ESTATE OF LOHMAN v. Commissioner

• Decision Date: 03 February 1972
• Docket Number: Docket No. 5170-69.
• Citation: 1972 TC Memo 27,31 TCM (CCH) 96
• Parties: Estate of Anna A. Lohman, Deceased, Manufacturers Hanover Trust Company and Genevieve R.F. Lohman, Administrators, C.T.A. v. Commissioner.
• Court: U.S. Tax Court

31 TCM (CCH) 96

1972 TC Memo 27

T.C. Memo. 1972-27. Estate of Anna A. Lohman, Deceased, Manufacturers Hanover Trust Company and Genevieve R.F. Lohman, Administrators, C.T.A. v. Commissioner.

Docket No. 5170-69.

United States Tax Court.

Filed February 3, 1972.

Richard J. Concannon, Kelly, Drye, Warren, Clark, Carr & Ellis, New York, N.Y., for the petitioner. Agatha J. Vorsanger, for the respondent.

Memorandum Findings of Fact and Opinion

SCOTT, Judge:

Respondent determined a deficiency in petitioner's Federal estate tax in the amount of $232,703.35 and an addition to tax under section 3612(d)(1), I.R.C. 1939,¹ for failure to file an estate tax return in the amount of $88,029.17.

The issues for decision are:

(1) Whether any additional assessment of estate tax is barred by the statute of limitations contained in section 874(a), or whether under section 874(b) this limitation period is inapplicable because of failure to file an estate tax return.

(2) In the event we decide that respondent is not barred by the statute of limitations, whether he correctly determined the value of decedent's two-thirds interest in the estate of her husband, who had predeceased her, and whether petitioner is liable for the additions to the tax set forth in section 3612(d)(1) for failure to file an estate tax return as required by the provisions of section 821.

Findings of Fact

Most of the facts have been stipulated and are found accordingly.

Petitioner is the Estate of Anna A. Lohman, deceased. Manufacturers Hanover Trust Company, which had its principal office in New York, New York, and Genevieve R.F. Lohman, who resided in Brooklyn, New York at the time the petition in this case was filed, are duly qualified and presently acting Administrators, C.T.A., of the Estate of Anna A. Lohman. They were granted letters of administration on January 19, 1965, by the Surrogate's Court of Kings County, New York.

Anna A. Lohman, the decedent, died on December 11, 1952. The executor of her estate was her son, J. Fred Lohman, Jr., who qualified and acted as such until his death on December 8, 1964.

By a letter dated March 10, 1954, J. Fred Lohman, Jr., requested a 6 months' extension of time within which to file the Federal estate tax return for decedent's estate. The letter set forth as the basis of the request that J. Fred Lohman, Jr., had suffered a nervous breakdown following the death of his mother, Anna A. Lohman, and as a result had a tremendous backlog of work. An extension of time within which to file the Federal estate tax return was granted until September 11, 1954.²

J. Fred Lohman, Jr., filled out, by hand, and signed under date of September 13, 1954, U.S. Treasury Department, Internal Revenue Service Form 706 (hereinafter referred to as the Document) in connection with the Estate of Anna A. Lohman. On the top of the first page of the Document were the handprinted words, "Tentative Return." The heading of the Document was filled in as well as the general information section which, among other things, stated that decedent's spouse had predeceased her and that the date of his death was November 15, 1940. Schedules reflecting decedent's ownership of real estate, stocks and bonds, and mortgages, notes and cash at the time of her death were completed. However, the remaining schedules were left blank and there was no computation of tax. The return contained the information that the estate was not represented by an attorney. The Document omitted the listing of a two-thirds interest of decedent in the estate of her husband, J. Fred Lohman, who had predeceased her.

On September 13, 1954, the Document was submitted to and received by the district director of internal revenue for the Borough of Brooklyn, City and State of New York. The Document was accompanied by a payment in the amount of $150,000.

An examination of the estate tax liability of the Estate of Anna A. Lohman was made by Alfred Yatkowitz, a revenue agent of the Internal Revenue Service. Based upon the information contained in the Document submitted, the revenue agent computed the estate tax liability to be $110,121.99 after allowance of credit for State estate, inheritance or succession taxes. However, this claimed credit was disallowed in the amount of $9,291.33.

Under date of September 10, 1957, the district director of internal revenue at Brooklyn, New York addressed a letter to J. Fred Lohman, Executor, in regard to the Estate of Anna A. Lohman, which stated in part as follows:

Estate of Anna A. Lohman Date of death: 12/11/54 (sic)

Reference is made to the Federal estate tax return filed for the above-named estate.

The amount of the gross estate tax is hereby determined to be $119,413.32. Credit against such gross tax for State inheritance or estate tax may be allowed in the amount of $9,291.33 (the maximum authorized under section 813(b) of the Internal Revenue Code), provided documentary evidence in support thereof is submitted as required by section 81.9, as amended, Estate Tax Regulations 105. * * *

Interest in the amount of $5,269.55 was added to the gross estate tax of $119,413.32 and the amount of $25,317.13 was refunded to decedent's estate on October 17, 1958.

Following the death of J. Fred Lohman, Jr., on December 8, 1964, and issuance of letters of administration to the current administrators of the Estate of Anna A. Lohman, a letter dated February 17, 1965, was sent to the district director of internal revenue at Brooklyn, New York, by the law firm which represents the current administrators. This letter referred to the "distributive share due to the decedent Anna A. Lohman * * * as legatee under the Last Will and Testament of J. Fred Lohman (date of death: 11/15/40 * * *)." and stated:

My examination of the 706 return filed in the above estate does not reflect the inclusion of any of the foregoing assets therein.

The 706 return was prepared and filed by Mr. J. Fred Lohman, Jr. who was the sole executor of the estate of said Anna Adeline Lohman. The said return was audited in 1957 and all assessments have been paid, — as your records no doubt will disclose.

Mr. J. Fred Lohman, Jr. was not represented by counsel either in the preparation, filing or auditing of the said 706 return in said Estate of Anna Adeline Lohman.

By reason of the fact that there were unadministered assets in said estate, as well as the estate of J. Fred Lohman (who died 11/15/40) an application was made by my clients for the issuance of letters of administration with the will annexed. Said application was granted by the Surrogate of the County of Kings and letters of administration with the will annexed were issued to Genevieve R.F. Lohman, the widow of J. Fred Lohman, Jr., jointly with the Manufacturers Hanover Trust Company. Both administrators qualified and are now acting in said capacities. All assets of the Estate of Anna Adeline Lohman (now in the name of said estate or to be acquired by it as the distributive share due to said decedent from the estate of J. Fred Lohman who died November 15, 1940) constitute a part of the gross estate of G. Fred Lohman, Jr. who died December 8, 1964.

J. Fred Lohman died on November 15, 1940, and his wife, Anna A. Lohman, and son, J. Fred Lohman, Jr., were named co-executors of his estate. A U.S. Treasury Department, Internal Revenue Service Form 706 Estate Tax Return was prepared and signed by J. Fred Lohman, Jr., for the Estate of J. Fred Lohman. The form 706 was filled out by hand and had the word, "Tentative" handprinted in ink across the top of the first page. There was no date shown by the signature but the form 706 was received by the collector of internal revenue, Brooklyn, New York (now the district director of internal revenue) on May 15, 1942. At that time the form 706 had a space for certification by a notary that the return was "sworn to and subscribed" with a space for the date to be filled in. The form 706 was not notarized. A second form 706, Estate Tax Return, was completed by hand and in ink, signed and sworn to by J. Fred Lohman, Jr. under date of September 14, 1942, and received by the collector of internal revenue, Brooklyn, New York on September 14, 1942.

Respondent in his notice of deficiency mailed to petitioner on July 16, 1969, determined that no estate tax return was filed for the Estate of Anna A. Lohman. The deficiency notice therefore set forth all amounts respondent considered to be assets and deductions of the estate. The notice of deficiency listed total assets of the estate as of the date of death of a value of $1,143,729.30. The only item included in these assets which had not been included in the assets of the estate as determined by the revenue agent prior to the mailing by the district director of internal revenue to J. Fred Lohman, Jr., executor, of the letter dated September 10, 1957, was "Interest in Estate of J. Fred Lohman" valued at $648,887.20.

Opinion

Section 821(a)(1)³ requires the executor of an estate to file a return in any case where the gross estate exceeds the amount of the specific exemption provided in section 812(a). Section 81.63, Regs. 105, requires that a return on form 706 be filed within 15 months after the date of death except where an extension of time for filing is granted.

Section 874⁴ bars the assessment and collection of any estate tax after the expiration of 3 years after the return is filed except in the case of a false or fraudulent return or in the case of a failure to file a return, in which case assessment and collection may be had at any time. In the case of any failure to make or file a return, or late filing of the return, section 3612(d)(1)⁵ provides for an addition to tax of an amount not to exceed 25 percent except that the addition for late filing does not apply if the late filing is due to reasonable cause.

Respondent contends that since the form 706 filed on September 13, 1954, was marked, "Tentative Return," and contained incomplete and...