Norberg v. Comm'r of Internal Revenue (In re Estate of Gudie)

• Decision Date: 30 November 2011
• Docket Number: No. 4089–10.,4089–10.
• Citation: 137 T.C. 165,137 T.C. No. 13
• Parties: ESTATE OF Jane H. GUDIE, Deceased, Mary Helen Norberg, Executor, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
• Court: U.S. Tax Court

137 T.C. 165

137 T.C. No. 13

ESTATE OF Jane H. GUDIE, Deceased, Mary Helen Norberg, Executor, Petitioner

v.COMMISSIONER OF INTERNAL REVENUE, Respondent.

No. 4089–10.

United States Tax Court.

Nov. 30, 2011.

E was never appointed executrix over D's estate by a State probate court, but she signed D's estate's Federal estate tax return as executor. R determined a deficiency in estate tax and a sec. 6662(a), I.R.C., accuracy-related penalty and issued a notice of deficiency listing E as executor. E filed a petition with this Court for redetermination. E subsequently filed a motion to dismiss for lack of subject matter jurisdiction, arguing this Court lacked jurisdiction because she was never appointed executrix by a State probate court and accordingly the notice of deficiency had been sent to the wrong person. R objected, arguing that because E was in possession of property of D, she was a statutory executor within the purview of sec. 2203, I.R.C., and the proper person to receive the notice of deficiency.

Held: E is a statutory executor within the purview of sec. 2203, I.R.C. R properly issued E a notice of deficiency. E timely petitioned this Court, and therefore this Court has jurisdiction.

Edward O.C. Ord and Robert P. Hess, for petitioner.

R. Malone Camp, Jr., and Donna F. Herbert, for respondent.

OPINION

WHERRY, Judge:

The sole issue before this Court is whether we have subject matter jurisdiction. Petitioner argues we do not; respondent argues we do. We agree with respondent.

Background

The following recitation of facts is drawn primarily from Mary Helen Norberg's (Ms. Norberg) motion to dismiss for lack of subject matter jurisdiction (motion to dismiss) and responses filed by both parties. We note that our recitation of “facts” is solely for the purpose of ruling on the motion to dismiss and is not a finding of facts.

Jane H. Gudie (decedent), a resident of California, died on June 14, 2006. Decedent had no children but was survived by two nieces, Ms. Norberg and Patricia Ann Lane (Ms. Lane). Decedent's will did not nominate either niece as her executrix.

Part of decedent's estate consisted of property held in the “Jane Henger Gudie Living Trust” (decedent's trust), created July 17, 1991. The trust document originally named Ms. Norberg and Ms. Lane (the nieces) as the remainder beneficiaries. Decedent retained for her life the right to revoke or amend the trust in whole or in part.

On April 1, 1995, the terms of decedent's trust were amended to name the nieces as the primary beneficiaries. On January 19, 1999, the terms of decedent's trust were amended to appoint Ms. Norberg cotrustee and the nieces as successor cotrustees upon decedent's death.

On February 9, 1999, decedent and the nieces entered into a transaction where, in form, the nieces each agreed to pay decedent an annuity of $937,483 per year, with the first payment due in 4 years. In return, decedent, as trustee, issued a note to each niece, due in 4 years or upon decedent's death, in the face amount of $3 million with 6 percent interest, secured by the assets of decedent's trust. Neither note was recorded, and no payments were made. On February 9, 2003, the unpaid annuity amounts were rolled over into new annuities and the annuity commencement date and the due date of the notes deferred for another 4 years. Again, no payments were made.

On or about March 14, 2007, a Form 706, United States Estate (and Generation–Skipping Transfer) Tax Return, was filed for decedent's estate (estate tax return). At the time the estate tax return was filed, no one was formally appointed, qualified, or acting as executor or administrator of decedent's estate. Ms. Norberg signed the estate tax return as executor but refuses to be formally appointed executrix of decedent's estate under California law.

The estate tax return reported a total gross estate less exclusion of zero and estate taxes owed of zero. Schedule G, Transfers During Decedent's Life, attached to the estate tax return listed assets including real estate totaling $1,890,000, furniture and furnishings totaling $100,000, and securities and bank accounts totaling $5,080,515. The real estate, securities, and bank accounts were titled in the name of decedent's trust. The assets of decedent's trust were listed subject to the outstanding debt owed to the nieces ($6 million principal plus $2,643,300 accrued interest). As a result, the estate tax return reported total assets transferred during decedent's life of negative $1,572,785.

As the sole beneficiaries of decedent's trust, the nieces received equal shares of the trust property. According to correspondence between the nieces, Ms. Norberg's husband, and Robert P. Hess (Mr. Hess), decedent's estate planner, the nieces each received $3,404,343.63 upon decedent's death.

Respondent audited the estate tax return, determining (1) decedent had made $2,983,437 of adjusted taxable gifts in 1992 that were not reflected on the estate tax return; (2) claimed gifts of $279,000 decedent made in 2005 and 2006 were invalid for estate and gift tax purposes; and (3) the deduction of $8,643,300 claimed on Schedule G is not deductible because it was not a bona fide loan and was not for full and adequate consideration.

On January 11, 2010, respondent issued a notice of deficiency to “Estate of Jane H. Gudie, c/o Mary Helen Norberg, Executor”, showing a deficiency in estate tax of $3,833,157.92 and a section 6662(a) accuracy-related penalty of $766,631.58.¹ On February 17, 2010, a petition was filed with this Court by Mr. Hess, who is an attorney admitted to practice before this Court, on behalf of “Jane H. Gudie, Deceased; Mary Helen Norberg, Executor”. At the time the petition was filed, Ms. Norberg resided in California. In the petition, Ms. Norberg alleged that respondent

erred in determining that the decedent did not receive full and adequate consideration in money or money's worth for promissory notes that represented bona fide claims against decedent's living trust dated September 16, 1981. There was no evidence that gifts made in 2005 and 2006 were not valid for Estate and Gift Tax purposes.

Respondent filed his answer on April 8, 2010. On January 3, 2011, respondent's motion for leave to file amendment to answer, filed December 23, 2010, was granted. In the motion respondent alleged that the gifts made in 1992 were made to “skip persons” under section 2613 and accordingly were subject to the generation-skipping transfer tax under section 2601. The motion asserted an increased deficiency in estate tax of $4,972,876.30 and an increased section 6662(a) accuracy-related penalty of $994,575.26.

On June 9, 2011, Ms. Norberg filed a motion to dismiss. On June 17, 2011, respondent was ordered to file any response to the motion to dismiss on or before July 25, 2011. Respondent's objection to the motion to dismiss was filed on July 22, 2011, with six exhibits, denominated A through F, attached. On August 26, 2011, Ms. Norberg filed two documents: (1) A reply memorandum in support of objections to respondent's objections to motion to dismiss and (2) Mary Helen Norberg's evidentiary objections to respondent's objections to motion to dismiss.

Discussion

I. Evidentiary Objections

Ms. Norberg asserts that “In ruling on a motion for summary adjudication, a trial court can only consider admissible evidence” and that because respondent's “factual allegations and exhibits in support of * * * [respondent's objection]” are inadmissible, they “must be stricken”, citing rule 56(e) of the Federal Rules of Civil Procedure, Orr v. Bank of Am., 285 F.3d 764, 773 (9th Cir.2002), and Beyene v. Coleman Sec. Servs., Inc., 854 F.2d 1179, 1181 (9th Cir.1988), as her authorities.

In Orr v. Bank of Am., supra at 773, the Court of Appeals for the Ninth Circuit, the court to which this case is appealable absent stipulation to the contrary, stated: “A trial court can only consider admissible evidence in ruling on a motion for summary judgment.” Beyene v. Coleman Sec. Servs., Inc., supra at 1181, and rule 56(e) of the Federal Rules of Civil Procedure stand for the same proposition. But we are not ruling on a motion for summary judgment. We are ruling on a motion to dismiss for lack of subject matter jurisdiction.² The U.S. Supreme Court has held where, as here, “there is no statutory direction for procedure upon an issue of jurisdiction, the mode of its determination is left to the trial court.” Gibbs v. Buck, 307 U.S. 66, 71–72, 59 S.Ct. 725, 83 L.Ed. 1111 (1939). When an issue of jurisdiction is raised, either by a party or on our own initiative, we “may inquire by affidavits or otherwise, into the facts as they exist.” Land v. Dollar, 330 U.S. 731, 735 n. 4, 67 S.Ct. 1009, 91 L.Ed. 1209 (1947), overruled by implication on other grounds by Larson v. Domestic & Foreign Commerce Corp., 337 U.S. 682, 69 S.Ct. 1457, 93 L.Ed. 1628 (1949); see also Stevens v. Redwing, 146 F.3d 538 (8th Cir.1998).

None of respondent's exhibits will be stricken, and the Court will examine all the facts before us in determining whether we have jurisdiction over this case.

II. Subject Matter JurisdictionA. Introduction

The Tax Court is a court of limited jurisdiction and may exercise jurisdiction only to the extent authorized by Congress. Adkison v. Commissioner, 592 F.3d 1050, 1052 (9th Cir.2010), affg. on other grounds 129 T.C. 97, 2007 WL 3005331 (2007). Our jurisdiction to redetermine a deficiency depends upon the issuance of a valid notice of deficiency and a timely filed petition. Rule 13(a), (c); Monge v. Commissioner, 93 T.C. 22, 27, 1989 WL 75172 (1989).

Section 6212(a) expressly authorizes the Commissioner, after determining a deficiency, to send a notice of deficiency to the taxpayer. In the instance of an estate tax deficiency, once the Commissioner is notified of the existence of a fiduciary relationship, the fiduciary steps into the shoes of the taxpayer for tax purposes, and the notice of...