Estate of Proios v. Commissioner
| Decision Date | 29 August 1994 |
| Docket Number | Docket No. 15452-93. |
| Citation | 68 T.C.M. 645 |
| Parties | Estate of Maria Proios, Deceased, Maria Tavlarios and Michael Frangos, Co-Executors v. Commissioner. |
| Court | U.S. Tax Court |
Laurence E. Curran, 14 Wall St., New York, N.Y., and Michael G. Chalos, 300 E. 42nd St., New York, N.Y., for the petitioner. Catherine R. Chastanet, for the respondent.
Memorandum Findings of Fact and Opinion
This case is before the Court pursuant to a petition filed on behalf of the Estate of Maria Proios to redetermine respondent's determination of a $220,255 deficiency in its Federal estate tax liability and an $89,074 addition thereto under section 6651(a)(1). Unless otherwise indicated, section references are to the Internal Revenue Code in effect for the year of death. Rule references are to the Tax Court Rules of Practice and Procedure. Petitioner is the Estate of Maria Proios (decedent). Maria Tavlarios and Michael Frangos are collectively referred to as coexecutors and are separately referred to as Tavlarios and Frangos, respectively.
Following a concession by petitioner that it was not entitled to $8,000 in deductions reported on its Federal estate tax return, we must decide:
1. Whether the fair market value of certain real estate owned by decedent on the date of her death was $593,335 as determined by respondent. We hold that the value was $531,036.
2. Whether petitioner is entitled to a $73,900 credit for the payment of foreign death taxes. We hold that it is.
3. Whether petitioner is liable for an addition to tax for the failure to file timely a Federal estate tax return. We hold that it is.
Some of the facts have been stipulated and are so found. The stipulations and attached exhibits are incorporated herein by this reference. Decedent was a resident of the State of New York at the time of her death on February 11, 1989. Coexecutors resided in the State of New York when the petition was filed.
Decedent owned two contiguous, rectangular pieces of real estate (collectively referred to as the Real Estate) in Piraeus, Greece,1 on the date of her death. Three semi-derelict buildings, which were dilapidated and needed to be razed, were located thereon. The separate lots of the Real Estate were located at 109 Notara Street and 22 II Merarchias Street, respectively, and together the lots formed an "L" shaped parcel of land. The area surrounding the Real Estate was one of the oldest sections of Piraeus and had undergone steady development as a prime office location for approximately 50 years.
Coexecutors retained the law firm of Chalos, English, and Brown (Chalos) to probate decedent's will and retained an attorney in Greece (Foreign Attorney) to handle decedent's estate for Greek tax purposes. Coexecutors also retained an accountant, Sanford Fine (Fine), to prepare decedent's Federal estate tax return. Fine was decedent's personal accountant before her death, and he was believed to be the most knowledgeable person with respect to decedent's finances.
Andrew Glen Weiss (Weiss) was the attorney at Chalos assigned to handle petitioner's case. Weiss had not handled or probated an estate prior to this assignment. Weiss and Fine consulted on a regular basis regarding information that was necessary for the preparation of decedent's estate tax return. Weiss also consulted with Foreign Attorney regarding decedent's assets in Greece.2 Weiss also had regular contacts with coexecutors regarding collection of information. Coexecutors spoke English and Greek, and they were able to act as liaisons between Weiss and the relevant people in Greece. Tavlarios also helped Weiss assemble decedent's assets, provided him with all of decedent's records that Tavlarios had in her possession, and provided him with the names of the banks that she dealt with on decedent's behalf.3
Petitioner filed an inheritance tax return with the Greek Government on or before October 11, 1989, that reported the Real Estate and certain funds deposited in Greece as owned by decedent at her death. For Greek inheritance tax purposes, the Real Estate was valued as of February 1989 at 28,140,900 drachmas, or approximately $175,880.4 On October 11, 1989, the Bureau of Taxation of Athens issued an order for payment to its tax collector computing the amount of payment due as 15,129,843 drachmas, for the Inheritance and/or Gift Tax or Dowry Tax of petitioner. Tavlarios was listed on this order as one of the taxpayers.5
On March 16, 1990, Fine sent a letter to respondent requesting an extension of time to file decedent's Federal estate tax return.6 The letter stated that an extension was necessary primarily because: (1) "certain property included in the estate was located in Athens, Greece, which resulted in language communication problems with remote beneficiaries", and (2) decedent "lived alone at the time of her death". The letter also stated that a $50,000 check was enclosed in payment of decedent's estimated Federal estate tax liability. Respondent cashed this $50,000 check shortly after receipt.
The coexecutors filed decedent's Federal estate tax return on June 28, 1990.7 The return listed decedent's gross estate as follows:
Property in United States
Cash in joint bank accounts ........ $ 177,960
Cash in decedent's bank account .... 99,751
Stocks and bonds ................... 198,134
Household contents ................. 6,200
Mortgage receivable ................ 123,348
Residence in Long Beach, New York8 264,500
__________
$ 869,893
Property in Greece
Personal property .................. $ 1,562
Funds on deposit ................... 96,475
Real Estate ........................ 374,690
__________
$ 472,727
__________
Gross estate .......................... $1,342,620
==========
After respondent received decedent's Federal estate tax return, respondent's Holtsville, New York, office mailed petitioner a bill for $99,097.93. The bill listed that petitioner owed: (1) An underpayment of $49,995, (2) a late filing penalty of $30,609.45, (3) a late payment penalty of $5,691.66, and (4) interest of $12,801.82. Weiss replied to this bill by sending correspondence to the Holtsville office stating that: (1) Decedent's Federal estate tax was fully paid because Fine had remitted a $50,000 check with his request for extension dated March 16, 1990, and (2) any penalty that had been assessed should be abated because petitioner had made a "good faith" attempt to comply with its obligations under the Internal Revenue Code. The Holtsville office adjusted petitioner's account by crediting the account for a decrease in penalties of $30,609.45 and $4,691.68, and a decrease in interest of $3,802.02, and the Holtsville office sent petitioner a bill for the balance due of $8,797.54.9 Petitioner mailed the Holtsville office a check for $8,797.54 with a letter from Weiss stating that he was enclosing a check "representing full and complete payment of said penalties and interest." Respondent cashed the check.
In March 1991, petitioner sold the Real Estate for approximately $810,810 to Teodomi Construction and Technical Company, Ltd. (Teodomi). Teodomi also acquired another piece of real estate (the Corner Lot), located at the corner of Notara and II Merarchias Streets. The Corner Lot was adjacent to the Real Estate, and Teodomi intended to develop it and the Real Estate into the site of one office building. The Corner Lot was too small to develop without the Real Estate.
On or after March 18, 1993, petitioner filed with respondent a Form 706CE, Certificate of Payment of Foreign Death Tax, listing the payment of 13,616,860 drachmas to the Greek Government with respect to property located in Greece that was owned by decedent at the time of her death. Form 706CE was signed by coexecutors, but was not certified by a representative of the Greek Government. According to the relevant instructions to Form 706CE, which were contained on the form, the form should have been signed by a certifying representative of Greece or, alternatively, coexecutors should have attached a statement under penalties of perjury to the effect that the foreign government refused to certify the form.
Respondent determined that the fair market value of the Real Estate on the date of decedent's death was $593,335. Respondent also determined that petitioner was not entitled to the $73,900 foreign tax credit shown on decedent's Federal estate tax return because respondent had not received evidence that the foreign death tax was actually paid.10 Respondent further determined that petitioner was liable for an $89,074 addition to tax because coexecutors had not filed decedent's estate tax return within the time prescribed by law, and had not shown that the delay was due to reasonable cause.
OpinionProperty includable in a decedent's gross estate is included at its fair market value on either: (1) The date of the decedent's death or (2) the alternate valuation date as provided under section 2032. Secs. 2031(a), 2032(a); sec. 20.2031-1(b), Estate Tax Regs. Fair market value is a question of fact, with the trier of fact having the duty to weigh all relevant evidence of value and to draw appropriate inferences. Commissioner v. Scottish Am. Inv. Co. [44-2 USTC ¶ 9530], 323 U.S. 119, 123-125 (1944); Helvering v. National Grocery Co. [38-2 USTC ¶ 9312], 304 U.S. 282, 294 (1938); Hamm v. Commissioner [64-1 USTC ¶ 12,206], 325 F.2d 934, 938 (8th Cir. 1963), affg. [Dec. 25,193(M)] T.C. Memo. 1961-347; Skripak v. Commissioner [Dec. 41,907], 84 T.C. 285, 320 (1985); Zmuda v. Commissioner [Dec. 39,468], 79 T.C. 714, 726 (1982), affd. [84-1 USTC ¶...
To continue reading
Request your trial