Fiorini v. Comm'r of Internal Revenue (In re Estate of Bailly), Docket No. 9487–81.

• Decision Date: 12 December 1983
• Docket Number: Docket No. 9487–81.
• Citation: 81 T.C. 949,81 T.C. No. 59
• Parties: ESTATE OF PIERRE L. BAILLY, DECEASED, DANTE M. FIORINI, PERSONAL REPRESENTATIVE, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
• Court: U.S. Tax Court

81 T.C. 949

81 T.C. No. 59

ESTATE OF PIERRE L. BAILLY, DECEASED, DANTE M. FIORINI, PERSONAL REPRESENTATIVE, Petitioner

v.COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 9487–81.

United States Tax Court

Filed December 12, 1983.

In Estate of Bailly v. Commissioner, 81 T.C. 246 (1983), we held that when payment of estate tax liability has been deferred under sec. 6166, I.R.C. 1954, the amount of interest to be incurred on the Federal and state estate tax liabilities may be deducted under sec. 2053(a)(2) only as that interest accrues. Petitioner timely filed a motion for reconsideration claiming that, contrary to language in our original opinion, because of the operation of sec. 6512(a) petitioner will not be able to legitimately claim deductions for that portion of the interest accruing after our decision becomes final. Hence, petitioner requests that we either (1) find and order that he shall be entitled to deduct the after-accruing interest, or (2) defer entry of our decision until expiration of the installment payment period prescribed under sec. 6166. Held, section 7459(c) and Rule 155, Tax Court Rules of Practice and Procedure, require that our decision specify a dollar amount. Therefore, entry of a decision that would, by its terms, be an indefinite amount changing over time is precluded. Held further, entry of our decision in this case will be postponed until the final installment of tax is due or paid, whichever occurs earlier. James Curtis Wood, for the petitioner.

Kathleen E. Whatley, for the respondent.

SUPPLEMENTAL OPINION

DAWSON, Chief Judge:

This case is before us on petitioner's motion for reconsideration of our opinion in the above-entitled case 81 T.C. 246 (1983). Under the facts of this case, Dante M. Fiorini (petitioner), personal representative of the estate of Pierre J. Bailly, deceased, properly elected under section 6166¹ to pay the estate tax liability in ten equal installments. Petitioner deducted on the initial Federal estate tax return an estimate of the interest to be accrued over the ten-year deferral period. The issue before us was the proper timing of the deduction of the interest under section 2053(a)(2). We held that petitioner may deduct from the value of the gross estate under section 2053(a)(2) the amount of interest on Federal and state estate tax liabilities only as that interest accrues. Our holding was based on our conclusion that unaccrued interest is not ascertainable with reasonable certainty within the meaning of section 20.2053–1(b)(3), Estate Tax Regs., because of (1) considerable fluctuation in interest rates, and (2) the possibility of acceleration or prepayment of the estate tax liability. Decision was to be entered pursuant to Rule 155.² The decision has not yet been entered.

The granting of a motion for reconsideration rests within the discretion of this Court. Such a motion is generally denied unless unusual circumstances or substantial error is shown. Haft Trust v. Commissioner, 62 T.C. 145 (1974), affd. on this issue 510 F.2d 43, 45 n. 1 (1st Cir. 1975). In this case we granted petitioner's motion by order dated November 4, 1983,³ because petitioner has persuasively presented that the possible ramifications of our opinion were not given prior adequate consideration. Furthermore, this reconsideration addresses only dicta in our original opinion and not our holding in the case. Thus, any reason not to grant the motion stemming from concerns that we may have about granting a rehearing for presentation of additional evidence or a new theory is not present here. See Pierce Oil Corp. v. Commissioner, 30 B.T.A. 469 (1934).

Petitioner requests reconsideration of the portion of our opinion relating to petitioner's entitlement to estate tax deductions for interest on the Federal and state tax liabilities accruing after the date of entry of our decision. Specifically, the request for reconsideration concerns two portions of our original opinion (now amended). First, on page 11 (of the slip opinion), we considered petitioner's contention that not allowing the interest to be estimated and be deducted “up front” would be inappropriate because taxpayers do not receive the protection of the suspension of the statute of limitations during the period of deferral of the estate tax payment. In dismissing petitioner's contention that the statute of limitations suspension is unavailable to taxpayers, we stated that petitioner could use Rev. Rul. 80–250, 1980–2 C.B. 278, and Rev. Proc. 81–27, 1981–2 C.B. 548,⁴ to obtain deductions for interest paid after the date of entry of our decision by filing a supplemental Form 706 after the interest has accrued. We further stated that petitioner may file a claim for refund in the event that the final total of petitioner's payments exceeds the ultimate estate tax liability. Second, we dismissed, in footnote 9 (slip opinion, p. 12), the parties' suggestion that this Court defer the entry of its decision until the ten-year installment period is concluded because of the inconvenience, hardship and administrative expense such a procedure would entail.

In his motion, petitioner requests that we modify our opinion in one of the two following ways: (1) Find and order in our opinion and our decision that petitioner shall be entitled to use Rev. Rul. 80–250 and Rev. Proc. 81–27, supra, and to deduct for Federal estate tax purposes all the interest incurred on both the Federal and state estate tax liabilities, including interest accruing after the date of entry of the decision (first alternative request); or (2) defer entry of our decision until expiration of the Federal estate tax installment payment period elected by petitioner under section 6166 (second alternative request).

Respondent objects to petitioner's first alternative request because he contends that section 7459(c) and Rule 155 require that our decision specify a dollar amount and, therefore, preclude entry of a decision that would, by its terms, be an indefinite amount that changes over time. However, with respect to petitioner's second alternative request, respondent has repeatedly stated that he has no objection to carrying this case on his open docket until the final installment is due.

We agree with respondent that our decision in this case must specify a fixed dollar amount and, therefore, we reject petitioner's first alternative request. Section 6213(a)⁵ provides that within 90 days (or 150 days, where applicable) after the notice of deficiency is mailed, the taxpayer may file a petition with this Court for a redetermination of the deficiency. No assessment or collection of the deficiency shall be made until the decision of this Court becomes final.

Where a petition for a redetermination of the deficiency is filed and not dismissed, section 7459(c)⁶ provides that a decision of this Court is rendered upon the date that an order that specifies the amount of the deficiency is entered in this Court's records. Section 6503(a)(1) provides that the statute of limitations on assessment and collection is suspended

for the period during which the Secretary is prohibited from making the assessment or from collecting by levy or a proceeding in court (and in any event, if a proceeding in respect of the deficiency is placed on the docket of the Tax Court, until the decision of the Tax Court becomes final), and for 60 days thereafter.

The entire scheme of these sections necessarily indicates that this Court will redetermine a deficiency in the form of a specific dollar amount. Once the decision becomes final, the period for assessment and collection is no longer suspended and the Commissioner may proceed to collect the redetermined amount due. This statutory scheme would be frustrated if this Court were able to render a decision without fixing the redetermined amount of the deficiency and would also be in direct contravention to the provisions of section 7459(c). As previously stated, under section 7459(c) a decision is rendered on the date that an order specifying the amount of the deficiency is entered. Furthermore, Rule 155,⁷ under which a decision will be entered in this case, contemplates that the decision of this Court be an exact amount of deficiency or overpayment. Rule 155 is consistent with the statutory scheme explained above.

Although we reject petitioner's first alternative request for the reasons stated above, we are granting petitioner's second alternative request because we agree with both petitioner and respondent⁸ who contend that it is unlikely that petitioner will be able to use Rev. Rul. 80–250 and Rev. Proc. 81–27, supra, due to the provisions of section 6512(a).⁹ The consequence of the operation of section 6512(a) and, therefore, of petitioner's inability to use Rev. Rul. 80–250 and Rev. Proc. 81–27, supra, is that petitioner will be foreclosed from claiming a legitimate deduction on the estate tax return for interest accruing on the deferred estate taxes after the date of entry of our decision.

Our conclusion is based upon the express language of the statute, as interpreted by the cases to be discussed. Under section 6512(a),¹⁰ if a taxpayer files a timely petition with this Court after receiving a notice of deficiency, no credit or refund shall be allowed and no suit shall be instituted in any court.

In Moir v. United States, 149 F.2d 455 (1st Cir. 1945), the taxpayer, an executor of an estate, filed a petition with the Board of Tax Appeals for a redetermination of an estate tax deficiency. After the Board's opinion in that case was filed, the taxpayer paid the redetermined deficiency, and, after the decision of the Board became final, filed a claim for refund based on expenses for attorney's fees that had not been previously allowed. The claim was disallowed by the Commissioner on the ground that the refund was precluded by section 319(a), Revenue Act of 1926, as amended (see footnote 10, supra). Thereafter, a suit for refund was...