United States v. Parks

• Decision Date: 18 November 2022
• Docket Number: 21-cv-12676
• Parties: UNITED STATES OF AMERICA, Plaintiff, v. RONALD G. PARKS, individually; RONALD G. PARKS, as Successor Personal Representative of the ESTATE OF MERLE L. PARKS; RONALD G. PARKS, as Trustee for the RONALD G. PARKS REVOCABLE LIVING TRUST DATED APRIL 13, 2006; and MADELINE M. PARKS, Defendants.
• Court: U.S. District Court — Eastern District of Michigan

UNITED STATES OF AMERICA, Plaintiff,
v.
RONALD G. PARKS, individually; RONALD G. PARKS, as Successor Personal Representative of the ESTATE OF MERLE L. PARKS; RONALD G. PARKS, as Trustee for the RONALD G. PARKS REVOCABLE LIVING TRUST DATED APRIL 13, 2006; and MADELINE M. PARKS, Defendants.

No. 21-cv-12676

United States District Court, E.D. Michigan, Southern Division

November 18, 2022

OPINION AND ORDER (1) GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR SUMMARY JUDGMENT (ECF NO. 13), AND (2) DENYING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT ON TIMELINESS OF § 2032A ELECTION (ECF NO. 14)

Paul D. Borman, United States District Judge.

This is a civil action relating to a dispute over alleged unpaid federal estate tax liabilities of the Estate of Merle L. Parks. Now before the Court are Defendants' Motion for Summary Judgment (ECF No. 13) and Plaintiff's Motion for Partial Summary Judgment on Timeliness of § 2032A Election (ECF No. 14). Both motions address the issue of the timeliness of an election for special use valuation under 26 U.S.C. § 2032A of the Internal Revenue Code made on the estate tax return of the

1

Estate of Merle L. Parks.^[1] Both motions have been fully briefed, and the Court held a hearing on the motions on Thursday, November 10, 2022, at which time the Court took the two motions under advisement.

For the reasons that follow, the Court DENIES Plaintiff's motion for partial summary judgment and GRANTS IN PART and DENIES IN PART Defendants' motion for summary judgment.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. Factual Background

On July 24, 2003, Merle L. Parks executed his Last Will and Testament, which named his brother, Elmer R. Parks, as personal representative, and his nephew, Defendant Ronald G. Parks, as successor personal representative. (ECF No. 1, Compl. ¶ 8.)^[2] Merle's Will, aside from two specific devisements to his brother and to a church that are not at issue here, devised all “personal effects and equipment” and “all the residue and remainder” of Merle's estate to Ronald. (Id.) The Will further “direct[ed] that all estate taxes .. that may be assessed or become payable

2

because of [Merle's] death shall be paid out of the residuary estate passing under this will.” (Id. ¶ 9.)

On August 8, 2003, six weeks before Merle's death, Merle and Ronald established the Parks Family Limited Liability Company, LLC (“Parks Farm LLC”), with Merle owning a 98% membership interest in the LLC and Ronald owning a 2% membership interest. (Compl. ¶ 10 (explaining that the name of the “Parks Family Limited Liability Company, LLC” was later changed to “Parks Farm Company, LLC” in 2004).) That same day, Merle executed a quitclaim deed transferring three parcels of working farmland situated in the Township of Berlin, St. Clair County, Michigan, (“The Parks Farm Property”) to the Parks Farm LLC for consideration of less than $100. (Id. ¶¶ 6, 11.)

Merle died on September 19, 2003. (Compl. ¶¶ 12-13.) Under the terms of Merle's Will, Ronald inherited the three parcels of working farmland (the Parks Farm Property), as well as the residuary estate cash, savings instruments, retirement accounts, stocks, and bonds. (Id. ¶¶ 25, 37-38.) According to the Complaint, Defendant Ronald, in concert with his wife, Defendant Madeline M. Parks, subsequently caused transfers to the Parks Farm Property, through a series of quitclaim deeds, to himself, his wife, entities that he controlled, and ultimately to the Defendant Trust, for which Ronald acts as Trustee. (Id. ¶¶ 15-18.)

3

Pursuant to 26 U.S.C. § 6075(a), the Estate of Merle Parks's (the “Estate”) Form 706 tax return was due on May 19, 2004 (nine months after Merle's death). The Estate requested and received one six-month extension to file the tax return (pursuant to 26 U.S.C. § 6081(a)), by December 19, 2004. (Compl. ¶ 22.) On June 22, 2004, the Estate made an estate tax prepayment of $333,959.00 to the United States, but it did not file a tax return with that prepayment. (Id. ¶ 23.) Moreover, the Estate did not file its Form 706 tax return by the extended due date for the return of December 19, 2004, (id. ¶ 22), and it did not seek any further extension of time to file a return.

Instead, in February 2010, over five years after the Estate's tax return deadline (as extended), the Estate filed its tax return on Form 706. (Compl. ¶ 23) (ECF No. 14-1, Form 706 Return, PageID.199-234.) The return reported a total gross estate in the amount of $1,703,173.00, and taxable estate of $1,664,059.00. (Compl. ¶ 24) (Form 706 Return, PageID.199.) The Estate's tax return included an election under Internal Revenue Code Section 2032A, 26 U.S.C. § 2032A, which in certain circumstances allows the value of qualified farm property to be adjusted downward through a special use valuation. (Compl. ¶¶ 26-28) (Form 706 Return, PageID.204.) The Estate's return adjusted the value of the farm property under § 2032A down

4

from the assigned fair market value of the property.^[3] The Estate's Form 706 Return then claimed an overpayment of taxes (based on its prior June 2004 tax prepayment) in the amount of $87,838.00. (Compl. ¶ 24.)

Following the filing of the Estate's tax return, the Internal Revenue Service selected the return for examination. On October 23, 2012, the IRS sent a Notice of Deficiency to the Estate, identifying additional taxes owed in the amount of $199,111.00. (Compl. ¶ 31.) The Notice of Deficiency stated that “the [special use valuation] election under Internal Revenue Code section 2032A is not allowed because it was untimely filed,” and the Notice increased the taxable estate by the amount the property had been adjusted down by the special use valuation. (ECF No. 14-2, Notice of Deficiency, PageID.239.) The Notice also asserted an additional tax of $27,818.25 in a late-filing penalty. (Id.)

5

These tax penalties remain unpaid, and Plaintiff alleges that the balance due, as of October 15, 2021 (one month prior to the filing of the Complaint in this action), is $433,654.66. (Compl. ¶ 32.)

B. Procedural History

On November 15, 2021, Plaintiff, the United States of America, at the direction and request of a delegate of the Attorney General of the United States and with the authorization of a delegate of the Secretary of the Treasury, brought this civil action against Defendants Ronald G. Parks, individually, as Successor Personal Representative of the Estate of Merle L. Parks, and as Trustee for the Ronald G. Parks Revocable Living Trust Dated April 13, 2006, and Ronald's wife, Madeline M. Parks, to collect the asserted unpaid tax liabilities of the Estate of Merle L. Parks, and to enforce the resulting tax liens through a judicial sale of the Parks Farm Property. (ECF No. 1, Compl.)

Defendants filed their Answer to the Complaint on March 15, 2022. (ECF No. 9, Answer.) In their Answer, Defendants admit that the Estate's tax return was filed over five years late, but assert that the § 2032A election for special use valuation was timely made pursuant to 26 C.F.R. § 22.0(b) because the election was made on the Estate's first-filed Form 706 return, and that Defendants therefore owe no taxes, penalties, or interest to the Plaintiff or the Internal Revenue Service.

6

The April 13, 2022, Civil Case Management and Scheduling Order in this case provides for early dispositive motions, limited to the issue of the “timeliness of [a] § 2032A election.” (ECF No. 12, Order, PageID.80.)

As permitted by that Case Management Order, Defendants filed a motion for summary judgment on June 16, 2022, arguing that the Estate's special use valuation election under 26 U.S.C. §2032A was valid when Defendants attached it to their first-filed Form 706 tax return, even though the return was filed late. (ECF No. 13, Defs.' Mot.) On July 7, 2022, Plaintiff filed a Response in opposition to Defendants' motion (ECF No. 15, Pl.'s Resp.), and Defendants filed a reply brief on July 14, 2022 (ECF No. 17, Defs.' Reply).

On June 17, 2022, Plaintiff filed a motion for partial summary judgment on the timeliness of the Estate's § 2032A election, arguing that the special use valuation election on the Estate's Form 706 tax return filed over five years late is not a timely or valid election. (ECF No. 14, Pl.'s Mot.) On July 8, 2022, Defendants filed a response in opposition to Plaintiff's motion (ECF No. 16, Defs.' Resp.), and Plaintiff filed a reply brief on July 22, 2022. (ECF No. 18, Pl.'s Reply).

II. LEGAL STANDARD

Summary judgment is appropriate where the moving party demonstrates that there is no genuine dispute as to any material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986);

7

Fed. R. Civ. P. 56(a). “A fact is ‘material' for purposes of a motion for summary judgment where proof of that fact ‘would have [the] effect of establishing or refuting one of the essential elements of a cause of action or defense asserted by the parties.'” Dekarske v. Fed. Exp. Corp., 294 F.R.D. 68, 77 (E.D. Mich. 2013) (quoting Kendall v. Hoover Co., 751 F.2d 171, 174 (6th Cir. 1984)). A dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986).

“In deciding a motion for summary judgment, the court must draw all reasonable inferences in favor of the nonmoving party.” Perry v. Jaguar of Troy, 353 F.3d 510, 513 (6th Cir. 2003) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). At the same time, the non-movant must produce enough evidence to allow a reasonable jury to find in his or her favor by a preponderance of the evidence, Anderson, 477 U.S. at 252, and “[t]he ‘mere possibility' of a factual dispute does not suffice to create a triable case.” Combs v. Int'l Ins. Co., 354 F.3d 568, 576 (6th Cir. 2004) (quoting Gregg v. Allen-Bradley Co., 801 F.2d 859, 863 (6th Cir. 1986)). Instead...