The decedent, Nancy Young, died in 2008 and the executor of estate requested an extension of time to file the necessary estate tax return. The extensions the estate requested were granted and the estate paid their taxes within a timely manner. Because of the recession, the estate sought to have some of the estate’s real estate assets to be re-appraised. The estate had two options at this point because the deadline to file the estate tax return was upon them. According to Proskauer Rose LLP, they could have “(1) file the estate tax return with the appraised values, and then file a supplemental return later when the real estate holdings were sold; or (2) wait until the real estate holdings were sold, and then file one estate tax return after the filing deadline.” They chose the second option, to file the estate tax return after the deadline had passed. They believed that this would simplify the process and the estate would not be adversely affected. The IRS felt differently and accessed a penalty against the estate.
In Nancy P. Young v. United States, the estate argued that it should not be penalized because it relied on expert advice. The district court disagreed with the estate and claimed that there was not reasonable cause here because the estate was well aware that it was legally required to file an estate tax return. The only advice that the estate relied on was that it would not be assessed a penalty. The court cited precedent that has already held that in this particular instances like this one, the reliance is not a reasonable cause.
See Proskauer Rose LLP, Estate of Nancy P. Young v. United States, Associate of Corporate Counsel – Lexology, Feb. 12, 2013.
Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.
