Estate of Woodbury v. Comm'r
| Decision Date | 14 April 2014 |
| Docket Number | T.C. Memo. 2014-66,Docket No. 19901-12 |
| Parties | ESTATE OF WALLACE R. WOODBURY, DECEASED, WALLACE RICHARDS WOODBURY, JR., EXECUTOR, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent |
| Court | U.S. Tax Court |
ESTATE OF WALLACE R. WOODBURY, DECEASED,
WALLACE RICHARDS WOODBURY, JR., EXECUTOR, Petitioner
v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
T.C. Memo. 2014-66
Docket No. 19901-12
UNITED STATES TAX COURT
Filed April 14, 2014
Estate (E) requested an extension of time to file its estate tax return and included a letter stating that it intended to make the election under I.R.C. sec. 6166 when it filed the return. E was allowed a six-month extension. E requested a further extension of time to file, which R denied. E filed its estate tax return nearly 2-½ years late. In the return, E expressly elected to pay estate tax in installments pursuant to I.R.C. sec. 6166 and included a notice of election providing all requisite information required by the applicable regulation. R sent E a notice of determination denying the election on the ground that E had failed to make the election on a timely filed estate tax return.
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E filed a petition requesting declaratory relief under I.R.C. sec. 7479. E alleged that it had made a valid I.R.C. sec. 6166 election under the doctrine of substantial compliance. R moved for summary judgment on the ground that sec. 20.6166-1(b), Estate Tax Regs., requires that an election under I.R.C. sec. 6166 be made on a timely filed estate tax return. E objected to R's motion and filed a cross-motion for summary judgment, arguing that it had substantially complied with sec. 20.6166-1, Estate Tax Regs.
Held: E did not substantially comply with sec. 20.6166-1, Estate Tax Regs., nor did it comply with I.R.C. sec. 6166 itself. E's motion for summary judgment will therefore be denied.
Held, further, because E failed to make a timely election under I.R.C. sec. 6166, R's motion for summary judgment will be granted.
D. Matthew Moscon and James F. Wood, for petitioner.
S. Mark Barnes and Skyler K. Bradbury, for respondent.
ARMEN, Special Trial Judge: This case is before the Court on the parties' cross-motions for summary judgment filed under Rules 121(a) and 217(b)(2).1
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Respondent issued a notice of determination denying the election by the Estate of Wallace R. Woodbury (estate) to pay its Federal estate tax in installments under section 6166.2 As a threshold matter, we must decide whether disposition of this case by summary judgment is appropriate. If so, the issue for decision is whether the doctrine of substantial compliance serves to deem the estate's installment payment election under section 6166 timely. If it does not, then we must decide whether respondent's denial of the election on the ground that the estate's election was untimely was correct.
The following is a summary of relevant facts that are not in dispute. These facts are stated solely for the purpose of deciding the pending cross-motions for summary judgment and are not findings of fact for this case. See Estate of Roski v. Commissioner, 128 T.C. 113 (2007); see also Estate of Kahn v. Commissioner, 125 T.C. 227, 228 (2005) (citing Fed. R. Civ. P. 52(a) and Lakewood Assocs. v. Commissioner, T.C. Memo. 1995-552).
On September 27, 2006, Wallace R. Woodbury (decedent) died. Decedent resided in the State of Nevada at the time of his death. Decedent's estate was
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probated under the jurisdiction of the Third District Court for the State of Utah. Wallace Richards Woodbury, Jr. (executor), was appointed executor of the estate. Executor is, and was at all relevant times, a resident of the State of Utah.
Decedent's Federal estate tax return was due to be filed by June 27, 2007. See sec. 6075(a).3 However, before that date the estate filed a Form 4768, Application For Extension Of Time To File A Return And/Or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes, and was allowed a six-month extension of time, to December 27, 2007, to file its return.4 See sec. 6081(a); sec. 20.6081-1,
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Estate Tax Regs.5 Along with Form 4768, the estate included a letter to respondent dated June 18, 2007, listing the decedent's name and taxpayer identification number. The letter, which referenced an "Anticipated Election under Section 6166", stated as follows:
Attached, please find Form 4768 for the estate of Wallace R. Woodbury (the "Estate"), a citizen of the United States, who died on September 27, 2006.
The gross estate of Wallace R. Woodbury includes shares or interests in businesses that in the aggregate meet the definition of an "interest in a closely held business" to qualify to be "treated as an interest in a single closely held business" pursuant to Section 6166(c).
The primary purpose of this letter is to inform you that the Estate intends to make the election to pay the Federal Estate Tax attributable to the decedent's interest in the closely held business pursuant to Section 6166 when the Form 706 Estate Tax Return is filed.
The Estate has paid non-deferrable tax in the amount of $9,500,000 simultaneously with the filing of the attached Form 4768. The Estate estimates the tax to be paid in installments pursuant to Section 6166 to be $10,000,000.
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The estate did not include with the foregoing application any specific information regarding the properties that allegedly constituted closely held business interests or even a list of such properties.
On December 31, 2007, respondent received a second Form 4768 from the estate that requested an additional six-month extension of time, to June 27, 2008, to file the estate tax return. Along with the second Form 4768, the estate included a letter dated December 26, 2007, listing decedent's name and taxpayer identification number. The letter, which referenced a "Request for Additional Extension of Time to File Form 706", stated as follows:
Attached please find Form 4768 for the estate of Wallace R. Woodbury (the "Estate"), a citizen of the United States, who died on September 27, 2006. We previously filed Form 4768 requesting the automatic extension of six months. We request an additional six month extension to file Form 706, with the new due date of June 27, 2008.
The gross estate includes commercial real property and shares or interests in businesses that own commercial real property. The Estate is in the process of valuing the business interests and real property interests, but due to the large number of appraisals needed, it is anticipated that all of the appraisals will not be completed in time to file the Form 706 by the December 27, 2007 due date.
As indicated in our prior letter dated June 18, 2007, the Estate intends to make the election to pay the Federal Estate Tax attributable to decedent's interest in the closely held businesses pursuant to Section 6166 when the Form 706 Estate Tax Return is filed. The Estate has paid non-deferrable tax in the amount of $9,500,000
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simultaneously with the filing of the original Form 4768 on June 18, 2007. The Estate estimates the tax to be paid in installments pursuant to Section 6166 to be approximately $10,000,000.
Again, the estate did not include with the foregoing application any specific information regarding the properties that allegedly constituted closely held business interests or even a list of such properties.
By letter dated February 6, 2008, respondent denied the second application for extension, stating in pertinent part as follows:
We are unable to grant you an additional extension of time to file your return for the following reason(s):
By law, we cannot grant an additional extension of time for filing this return. The maximum extension that we can grant to a taxpayer residing within the United States is six months. You should file your return by the previously extended due date.6
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The estate made payments approximately consistent with an election under section 6166 and noted on the payments that they were related to an election under section 6166.
On June 1, 2010, the estate filed its Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. In Part 3, Elections by the Executor, of its Form 706, the estate expressly elected "to pay the taxes in installments as described in section 6166".
In support of its election under section 6166, the estate attached to its Form 706 a four-page notice of election containing the information required by section 20.6166-1(b), Estate Tax Regs. In particular, the notice of election included as Exhibit A a schedule entitled "Interests Which Qualify for 6166 Deferral". The exhibit described in detail the nature of decedent's ownership in 20 interests (e.g., 29.267745% interest in Woodbury Management Co., LLC; 17.6725% limited partner interest in Vera Sequor Family Limited Partnership; 36.05% interest in Hogwarts, LLC). For each such interest, the exhibit specified where it was reported on Form 706 and provided its employer identification number and date-of-death value.7
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The list provided by the estate in its notice of election was the first time that the estate provided to respondent any specifics regarding the properties that purportedly constituted closely held business interests.
The estate's notice of election also included a second exhibit entitled "Interest Installments on 6166 assets". The portion of this second exhibit headed "Payment schedule" stated as follows:
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