Macy v. Comm'r of Internal Revenue (In re Estate of Gardner)

• Decision Date: 25 June 1984
• Docket Number: Docket No. 28332–83.
• Citation: 82 T.C. No. 74,82 T.C. 989
• Parties: ESTATE OF SHELLA B. GARDNER, DECEASED, T. ALEEN MACY, EXECUTRIX, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
• Court: U.S. Tax Court

82 T.C. 989

82 T.C. No. 74

ESTATE OF SHELLA B. GARDNER, DECEASED, T. ALEEN MACY, EXECUTRIX, Petitioner

v.COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 28332–83.

United States Tax Court

Filed June 25, 1984.

D's estate tax return was not filed within nine months after her death (sec. 6075(a), I.R.C. 1954), but was filed within the 18-day extension of time requested by P for filing of the return. R denied P's request for that extension of time. Sec. 6081(a), I.R.C. 1954. Had R granted the extension request, the return would have been timely filed. R moved for partial summary judgment under Rule 121, Tax Court Rules of Practice and Procedure, on the grounds that R's denial of the extension request is not subject to judicial review and that P's attempt to elect special use valuation under section 2032A, I.R.C. 1954, was invalid as a matter of law because the return was untimely.

Held, R's motion denied. Tax Court has jurisdiction to review R's denial of an extension of time for filing under section 6081(a), I.R.C. 1954. There remains a genuine issue of material fact as to whether R abused his discretion in denying P's request for the 18-day extension of time. H. Kent Heller, for the petitioner.

Michael W. Bitner, for the respondent.

OPINION

PARKER, Judge:

This case is before the Court on respondent's motion for partial summary judgment under Rule 121.¹ By his motion, respondent seeks a determination that as a matter of law petitioner was not entitled to the special use valuation under section 2032A because petitioner did not so elect on a timely filed return. Petitioner did not file decedent's estate tax return within nine months of decedent's death, but filed within the 18-day extension of time requested for such filing. Respondent denied petitioner's request for the extension. The sole issue for decision is whether we have jurisdiction to review respondent's exercise of discretion under section 6081 denying petitioner's request for an extension of time to file decedent's estate tax return.

Since the case is before us on a motion for partial summary judgment, we must follow the rule that “the factual materials presented and the inferences therefrom must be viewed in the light most favorable to the party opposing the motion.” Jacklin v. Commissioner, 79 T.C. 340, 344 (1982); Elkins v. Commissioner, 81 T.C. 669, 674 (1983). Consequently, for purposes of this motion, the following statement of facts is taken from petitioner's pleadings, both admitted and denied, and from the attorney's affidavit in opposition to respondent's motion. The facts are viewed in the terms most favorable to petitioner.

Shella B. Gardner (decedent) died on November 14, 1979. Her will devised her real property, including two farms, to her daughter, T. Aleen Macy. Petitioner is the Estate of Shella B. Gardner, Deceased, T. Aleen Macy, Executrix. T. Aleen Macy is the duly qualified executrix and resided in Mattoon, Illinois at the time she filed the petition herein. Decedent's estate tax return was due to be filed by August 14, 1980. Sec. 6075(a).

Petitioner relied upon competent counsel for the preparation of the estate tax return. In the week following her death, decedent's file was initially assigned to Mr. Alan Spaniols, an attorney with the firm representing petitioner in this proceeding. On Thanksgiving Day of 1979, Mr. Spaniols was killed in an airplane crash. In reassigning Mr. Spaniols' work, the law firm did not discover that, contrary to the firm's customary practice, Mr. Spaniols had failed to prepare a “statute card” indicating the date decedent's estate tax return was due.

On the day the return was due (August 14, 1980), and for several weeks prior thereto, petitioner's present attorney was engaged in litigation in Federal district court in Danville, Illinois. On August 25, 1980, immediately after returning from Danville, petitioner's attorney, realizing that the return was late, prepared and filed that day a request for an extension of time for filing decedent's estate tax return for a period of 18 days to and including September 1, 1980, i.e., a date one week from the date of the request. Decedent's estate tax return (Form 706) was signed by the executrix and her attorney on August 28, 1980, was postmarked on August 30, 1980, and was received in the IRS District Office on September 2, 1980. On a date not disclosed by the record, respondent denied petitioner's request for an extension without considering the reasons stated for the request.

On October 9, 1980, petitioner's attorney filed a written protest of the denial of the requested extension. In response to petitioner's protest, an officer of the St. Louis Appeals Office telephoned petitioner's counsel to inform him that the protest should be handled after the audit of decedent's estate tax return had been completed. The appeals officer also indicated that based on the stated reasons for the request (described above), the extension should have been granted.

At some point the District Director of the Springfield District Office sought technical advice from the National Office as to the legal effect of a late filed return on the election under section 2032A. That Technical Advice Memorandum was dated May 26, 1982, but did not address the matter of the request for extension of time.

On December 7, 1982, after the examining agent had submitted his report, an officer of the St. Louis Appeals Office indicated that the extension should not have been denied without consideration of the circumstances, as it appeared from the file that the District Director's Office had done. Consequently, the appeals officer returned the file to the examining agent in the District Director's Office, directing him to consider the factual circumstances surrounding petitioner's extension request.

On April 19, 1983, the examining agent had a meeting with the executrix, her husband, and her attorney, to discuss the circumstances surrounding the request for an extension of time to file the estate tax return, described above. The examining agent stated that petitioner had made a very strong case for an extension but that his supervisor would not allow him to grant it because decedent or the executrix's husband or both were farmers, and his supervisor disliked farmers, believing farmers were too rich, got away with too much already, and did not deserve any further breaks. Petitioner was not thereafter afforded an appellate conference.

In his statutory notice, mailed to petitioner on July 5, 1983, respondent determined that petitioner was not entitled to elect the special use valuation under section 2032A because the election had not been made on a timely filed estate tax return. Based on this conclusion, and on a minor issue not before the Court at this time, respondent determined a deficiency in Federal estate tax of $113,635.73 and an addition to tax under section 6651(a) of $5,681.79. Petitioner timely petitioned this Court for a redetermination of that deficiency and addition.

Under section 2032A, a decedent's estate may elect to value certain qualifying property for Federal estate tax purposes based upon its actual (“special”) family farm or small business use rather than upon its highest and best use, as would ordinarily be the case under general valuation principles. This election requires strict compliance with various statutory requirements. See generally, Estate of Sherrod v. Commissioner, 82 T.C. 523 (1984); Estate of Coon v. Commissioner, 81 T.C. 602 (1983); Estate of Cowser v. Commissioner, 80 T.C. 783 (1983); Estate of Geiger v. Commissioner, 80 T.C. 484 (1983). As these cases show, the whole tenor of these statutory requirements is to assure the continued use of the property for family farming or other small business purposes by reducing the tax burden upon such qualified property and to restrict the special use valuation to the limited class of persons intended to be benefitted thereby.

As in effect at the time of decedent's death,² section 2032A (d)(1) provided as follows:

Election.—The election under this section shall be made not later than the time prescribed by section 6075(a) for filing the return of tax imposed by section 2001 (including extensions thereof), and shall be made in such manner as the Secretary shall by regulations prescribe. [Emphasis added.]

The regulations provided that the election must be made on a timely filed estate tax return. Sec. 20.2032A-8(a)(3), Estate Tax Regs. In a series of memorandum opinions, we have held that a timely filed return is mandatory, requiring literal compliance and leaving no room for a “reasonable cause” exception for an untimely return.³ In these cases, we relied upon decisions reaching the same result in construing substantially identical language in section 2032(c), involving the election of an alternate valuation date under section 2032. See Estate of Ryan v. Commissioner, 62 T.C. 4, 10 (1974); Estate of Downe v. Commissioner, 2 T.C. 967, 970–971 (1943); Estate of Flinchbaugh v. Commissioner, 1 T.C. 653, 655 (1993); Crissey v. United States, an unreported decision (N.D. N.Y. 1980, 45 AFTR 2d 80–1754, 80–1 USTC par. 13,335).⁴ We adhere to these holdings and those in footnote 3, none of which raised the issue now before the Court.

Decedent's estate tax return was due August 14, 1980, nine months after her death. Sec. 6075(a). However, section 6081(a) provides that respondent” may grant a reasonable extension of time for filing any return * * * required by this title or by regulations.” [Emphasis added.] In the case of an income tax return, respondent's regulation requires the request for an extension to be filed “on or before the due date of such return.” Sec. 1.6081–1 (b)(1), Income Tax Regs. There is no such requirement, however, for a request for an extension to file an estate tax return. Instead, the regulation plainly contemplates that an extension may be granted even though the request is filed after...