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IRS wins summary judgment motion in estate administration case

After a person dies, his or her estate will be responsible for any unpaid tax obligations. The estate's tax return will need to be filed with the Internal Revenue Service (IRS) as well as the state government tax agency in Maryland or any other applicable jurisdiction. This filing will include any estate tax payments due to the IRS and the state, which will significantly affect the estate administration process. Understandably, one must use the proper process when making payments in order to avoid future complications.

One woman had failed to do this when she filed a tax return with the IRS for an estate she was charged with managing. With an application for extension to file a tax return, the woman sent a payment to the IRS for an expected tax bill of $170,000 in accordance with advice given to her by her certified public accountant. The woman then filed an estate tax return which claimed there were no estate tax obligations due. However, the IRS audited the estate and found that the estate owed $25,526.

The woman did not attempt to challenge the amount stated in the IRS assessment following the audit. Instead, she asked for a refund of $144,474 from the IRS. However, the IRS refused to refund the amount because it categorized the payment as a partial tax payment, rather than a deposit. The IRS argued its case based upon the fact that the woman failed to send a written statement characterizing the payment as a "deposit," which is required by law. A judge agreed with the IRS and granted the motion for summary judgment filed by the IRS against the estate, which means the IRS is not obligated to return the money paid by the estate.

This case demonstrates how the estate administration process may not be exactly straightforward -- in Maryland or in any other state. It is clearly important to have a strong grasp on the relevant estate planning and tax issues when charged with managing an estate. This will help to avoid problems with the IRS as well as a variety of other legal complications.

Source: wealthmanagement.com, No Deposit, No Return, Dawn S. Markowitz, Aug. 27, 2013

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  • Best Of The Best The Frederick News Post
  • Bar Association Of Frederick County, Maryland
  • NAELA National Academy Of Elder Law Attorneys, Inc.
  • Maryland State Bar Association Inc.
  • Washington County Bar Association , DC Bar
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