DiRezza v. Comm'r of Internal Revenue (In re Estate of DiRezza)
| Decision Date | 11 January 1982 |
| Docket Number | No. 16705-79.,16705-79. |
| Citation | 78 T.C. 19 |
| Parties | Estate of Nero DIREZZA, Deceased, James L. DiRezza, Personal Representative, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Gene F. Reardon, for the petitioner.
W. Edward Williams and Thomas G. Hodel, for the respondent.
P delinquently filed an estate tax return. Accordingly, respondent summarily assessed additions to tax for late filing and late payment. Respondent subsequently examined P's return and proposed an additional estate tax liability and an addition to tax for late filing in respect of that liability. P agreed to the additional tax liability and paid it. However, the addition to tax was disputed. Respondent then sent a statutory notice determining the disputed addition but no deficiency in estate tax. Held, this Court has jurisdiction to redetermine the disputed addition for late filing because it is attributable to a deficiency in tax. Sec. 6659(b)(1), I.R.C. 1954. Held, further, P is liable for the disputed addition to tax because P failed to exercise ordinary business care and prudence in relying on an attorney to prepare and file the estate tax return. Sec. 6651(a)(1), I.R.C. 1954.
In the statutory notice which he sent to petitioner, respondent determined an addition to tax under section 6651(a)(1)1 in the amount of $552 but did not determine any deficiency in Federal estate tax. The issues for decision are as follows:
(1) Whether this Court has jurisdiction to redetermine an addition for late filing attributable to an agreed additional tax liability if respondent sends a statutory notice determining the addition but no deficiency in tax.
(2) If this Court has jurisdiction, whether petitioner exercised ordinary business care and prudence in relying on an attorney to prepare and timely file the estate tax return so that the addition to tax under section 6651(a)(1) should not be sustained.
Some of the facts have been stipulated and are found accordingly.
The decedent, Nero DiRezza, died on April 17, 1975. At that time, he was a resident and domiciliary of the State of Colorado. His son, James L. DiRezza (hereinafter DiRezza), resided in Golden, Colo., at the time that the petition herein was filed. DiRezza was named executor in his father's will. On May 19, 1975, he was duly appointed personal representative of his father's estate by the District Court of Arapahoe County, Colo.
The decedent's estate tax return was due on January 17, 1976.2 However, it was not filed with the Internal Revenue Service Center at Ogden, Utah, until January 10, 1977. No extension of time to file was ever sought.
Tax in the amount of $35,810.76 was reported on the decedent's estate tax return. Because that return had been delinquently filed, the Ogden Service Center summarily assessed additions to tax for late filing and late payment in the respective amounts of $8,057.42 and $2,148.65. As ad valorem penalties, those additions to tax were determined (i.e., measured) by the amount of tax shown on the return as filed.3
Petitioner protested the assessment of both additions to tax, which was then abated by the Service Center. The estate tax return was then assigned to the Denver District Office for examination and a final determination whether petitioner's delinquency was due to reasonable cause and not willful neglect.
After its examination of the estate tax return, the Denver District concluded that petitioner's delinquency was not excused.4 It also proposed an additional estate tax liability in the amount of $2,208. Accordingly, the additions to tax for late filing and late payment were reassessed in the original amounts. Petitioner paid these amounts under protest.5 In contrast, it agreed with the additional tax liability and paid it. 6 However, it did not agree that it was liable for any addition in respect of the additional tax liability. Consequently, on September 10, 1979, respondent sent petitioner a statutory notice determining an addition for late filing in the amount of $552, but no deficiency in estate tax. See Rev. Rul. 78-20, 1978-1 C.B. 441. This addition to tax was determined (i.e., measured) by the amount of the additional tax liability to which petitioner had previously agreed.7
Within a month after his father's death, DiRezza contacted Doug McKinnon, a local attorney who had previously represented him on several occasions over the years, and requested that he handle his father's estate. McKinnon declined because he was not familiar with estate practice. DiRezza then asked for a recommendation. McKinnon referred him to Harold Fielding, an attorney with whom he shared offices. McKinnon recommended Fielding because he enjoyed a good reputation, was considered reliable, and had many years of legal experience. Fielding's practice included probate, although most of the estates that he had previously handled fell in the $20,000 to $50,000 range. He had never before filed a Federal estate tax return.
DiRezza contacted Fielding and retained him. He employed professional counsel because he felt he was not equipped to administer his father's estate. He was a pipefitter by profession with only a formal 10th grade education and a G.E.D. degree. Furthermore, he had never before been a personal representative of an estate. However, DiRezza, who was 38 years old at the time of his father's death, was not completely without business or legal experience. In addition to his employment, he owned some stocks and bonds as well as real estate in both Golden and Parker, Colo. He had also filed Federal income tax returns and had retained legal counsel on several occasions to represent him in various contract and real estate transactions.
When he retained Fielding, DiRezza furnished him with all relevant documents in his possession, including tax returns. DiRezza then instructed him to handle all matters related to the probate and administration of his father's estate, specifically including the preparation and filing of all necessary tax returns. Although at that time DiRezza was not specifically aware of the requirement to file a Federal estate tax return, he was very conscious of taxes in general and the need to file returns on behalf of the decedent. However, he never inquired about what particular taxes might be due or what particular returns might have to be prepared, much less when such returns were required to be filed. He never inquired about his general legal obligations and duties as the personal representative of his father's estate. Rather, he completely relied on Fielding to take care of everything. In effect, DiRezza instructed Fielding not to bother him except as necessary to present him with documents for his signature.
DiRezza cooperated with Fielding and maintained periodic contact with him. However, he never inquired about Fielding's progress in administering the estate, except in a very general way, and was always satisfied when told that everything was under control and not to worry. He did not, in fact, know what was being done (or not being done) and simply assumed that Fielding was on top of the situation.
On April 30, 1976, DiRezza met with Fielding to execute the Colorado inheritance tax application. On the first page of that return, a response of “Yes” was given to the question “Will Federal Estate Tax Return be Filed?” DiRezza examined the return and asked Fielding to explain the nomenclature. He also inquired whether all State and Federal taxes were going to be taken care of, and Fielding assured him that they were. He did not, however, specifically inquire about the obligation to file a Federal estate tax return or its due date. DiRezza executed the return, under oath, immediately below the statement that he had read the return and that the recitals therein were true.
In May 1976, DiRezza received the first of several letters from the Internal Revenue Service inquiring about the decedent's estate tax return. 8 He contacted Fielding, who reassured him that there was no cause for concern.9 He did not, however, explain to DiRezza why he thought so. DiRezza did not ask why, nor did he inquire whether Fielding had obtained an extension of time to file. Rather, he simply assumed that all was well.
In September 1976, Fielding retained a C.P.A. to prepare the estate tax return. The preparer completed and executed the return on December 17, 1976; DiRezza executed it on January 4, 1977. The return was filed with the Ogden Service Center on January 10, 1977. It reported a gross estate of $273,417.89. In addition to the specific exemption of $60,000, deductions in the total amount of $57,799.18 were claimed. This amount included $16,000 for the alleged common law wife, $23,100.08 in attorneys' fees, and $10,496.70 for the personal representative's commission.
The additions to tax for late filing and late payment which were assessed against the estate in respect of the tax shown on the return were paid by Fielding. Fielding paid those amounts because he felt responsible for the delinquency.
Finally, Fielding never advised DiRezza, or otherwise led him to believe that a Federal estate tax return was not required to be filed.
DiRezza's reliance on his attorney to prepare and timely file the estate tax return did not constitute reasonable cause for the delinquency.
OPINIONIssue 1. Jurisdiction10
At the outset, we would like to emphasize that petitioner has not claimed an overpayment or otherwise raised any issue concerning the two previously assessed additions to tax.11 Accordingly, whether we have jurisdiction over them is an issue which we need not consider or decide. See sec. 6512. Rather, our inquiry is limited to whether we have jurisdiction over the late-filing addition which respondent determined in the statutory notice. For the reasons which follow, we hold that under...
To continue reading
Request your trial
-
Kluger v. Comm'r of Internal Revenue
...to redetermine deficiencies in income, estate, gift and certain excise taxes. Sections 6211-6212, 6214-6215; Estate of DiRezza v. Commissioner, 78 T.C. 19, 25 (1982). In this case, there is no dispute that respondent issued a statutory notice of deficiency in which an underpayment of income......
-
Boyle v. U.S.
...a question of fact to be determined by the trier of fact from all of the facts and circumstances in a particular case. Estate of DiRezza v. Commissioner, 78 T.C. 19 (1982) (citing Estate of Duttenhofer v. Commissioner, 49 T.C. 200, 204 (1967), aff'd. per curiam, 410 F.2d 302 (6th Cir.1979))......
-
Graham v. Comm'r of Internal Revenue
...the taxpayer there might have pursued as an alternative to seeking invalidation of the deficiency notice. See also Estate of DiRezza v. Commissioner, 78 T.C. 19 (1982). In the case before us, a motion to suppress the 6(e) evidence under the Fourth Amendment exclusionary rule would squarely ......
-
Estate of Whitt v. Commissioner
...concerning the applicability of these additions to tax even though it bears the burden of proof. Rule 142(a); Estate of DiRezza v. Commissioner Dec. 38,706, 78 T.C. 19, 32 (1982); Estate of Mason v. Commissioner Dec. 33,349, 64 T.C. 651, 663 (1975), affd. 78-1 USTC ¶ 9162 566 F. 2d 2 (6th C......
-
Surviving Section 6651 of the Internal Revenue Code
...24, 1982); Shaw v. U.S., 82-1 U.S.T.C. § 13,455 (Feb. 11, 1982); Corum v. U.S., 82-1 U.S.T.C. § 13,450 (Jan. 12, 1982); DiRezza v. Comm., 78 T.C. 19 (Jan. 11, 1982); Boeving v. U.S., 650 F.2d 493 (8th Cir. 1981); Lillehei v. Comm., 638 F.2d 65 (8th Cir. 1981); Daley v. U.S., 480 F.Supp. 808......