Statute of Limitations for Action to Quiet Title

In Wallace v. I.R.S., the U.S. District Court for the Southern District of California recently resolved an issue of first impression – holding that the statute of limitations for an action to quiet title begins to run when estate tax is assessed, not when the lien attaches. Both parties cited Nesovic v. United States (71 F.3d 776) in support of their positions. In Nesovic, the lien was attached to the property on the same date that the taxes were assessed.

The date that the court chose as the start date for the statute mattered in Wallace because if the court applied the date that the lien attached, the plaintiff’s claim would have fallen outside the statute of limitations. If the court used the date the taxes were assessed, however, the claim would be timely. The court reasoned that it would not make sense for the statute of limitations to start running when the lien is attached because it is not known until well after that date whether the lien is necessary. Executors or other representatives of the estate do not even have to file the estate tax return until nine months after the date of death. The plaintiff’s claim to quiet title was deemed timely when the court held that the statute begins when the estate tax is assessed.

See Wallace v. I.R.S., No. 11cv0978 (S.D. Cal. Oct. 4, 2011); Adam Bair, Court Holds Statute of Limitations for an Action to Quiet Title Begins to Run When Estate Tax Assessed, Wealth Strategies Journal, Oct. 6, 2011.

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this case to my attention.