samango,
professional firm and based on same, Mr. White’s letter shows a reasonable cause for delay.
In addition, Mr. White’s prior letter of March 6, 2014 notes that there was difficulty in “securing all of the necessary valuations and appraisals. caused by the contested litigation.” (Hayes Cert., Ex. C). Drawing from my professional experience, such appraisals often require months to prepare because a farm located in Monroe, New Jersey will often sit in residential, retail, and manufacturing zones. To appraise such a farm requires extensive knowledge of zoning considerations. Thus, this also constitutes a reasonable cause for delay.
In conclusion, based on the above facts and reasons, judgment is entered in favor of the Plaintiff.
ORDER THIS MATTER having initially come before the Court on the parties’ motions for summary judgment (ECF Nos. 12, 13) and subsequently on the Government’s motion for partial reconsideration (ECF No. 22); and the Court having carefully reviewed and taken into consideration the submissions of the parties, as well as their oral argument (January 6, 2020); and for good cause shown; and for all of the foregoing reasons,
IT IS on this 7th day of January, 2020,
ORDERED that Plaintiffs motion for summary judgment (ECF No. 12) is GRANTED; and it is further
ORDERED that Defendant’s motion for summary judgment (ECF No. 13) is DENIED; and it is further
ORDERED that the Government’s motion for partial reconsideration (ECF No. 22) is GRANTED; and it is further
ORDERED that the Court’s’Memorandum filed on October 3, 2019 (ECF No. 21) is hereby vacated.
PETER G. SHERIDAN, U.S.D.J. *17 UN I TE D S T A TE S D I S T R I C T C OU R T F O R T H E D I S T R I C T O F N E W J E R S E Y E S T A TE O F AGN E S R . S K E B A , C il A ti on N o . - - ( P G S ) ( T J B )
P ff V.
S U P E R S E D I NG J N TTE D S A TE S O F A M E R I C A M E M O R ANDU M AND O R D E R D f nd s r o s f o C ou on o on f o r r ec on ( E C F N o ) by D nd U it S s o ca ( “ G o r “ D f nd ” ) gov t ss novo nd d o f r w op o r ss ss ss o r P ff E o gn R S k ( “ E e” o r “ P ff’) nd ill l t i ili il x ; C ou o l ndu m ca s s nd ( ee M ndu m E C F N o ) B C aca ndu m ( E C F N ) il s s up ng ndu s s
O ll ca C ss - mm j udg t ough by P ff ( E F N ) nd by D nd ( E C F N M ll P ff k $ , n p lti d by l R nu S ( “ R S ” ) f ng o O J un gn R “ S k a” “ ” ) P ff pu uppo mm udg P U F ” ¶ E F S od e a s d d h 10 (I ¶ *18 On or about March 6, 2014, Plaintiff, through its counsel, George White, Esq., filed an IRS form entitled “Application for Extension of Time to File a Return and/or Pay U.S. Estate... Taxes” (IRS Form 4768) with a partial payment of the estate tax in the amount of $725,000, along with a cover letter explaining the reasons for the application. (Id. 3).
Mr. White’s letter to the IRS stated that he was paying all of the liquid assets ($1 .475 million) of the Estate to the State of New Jersey, Commonwealth of Pennsylvania, and the United States in payment of state and federal estate taxes. Mr. White furthered that the Estate was negotiating a mortgage on a commercial property to satisfy the remainder the estate tax it owed to the federal government; but this would require additional time. More specifically, Mr. White’s letter states:
Our office is representing Stanley L. Skeba, Jr. as the Executor of the Estate of Agnes Skeba. Enclosed herewith is a completed “Form 4768 — Application for Extension of Time to File a Return and/or Pay U.S. Estate Taxes” along with estimated payment in the amount of $725,000 made payable to “The United States Treasury” for the above referenced Estate Tax.
Additionally, we are requesting a six (6) month extension of time to make full payment of the amount due. Despite the best efforts of this office and the Executor, the Estate had limited liquid assets at the time of the decedent’s death. Accordingly, we have been working to secure a mortgage on a substantial commercial property owned by the Estate in order to make timely payment of the balance of the Estate Tax anticipated to be due.
Currently, we have liquid assets in the amount of $1 .475 million and the estimated value of the total estate is $14.7 million. Accordingly, we have submitted payments in the amount of $575,000 to the State of New Jersey, Division of Revenue, for State estate taxes payable and in the amount of $250,000 to the Pennsylvania Department of Revenue for State inheritance taxes payable. We are hereby submitting the balance of available funds to you, in the amount of $725,000, as partial payment of the expected U.S. Estate Taxes for the Estate.
We are in the process of securing a mortgage, which was supposed *19 o c l o e p i o r t o t e t a x s b i ng du e , i n t m oun o f $3 . 5 m illi on a w l d h a e p m itt d u s o m a e u ll p a y m n f e a x s ti m l y . D u e o c i c u m a n ce s p i l y unkno w n a nd un a vo i a b l e by e E x ec , e l nd r a s b ee n a b l e o c m l w e c l i ng d ea n e f M a c h 7 , 2014 . t i s a n ti c a d a t t l nd r w ill l ea r c l e w i n ee n ( ) a y s a nd n w ill it t a l a n f e e ti m a d U . S . E a T a x s a y a l .
A dd on a ll y a s ee n d l a y s n ec ng a ll f ece a y l ti s nd a pp a a l s du a a ti l a y s ca d by d liti g ti on rr tl y p nd ng n M dd l x C oun y N w J y .
( C ti ca ti on o f J ph M H y E n uppo f P l ti ff s M ti on r mm y J udg ( “ H y . ) E x C ., E C F N ) .
A t t ti E pp ox y $13 . illi on o f h $10 . 2 illi on d o f r ea l h o it nd ) nd ng y . P ff F ¶ ) y n ec ll y v pp nd ongo liti g on p n M dd oun y w J y (I ¶ tt P ff r ea e a ond y t t R S oun $2 , , ound M h 18 gh y s r du r y (I ¶ oun y t $725 , d $3 , , x ng b n p R O bo O S pp ca on o x e e fr h 10 2014 un til H ., x E Ow ’ ny x on o s s ub j d on by y ea (I r r ea n t: ny ill d on by y n on o o p x o
f o r a p r e v i s pp r ov e d e x t e n s i , t h e I n t e r n l R e v e nu n r e qu r e a p e rf o r m n ce bond , und e r S ti on 6161 ( nd 6165 o f t e I n t e n l R e v e nu e C od e h a f ace v u e o f up t o doub e t h e m oun t b e ng d e f e rr e . I n t e e e n e I n t e n R e v e nu e S e v e n e you r e x t e n s on e qu e s t , you r p y e n t o f t x du e upon p t o f t e e n e d e x t e n s .
O n o r bou t J u y 8 e e x e n s on o f ti o p e e s t t t x n t e d by G O e n o f R un til e p e b e r . H y e C e ., E x M O e n pp l e d e r ond y b po e d r f u u e e x e n M O e e n p : qu n n bond und r I RC e ng d r x on o p qu t bu t y b e a qu t r f qu P no ng o f x on f r y t do t li e e fr m li ilit r e y t f t du od o f x A ny e r x on o f o p li ilit e a pp li d r on o r e e on o s x O Ow tt r kno dg d d x d ee n p d on o bou h 18 bu bo dv d E ny r e a d y o
O n o ound un P ff f d d by D L V K d P ub c cc oun “ P ” ho e d by E W o p po $2 , , d p $3 , , ub x fr d p n ov $941 , ee H .,
O ugu S pond P ff F ¶ O acc oun j $941 , it i *21 w a s a p e n a lt y a e ss e d du e t o t h e E t a t e ’ s f a il u e t o f il e i n t h e a m oun t o f $450 , 959 . a nd a n e “ O p a y m e n t ” o f $488 , 719 . 34 , w h i c h w a s e f und e d t o P l a i n ti ff . (I d . . T h e I R S N o ti ce t a t d t h a t t h e “ f a il e t o f il e” p n a lt y w a s % o f t h e “ unp a i d a m oun t ” o f $1 , 803 , 838 S ee H a y s C t ., E x . I) . T h e I R S ca l c l t d t h e a m oun du e on M c h 10 , w s $2 , , m i nu s $750 , 000 p i d , qu li ng n oun du e o f $1 , , h e I R S h n i m po d a % p n lt y on h oun (I d .
O n ugu , , M W h it , on b h l f o f P l ti ff nd i n pon e o h e R ’ s ac ti a l tt o h e R S ti ng o f p lti s n h oun o f $450 , H y s C ., E J n h l tt M W h it e h v ou ea s h e l n f ili ng P l ti ff’ s f d l x h c l ud o a c onv ti on h W h it e h d w it h p ti f ” n c h h “ w w l ong h e p y ll n ili ng o f n b yond e e on d li s p l ou l d no ub j ec e e ny p lt (I F M W ’ s h dd iti l i ti c ce hy P l ti ff d no e a ti l x :
*22 B yond p E e c nu o h n ili ng du c p on o f e on ov y o f ’ W ill ou d ilit ili e e r’ s o p cee ll f d b d b J udg nk M C ff i i e up f w J dd oun ce y P ob P t i J y o D o h lt on P ff J ph J udg cee lti ough nd o eac ng u w on o on o l t o p it po d udg ll du J y 7 h w [*] [*] [*] A cc d i ng l y , h i s liti g a ti , w h i c h w a s ca s i ng u s ea s on o d e l a y n h e ili ng , g a e e o h e e a e ’ s i a b ilit y o il e h e e . a ll y , n M a y o f w e w e no ti d o f h e E a e ’ s liti g a ti on a tt y , T ho a s W a l h o f h e l a w m f H a l a L ongo M a n D un & D ouk a LL P , h a h e w a s a gno d w it h ca ce r h a w l d po ss b l ca h m o d l a h s a tt r fr m p cee ng a s s c h du l . I n ea l J un w w no d by M . W a l h ’ s h h s ogno s h a d w d a nd h w l d b d fr m h r h li h liti on o f h s tt o n w oun l it n h s m l d b e a ss n rr y s tt r h ough l . D o e c ng n oun l it s d e d l no l ong r b l n du li o e E il it ood .
(I .
O n o ound r R S pond d M . W it ’ tt r it d M . W it ’ tt do no “e li ea w du e ili . H ., E x K pon tt on ece M k R A ac k M k ’ l acc oun d pp l R S ff r r d s tt H ., x L M ’ tt l d po M W ’ ugu tt it o h gh li gh d on e a dd iti on no y d W :
I do no R S d kno dg e e n p ace a lt no y h e a d o dd $2 , , S unp s $1 , , % rr lt y $450 , . y p e e d by du o p y bu o h n ov on 665 1 (I k dd ss nu y 12 H
E x . M ) . o d a t e , I R S pp l s h a s t r e pond e d t o e it h e l e e r .
F r h r , M r . W h it e ti f d h a t h e h a d a c onv e r a ti on w it h a r e p r e e a ti v e t h e I R S a bou t h s on s w it h P l a ti ff s a e liti a ti on a nd a k d h e I R S p a ti v e a bou t t h p li ca ti w a iti ng un til a f h e liti a ti on w a on ud d f il e h e f d a a e a x h e I R S p ti v e w it h w m h e pok e d h und nd ng h a t b eca e ll d b ee e d e d p e w ou d b e no p li ca ti on r f ili H ., E x . N 29 : 6 - 30 : 19 )
U pon ugu M . W it e ca ll d ac on ho nd ca d e a nd dv d “e rr nd e a ss ss rr ” (I . : - : po iti M . K ee d d a c onv it a f R S il M . W it ac e ca d R S o d ss d p y v ca a ng nd R S dv d f
“ you ’r d you ’r H ., E x . : - . F M . K ee d und ood ong e e x d a r f il il d on ‘ d no (I t : -
D S op d bou ac k ca l k n by ff il M k littl kno dg f e e d d nd pu U F ” ¶ F ) M k M W d b il (I ¶ M ov M W d h acc oun o p bu mm un W o p *24 i n f o r m on r qu s d by t f i r i c h p r v n it fr o m f ng r u r n on a m o r ti m y s i s . (I d . ¶ J - 20 )
II S u mm y j udg m n t i op r i und r F d . R. C i v . P. 5 ( c m ov i ng p r y d m on t t is no g nu i n i ss u m i l f ac t nd v i d n ce e s li s m ov i ng p ’ titl m n t t j udg m n t a m . C C . V. C , 477 U . - 23 ( ) . A ac l i pu is g nu i i a ea j u y c ou u a d i c t r non - ov it i i l if, und ub it ff ec t t ou c f . nd on v. L i L obby c ., 477 U . . 248 ( ) c i i ng a on mm j udg a i i y no t i ilit y d i ng g in ny gh ng o ce ; i non - ov i ng p i ce “ i o b ll j o b n h vo . ” no v. ndu . C ng C ., 358 F . 3d 241 247 ( 3d C . ) ( quo nd 477 U . . )
O ce ov ng p y h s s l bu y oppo on t g nu ss l ac C & L gh Co. v. L ace ., 772 F . 2d 1103 1109 3d C T y oppo mm y j udg nno ll g ac l a ac 477 U . ; l Inc. v. rr ., F . 3d 1125 1 3d C 1 “ [ uppo nd p ff mm j udg v. F F B ., 912 2d 654 3d ; ee a F R. P. ) (r ng non ov ng p c s s is a nu ” y d pu ov r f gh it und r *25 gov e r n i ng l a w w ill p r ec l ud t e e n t r y o f s u mm a r y j udg e n t . A e r s on , 477 U . S . a 247 - 48 . If a c ou r d r i n s , “a r d r a i ng a ll i n r e n s i n a vo r f [ t non - ov i ng p a r t y ] , a nd a k i ng ll c r b ilit y d r i n a on s i n h i s a vo r . . . no r ea s on b l j u r y c ou l d nd s u mm j udg n t i s op . ” l v s v . T op n , 226 F . A pp ’ x 222 , 227 ( 3d C r . 2007 ) .
III . T l ong - li d p c p l n p ng x s u s s t t rr l y c on u . G l dv . G ou l , 245 U . . 151 , 153 ( 1917 . G ou l ea on : “ [I] t i e e li d u no t t o nd r [ x ] p ov on , by p ca on , yond e c l po f l ngu e u , op s s o o ace tt ec ca y po d ou . ” I . 153 . I n e e v f gu C hou d b e “c u ong y t t gov n vo e c iti ze . ” n dd iti n x t i po lti ce “ o b e c u d c tl ’ [ a xp r] ‘ o b ub j ec a lt y un ss e po . ” C mm ‘r v 361 U . 87 9 1 ( 1959 ) ( itt G d p n ub j ee F dd F C D on o . J - 85 ( D w vo d kno dg bu n p t it s bu ss nd p ud ce t it il a U B oy . ) ( quo ng 26 C F R § . )( ) ( )) B oy B dd a xp r’ ce o e a tit ‘r ’ und § 665 1 )( l nu od o d y p rr d b eca a ili cc o 26 R )( r f w *26 e x e r c i s e d o r d i n a r y bu s i n e ss ca r e a nd p r ud e n ce a nd w a s n e v e r t h e l e ss un a b l e t o f il e t h e r e t u r n w it h n h e p r e s c r i b e d ti m e I d a t C e f J u s ti ce B u r g e r r ea s on e d h e r e w a s a n a d m n s r a ti v e n ee d f o r s r c t f ili ng r e qu r e m e n s H e w r o e :
T e ti m e a s c o m e f o r a r u l e w it h a s ‘ b r gh ’ a li n e a s ca n b e d r a w n c on s s e n t w it h e s a u e a nd m p l e m e n ti r e gu l a ti on s d li n s a r e nh r n tl a r b r a r y ; f x d d a ho w e e r a r e o f e n ss n a l t o acc o m p li h n ss a r r u lt e G ov r n m n t a s illi s o f a xp a y r s o o r a nd ou r y m o f l f- a ss ss m t n a l ca l u l a on o f a a x p l ca nno t w o r k on a ny b a s o r n on o f t f ili a nd a d ny l ss r g d a nd a r d l k a l x ttit ud o d f ili ng d o p t y t f x s o G ov h hou d o ss u u n f u ec d h c cc ng C f u ce B u d b ee n xp y r’ ce on dv ce fr n tt y o acc oun e ca bu ound “a xp do no o b e a x o kno w x u ili ng d x u n du . ” s s u on on ’ y o acc oun do e u on o f ng on o f ec on f S od 26 R ) ca ll F il il u n o o p . s on h s s l ec eac h ll e a dd ss
G § dd e a ss lti ili ng o f e du ca y und 665 1 )( ) dd il o il e a : ca f f il il e a ny n on d r ( h ny on o r un ss it i s s il du e d n oun o b x on oun h
art a dd iti on a l 5 p r ce t f o r eac h a dd iti on a l m on t h o r fr ti on t h r o f du r w h c h s u c h f a il u r e c on ti nu s no t cee ng 25 p r ce t i n h e a gg r g a
26 . . § 665 1 ( a )( 1 )
O n h e o h r h a h e p a lt f o r f a il u r e o ti m y p a y h e a x is s t f o r h in § 6651 ( a )( ) T h s s ec ti on r s : n s e o f f a il u r ( ) o p a h e a m oun t s ho w n a a x on a ny u n s p ec f d n p a a g a ph ( ) on o r b f o h a p r s c r b d
f o m t o f u c h x ( m w h g d ny s on o f ti m o m ) un ss it is ho w n h t u c h il u is du o on b e ca u e a nd no t du w ill u l g ec h h ll b e m h o n x o n u c h u n . 5 ce t o f h e m oun o f c h x f il is o m o n m on h n dd iti 5 p ce o eac h dd iti on h o r fr ti on o f du c h c h il e c ti nu cee ng 25 p ce t i e a gg g § ( )( c on o f lt po o r f il il ( ub ec on
( )( )) y p x ( ub ec on ( )( )) is c § 1(b). It ec :
( b ) P po d on n oun du F pu po o f-- ( ) ub ec on ( )( e a oun f x o b n on ll b du ce d by e a oun f ny p f x c h is d on o c f e x nd by e a oun f ny it x h y b d on ) ub ( )( e a oun f x n on n pu po pu e a dd ny du d by oun ny p h is d on o r nn ng o h nd by oun ny it y b d on [ ] § ee on ho w P ff o gu P ff gu § 5 1 )( ) d og r ( n p )( 1). ub og ff
c c ud e t h a t t h e a t e f ili ng p e n a lt y is ca c u a t e d by u s i ng t h e f o r m u l a s e t f o r t h in s ub s ec on ( a )( ) i n c o r po r a ng t e “ n e t a m oun t du e” on t e “ t h e d a t e p r e c r i b e d f o r p a y m e n t ” a s s e t f o r t h n ub ec on ( b )( S n ce a e a x w a ov e r p a d on a r c h 18, 2014 a nd x t e n on r a n un til e p e m e r 10, e r e w a no n e t a m oun t du e on e S e p e m b e r d d n e ; a nd h e n ce , no p e n lt y m a y b e m po e d ec ond y nd n e a lt r n e n ff r gu e e ph r e “ u c h f il u r e is du e o e ca u e no t du e o w ill f u l n g ec ” in ub ec ( )( ) p o ec e xp y r fr o m a
p f u w f il d du o a u
T G ov ee w it h y r’ gu T G ov m p o ff s qu o f § 665 1 ( )( ) ( ) u u d w it h r u ( 26 U . . § 615 1) titl d nd p ace f r p y x s s ho n on . ” § 6151 : ‘[ ] f il d f p y h x ll ee d a f ce o f x d f r c h p y ( d it hou d o ny x on o p y x p f ca ll y § n p p t: ) G x ce d s s ub r
[ S q ] a n o x is qu d und r titl r r gu qu d h n hou ce a nd d fr m h x nu ce h is ll x nd p ace x d r f ili ng d hou d ny x on o r [***] x x In ny a is o b d on o n d ce n od ny ce in titl x f ll h n o r *29 d . B a d on § 6151 , t h e G ov n m n c v y on s t h a t t h e l a t d a y f o a y m n t w a s n n e m on t h a f t t h e d t h o f A gn k a — M a c h 10, 2014 ; b eca e no t w a s f il d by t h a t d a e a n a lt y m a y b e a ss ss d . A pp y h e a a e o h e f ac , t h e G ov n m n c t nd s y $750 , 000 a d on o f o e M a c h 10, h n $2 , , 838 w a du e h a d a R rr ng b k o § 665 1 ( )( a % n lt y on e ff n ce m y h f o e e a ss ss d eca e it no d by M h 10, . A s s c e ll m n o f e e e x on M h 18, 2014 f no v il eca e e “ e x ” M h 10, . cc o ng e G ov n m n gu t t e m po on o a n lt y e a m oun $450 , . 00 is op
T e ’ gu m n m ss e m k F bo h § 665 1 )( nd ( )( ) gn e ec c y on h p lti ill ss bo h e ili nd p m n e e e x B h p g ph s s y e “ e ” is o e g to ny on o r f ng . T ngu g n d pu is e e is n p ov c li ee L a V ll ee N C c v. VI. Z C ., . 2d 616 621 3d C ; ee a M v. H L W L *8 D N . J 8, G ov pu d po ee H d n il dd d un il ll dd il lt hough y p G d ob j il ee B oy 469 y b e a r f il bu ong ss
F i ll , no e i ss u e i n h i s ca e i s h e h e P l i ff d e on s e d ea s on l e ca u s e a nd no t ill u l g l ec t i ll g d l y ili o l y il it s e e e u . A lt hough e C ou t s l ea dy d d lt t i ss u s no t op l y po d pu u o e G ov ’ s l d u o on l , it ill v w s ss u o o l ss .
A s v l d , und 26 U . S . C . 6651 ( ) , no p lt o il u o l il e a u y b e a ss ss d f “ it i s s u h u s du ea l e ca u e a nd no du e ill g l ec . ” I d . “ W hou l d b d [ du l e ca ] s d d d novo it hou d d ec on o f I R S . ” P . W ll bo d & P l r C o . v . U it d S , 319 F . S upp . 2d 1187 , 1188 ( D . O . 2004 ) , ff’ d , N o . 04 - 35511 , 2005 W L 3113470 ( 9 C . N . 22 , 2005 ) ; C n v . U it d S , 110 F d . C l . 1 , 6 ( 2013 ) ; B . v . . R . S ., N o . : 05 - C V - 301 , 2006 W L 2797744 , *2 ( N . D . d . S . 28 , 2006 ) ; ee a o S ngo v . U it d S , o . C V - , 2019 W L , *7 ( . . . J un , ) ( iti W ll F go & C . & S ub d . U it S , 91 F d . C . , 75 ( ) , ff’ ub no . W ll F go & C . . it S 641 F . 3d 1319 F d . C . )) pp do d 3d y 22 ) cc ng C ill w ss d novo . ’ . ca M W it ub itt d h ugu tt r ee up a a ) F W it nd ca ce n g du o h nd iti s s d by (I . dd W H w m nd on f gn ca ng b n d gno ca (I . H y p nd
F vo “ j [I R ] ; t ace [I R ” ngo W L *7 itt hu w do t i e a w *31 ss on m nd b d on M W ’ on e ca dd on W M h 6 2014 no ff n ll y v on pp .. ca d by on liti on ” H ., fr m m y p on pp qu on o p eca e a m on w ill it i nu z on kno dg f z hu tit d on bov j udg t i vo
ORDER THIS MATTER having initially come before the Court on the parties’ motions for summary judgment (ECF Nos. 12, 13) and subsequently on the Government’s motion for partial reconsideration (ECF No. 22); and the Court having carefully reviewed and taken into consideration the submissions of the parties, as well as their oral argument (January 6, 2020); and for good cause shown; and for all of the foregoing reasons,
IT IS on this ‘7th day of January, 2020,
ORDERED that Plaintiff’s motion for summary judgment (ECF No. 12) is GRANTED; and it is further
ORDERED that Defendant’s motion for summary judgment (ECF No. 13) is DENIED; and it is further
ORDERED that the Government’s motion for partial reconsideration (ECF No. 22) is GRANTED; and it is further
ORDERED that the Court’s Memorandum filed on October 3, 2019 (ECF No. 21) is hereby vacated.
PETER G. SHERIDAN, U.S.D.J.