Friday, April 25, 2014
Wallace R. Woodbury died in September 2006 with his federal estate tax return due in June 2007. Woodbury’s estate filed a Form 4788 requesting an extension as well as a letter stating that it included business interests and intended to pay taxes due on those interests in installments pursuant to Internal Revenue Code 6166. The IRS granted the estate’s extension by six months; however, in December 2007 Woodbury’s estate requested an additional extension. The IRS denied the estate’s request for an extension, but the estate made installment payments regardless, noting the installment payments were lawful pursuant to Section 6166. The IRS subsequently sent the estate a letter denying the Section 6166 election on the basis that the estate tax return had not been timely filed. The IRS then issued a notice of final determination, iterating the estate was not entitled to an election because it had not filed a timely estate tax return.
In response to the notice of final determination, the estate filed a petition for declaratory judgment and argued it had paid all applicable interest that would have been due under a Section 6166 election. The IRS moved for summary judgment, arguing that a Section 6166 election can only be made on a timely filed Form 706.
The tax court found Woodbury’s estate failed to substantially comply with Section 6166 and did not comply with the regulatory requirements for making such an election. Thus, the court granted the IRS’ motion for summary judgment. Woodbury v. Commissioner, T.C. Memo 2014-66 (Apr. 14, 2014).
See Dawn S. Markowitz, Estate Tax Liability Installments Denied, Wealth Management, Apr. 18, 2014.