Blaming Attorney Doesn't Eliminate Estate Tax Penalty
A recent U.S. Tax Court case held executors liable for the penalty for the late filing estate tax return despite their attempt to blame their lawyer for the untimely return. Decedent, a U.S. citizen domiciled in Germany, died on September 10, 1999. She had two wills - U.S. and German. Two individuals, Roisen and Helman, were nominated as executors. They hired an attorney, who sought an extension of time for filing the estate tax return. The return was eventually filed on September 19, 2001, although the last date is could be timely filed was December 10, 2000. The IRS imposed a $233,359 penalty for late filing the return. The surviving executor argued the penalty should not be imposed because the return was late filed as a result of reasonable cause, not willful neglect. He argued that his attorney failed to advise him the return was due. The court found that the executor’s expectation that an attorney will file a return does not relieve the executor from his statutory duty to timely file the return. An executor might be excused if he reasonably relied on incorrect advice, such as no return was required, but here there was no evidence the executors even knew the filing deadline had passed, much less any evidence that they received errant advice.
Estate of Zlotowski v. Commissioner, T.C. Memo 2007-203 (July 24, 2007)
Lesson learned: You can't always blame the lawyer! Executors need to keep themselves informed about estate matters, including tax and other deadlines.
