United States v. Ringling, 4:17-CV-04006-KES
| Decision Date | 21 February 2019 |
| Docket Number | 4:17-CV-04006-KES |
| Parties | UNITED STATES OF AMERICA, Plaintiff, v. DONNA RINGLING, JOANN JANDREAU, KATHRYN STANDY, and KORY STANDY, Defendants. |
| Court | U.S. District Court — District of South Dakota |
ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT
Plaintiff, the United States of America, moves for summary judgment against defendants, Donna Ringling, Joann Jandreau, Kathryn Standy, and Kory Standy under Federal Rule of Civil Procedure 56. Docket 43. Defendant Ringling opposed the motion. Docket 57. Defendants Jandreau, Kathryn Standy, and Kory Standy did not file any opposition. For the following reasons, the court grants plaintiff's motion for summary judgment against defendants.
FACTUAL BACKGROUND
The undisputed facts are as follows:
Defendants Donna Ringling, JoAnn Jandreau, and Kathryn Standy are the daughters of the late Harold and Margery Arshem. Margery predeceased Harold. Defendant Kory Standy is the son of Kathryn Standy and the grandson of Harold Arshem (Arshem).
Arshem died testate on December 24, 1999. In his Last Will and Testament, executed on February 20, 1998, Arshem bequeathed his estate (the Estate) in equal parts to his three daughters. His will also contained a specific bequest of real property to Ringling as part of her one-third portion of the Estate. In his will, Arshem also nominated and appointed Ringling, Jandreau, and Kathryn Standy to serve as co-personal representatives of the Estate. The Estate included real property located in Charles Mix County and Lyman County, South Dakota, stocks and bonds, co-op shares, cash, CDs, bank accounts, two contracts for deeds, a retained life estate in real property located in Charles Mix County, life insurance proceeds, crops, household goods, farm machinery, equipment, and vehicles.
Prior to his death, Arshem bought several government H/HH series bonds. Thirteen of those bonds were jointly owned by Arshem and Ringling, but Ringling did not make any contribution toward the bonds. At the time of Arshem's death, the thirteen bonds were valued at $12,000. Arshem also jointly owned ten bonds with Jandreau. Jandreau did not make any contributions toward the bonds. At the time of Arshem's death, the ten bonds were valued at $12,500. Additionally, Arshem jointly owned seven bonds with Kathryn Standy. Like her sisters, Kathryn Standy did not contribute anything toward the bonds. At the time of Arshem's death, the seven bonds were valued at $6,500.
Along with the bonds, Arshem owned other property jointly with his daughters. Prior to his death, Arshem purchased two vehicles, a 2000 DodgeRam Pickup Truck and a 1994 Dodge Van. The pickup truck was titled in the name of Arshem and his three daughters. None of the daughters made any contribution toward the pickup truck. The van was titled in the name of Arshem and Kathryn Standy. Kathryn Standy made no contribution toward the van. At the time of his death, the pickup truck was valued at $25,000, and the van was valued at $8,000. Prior to his death, Arshem also added Kathryn Standy as a joint owner on his checking account at Community First Bank. Kathryn Standy never made any contribution to the checking account.
Arshem purchased two life insurance policies on his life prior to his death, New York Life Insurance Company Policy #xxx7361 and Continental General Insurance Company Annuity Policy #xxx8783. All three daughters were listed as the beneficiaries on the policies. At the time of his death, Arshem owned both policies outright, and the policies had a total value of $21,616.20.
Prior to his death, Arshem was involved in several transactions with his grandson, Kory Standy. The first transaction occurred on March 27, 1996, when Kory Standy entered into a contract for deed with Arshem to purchase real property located in Charles Mix County.1 According to the contract, Kory Standy was to pay Arshem $32,000 for the property with an initial $100 due at or before the execution of the contract, $1,900 due on December 20, 1996, and the remaining balance paid in fifteen annual installments. On December 14,1999, Arshem forgave the remaining balance of $27,600.96 due on the contract.
The second transaction between Kory Standy and Arshem occurred on May 9, 1996. In this transaction, Arshem conveyed a warranty deed to Kory Standy for the family farm located in Charles Mix County along with irrigation equipment and permits. In his conveyance, Arshem retained a life estate and the right to receive the rent income and profits during his lifetime. After Arshem's death, on January 24, 2000, the family farm's fair market value was appraised at $345,700.
The third transaction occurred on December 18, 1999. Kory Standy and Arshem entered into a contract for deed for real property in Charles Mix County.2 According to the contract for deed, Kory Standy was to pay $90,000 to Arshem with an initial $10,000 due at or before the contract's execution and the remaining $80,000 paid in twenty annual installments. Kory Standy would not take possession, or receive the rent, issues, and profits until March 1, 2000. At Arshem's death, Kory Standy still owed $80,093.30 on the contract for deed.
Additionally, Kory Standy received other types of property from Arshem. On December 19, 1999, Arshem endorsed a certificate of deposit (CD) to pay off a note in the name of Arshem and Kory Standy. On the date the CD wascashed in, the value was $32,989.49. Of that amount, $28,845.44 was used to pay off the note and $3,779.21 (the remaining balance after the penalty for early withdrawal) was paid to Kory Standy. Also, in December of 1999, Arshem gave Kory Standy approximately 6,000 bushels of corn. At Arshem's death, these bushels were valued at $10,200.
In the First Judicial Circuit Court of the State of South Dakota, Ringling, Jandreau, and Kathryn Standy filed an application for informal probate and appointment of personal representative on December 31, 1999. On January 3, 2000, the First Judicial Circuit issued Letters of Representative to the daughters and docketed the probate case. In September of 2000, the Estate reported Arshem's real and personal property interests at the time of his death to the State of South Dakota as part of the probate proceeding. Attorney James Haar prepared the South Dakota Inheritance Tax Report and Information for Judicial Determination of Inheritance Tax. Kathryn Standy signed the document on behalf of the Estate. This report, however, incorrectly used county assessed values for the real property, instead of appraised values.
In June 2003, Stan Whiting was appointed by the court to serve as a special administrator over the probate proceeding after Ringling filed a petition. As special administrator, Whiting's duties included investigating issues contained in Ringling's petition, like whether a federal estate tax return was required. Around August 4, 2003, Whiting filed a motion in the probate proceeding asking for permission to file a federal estate tax return and to amend the state inheritance tax return. In his motion, Whiting stated that thevalue of the real property should have been determined by the fair market values instead of the county assessed values. On August 13, 2003, the First Judicial Circuit ordered Whiting to file a federal estate tax return and amend the state inheritance tax return.
On April 14, 2008, on behalf of the Estate, Ringling signed Form 706, the federal estate tax return, and reported a gross estate of $834,336.00 and a net estate tax due of $28,939.00. Whiting mailed the form to the IRS on May 5, 2008. The IRS received it around May 15, 2008. When the Estate filed the Form 706, it did not make any payments. On the Form 706, the Estate reported its assets as: three pieces of real property, co-op shares, stocks, bonds, two contracts for deeds, cash, bank accounts, CDs, two life insurance policies, the corn crop gifted to Kory, the pickup truck, the van, and other miscellaneous property. The Estate also reported the values of the assets each defendant received. Kathryn Standy and Jandreau each received $121,988.00, Ringling received $121,987.00, and Kory Standy received $416,116.00.
On July 14, 2008, a delegate of the Secretary of the Treasury made assessments against the Estate totaling $65,874.80. The estate tax owed was $28,939.00, the late filing penalty was $6,511.27, the failure to pay penalty was $7,234.75, and the interest was $23,189.78. On that same day, the IRS sent the Estate a notice of assessments and demanded payment. About a month later, on August 18, 2008, the IRS sent the Estate a notice of intent to levy after the Estate failed to pay the tax liability. The IRS sent an additional notice of balance due and request to pay to the Estate on November 10, 2008.
On December 11, 2008, Whiting filed a petition in the probate proceeding for payment and an order releasing him of further duties. At that time, Whiting had filed a federal estate tax return, amended the state inheritance tax return, and advised the heirs the amount each owed for the federal estate tax. The IRS accepted the tax return as filed on December 17, 2008. On November 16, 2009, the IRS sent a third notice of balance and request to pay to the Estate.
On January 29, 2010, Ringling sent a request to the IRS to abate the penalties and interest on the Estate's tax liability. The IRS denied Ringling's request based on its finding that the information submitted did not establish reasonable cause or show due diligence. The IRS's letter also provided information on how to file a claim for refund or seek further IRS administrative review. Neither the Estate nor Ringling filed such a claim. For the next three years in November (2010, 2011, 2012), the IRS sent additional notices of balance due and requests to pay.
On April 18, 2011, Dennis Duncan, an attorney, forwarded a check to Ringling, Jandreau, and Kathryn Standy and attached a letter that advised the daughters that the federal estate...
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