2000 U.S. Tax Ct. LEXIS 56">*56 An appropriate order and decision will be entered.
An estate tax return was delinquently filed on behalf of
decedent's estate (E). R assessed the tax reported on the return
and an addition to tax for late filing. R subsequently examined
E's return and determined a deficiency and an addition to tax
for late filing relating to such deficiency. The parties settled
the issues relating to the estate tax liability. As part of the
settlement, E agreed to various increases to the taxable estate.
However, due to R's allowance of a deduction for interest
expense, the settlement produced an overassessment in tax.
E disputes the late filing addition to tax assessed by R
prior to the issuance of the notice of deficiency. R contends
that this Court lacks jurisdiction over such addition to tax
pursuant to
jurisdiction over a portion of the addition to tax under sec.
taxable estate through the deficiency procedures.
2000 U.S. Tax Ct. LEXIS 56">*57 HELD: This Court lacks jurisdiction over the late filing
addition to tax assessed by R prior to the issuance of the
notice of deficiency, because such addition is not attributable
to a deficiency as defined in
115 T.C. 142">*143 VASQUEZ, JUDGE: A Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, was delinquently filed on behalf of the Estate of Glenn G. Forgey (the estate). Respondent assessed the estate tax reported on the return and a
2000 U.S. Tax Ct. LEXIS 56">*58 The parties reached an agreement as to all issues raised in the notice of deficiency except for the
The estate requests the Court to review the late-filing addition to tax assessed by respondent prior to the issuance of the notice of deficiency (the assessed addition to tax). In response to respondent's argument that we lack jurisdiction to do so, the estate contends that, despite the resulting overassessment in tax, a portion of the assessed addition to tax is attributable to a deficiency. Therefore, the issues for decision are whether the Court has jurisdiction to review any portion of the assessed addition to tax, and if so, whether the estate is liable for such addition.
115 T.C. 142">*144 FINDINGS OF FACT
Some of the facts have been stipulated and are so found. The stipulated2000 U.S. Tax Ct. LEXIS 56">*59 facts and the related exhibits are incorporated herein by reference.
Glenn G. Forgey (decedent) died testate on October 14, 1993. At the time of his death, decedent resided in Keya Paha County, Nebraska. Decedent's son, Lyle A. Forgey (Mr. Forgey), was appointed as the personal representative of decedent's estate. At the time the petition was filed, Mr. Forgey resided in Springview, Nebraska.
The Federal estate tax return for the estate was originally due on July 14, 1994. 3 A day prior to the due date, Mr. Forgey filed a Form 4768, Application for Extension of Time to File a Return and/or Pay U.S. Estate Taxes, requesting an extension of time to file the estate tax return until January 14, 1995, and an extension of time to pay the estate tax until July 14, 1995. The requested extensions were granted by the Commissioner.
The January 14, 1995 extended2000 U.S. Tax Ct. LEXIS 56">*60 due date for filing the estate tax return expired with no return having been filed. Following respondent's written inquiry as to the status of the estate tax return in late May 1995, Mr. Forgey signed the return and mailed it to the Internal Revenue Service Center in Ogden, Utah. The Commissioner received the estate tax return on June 2, 1995. The return reflected an estate tax liability of $ 2,165,565 and a balance due of $ 1,683,565. 4
On July 17, 1995, respondent assessed the estate tax liability and a
2000 U.S. Tax Ct. LEXIS 56">*61 By notice of deficiency dated April 23, 1998, respondent determined a deficiency in estate tax of $ 866,434. Based on this deficiency, respondent determined an additional
In the notice of deficiency, respondent determined a $ 1,580,432 net increase in the amount of the taxable estate. 115 T.C. 142">*145 This net adjustment, in turn, was based on the following: (1) A $ 2,040,249 increase in the value of items included in the gross estate; (2) a $ 28,373 reduction in the allowable deductions claimed on the estate tax return; and (3) the allowance of a $ 488,190 deduction for interest accrued on the deferred estate tax obligation (the interest expense deduction). 6
2000 U.S. Tax Ct. LEXIS 56">*62 The parties reached an agreement on the correct amount of the taxable estate, as evidenced by a stipulation of settled issues (the settlement). Apart from the interest expense deduction, the settlement resulted in a $ 332,352 increase in the taxable estate. 7 However, when the $ 488,190 interest expense deduction is taken into account, the net adjustment to the taxable estate is negative. Thus, the settlement produced an estate tax liability that was lower than that reported on the return. 8 Consequently, any addition to tax under
2000 U.S. Tax Ct. LEXIS 56">*63 OPINION
By way of a motion for entry of decision, respondent contends that this Court does not have jurisdiction to review the assessed addition to tax. The question of the Court's jurisdiction is fundamental and must be addressed when raised by a party or on the Court's own motion. See
This Court is a court of limited jurisdiction. See
2000 U.S. Tax Ct. LEXIS 56">*65 Respondent contends that no statutory deficiency exists, given that the deficiency procedures and the parties' settlement resulted in an overassessment. The estate contends otherwise. The estate's argument is essentially that, but for the "fortuitous accrual of interest", the taxable estate would have increased by $ 333,919 11 as a result of the deficiency procedures and the parties' settlement. The estate treats the tax attributable to this figure as the deficiency, ignoring the interest expense deduction in this context on grounds that 115 T.C. 142">*147 the interest accrual occurred "independent of the deficiency process".
The estate's argument as to2000 U.S. Tax Ct. LEXIS 56">*66 the existence of a deficiency must be rejected as it ignores the statutory definition.
the amount by which the tax imposed * * * exceeds the excess of
--
(1) the sum of
(A) the amount shown as tax by the taxpayer upon
his return * * * plus
(B) the amounts previously assessed * * * as a
deficiency, over --
(2) the amount of rebates * * * made.
This case involves no rebates. Furthermore, respondent has not previously assessed any amounts as a deficiency. Accordingly,
The parties' settlement in this case produced an overassessment in tax. This somewhat anomalous result (particularly in light of the concessions made by the estate) is attributable to the interest expense deduction, which the estate was prohibited from claiming prospectively on the estate tax return. 12 Yet, despite the unique circumstances of this case, it remains that the tax imposed on the estate does not exceed the amount of the tax shown on the estate tax return. A deficiency in tax, as2000 U.S. Tax Ct. LEXIS 56">*67 defined by
Having decided that there is no statutory deficiency, it follows that no portion of the assessed addition to tax is attributable to a deficiency. In other words, the requirements of paragraph (1) of
We have considered the estate's other arguments for a contrary holding 14 and, to the extent not discussed herein, find them to be without merit.
2000 U.S. Tax Ct. LEXIS 56">*69 Accordingly, respondent's motion for entry of decision will be granted.
An appropriate order and decision will be entered.
1. Unless otherwise indicated, section references are to the Internal Revenue Code as in effect on the date of the decedent's death, and all Rule references are to the Tax Court Rules of Practice and Procedure.↩
2. Respondent allowed a deduction for interest expense, discussed in detail infra.↩
3. Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, must be filed within 9 months of the decedent's date of death. See sec. 6075(a).↩
4. The estate submitted a payment of $ 482,000 with the Form 4768, Application for Extension of Time to File a Return and/or Pay U.S. Estate Taxes.↩
5. Respondent also assessed interest and an addition to tax for late payment under
6. The estate made an election under sec. 6166 to pay the estate tax liability on a deferred basis. The estate of a decedent dying prior to 1998 is entitled to deduct interest expense on a deferred estate tax obligation as an administrative expense under
7. The estate conceded $ 303,979 of the $ 2,040,249 valuation increase sought by respondent, and the estate further conceded respondent's $ 28,373 reduction in allowable deductions claimed on the return.↩
8. The statement of account dated Feb. 29, 2000, which the parties have stipulated, provides for a revised estate tax liability of $ 2,003,524. This figure is $ 162,041 less than the estate tax liability of $ 2,165,565 shown on the estate tax return.↩
9. The statement of account provides for a revised
10.
11. The $ 333,919 figure ignores an increase of $ 1,567 in deductions claimed by the estate on the estate tax return that was allowed by respondent in the notice of deficiency. The proper figure therefore should be $ 332,352. the definition of a deficiency for present purposes is reduced to the excess of the estate tax imposed over the amount of estate tax shown on the return.↩
12. The procedure for claiming a deduction for interest expense attributable to a deferred estate tax obligation is to file a supplemental estate tax return after the interest has accrued and been paid. See
13. That we lack jurisdiction to decide the issue is confined to the facts of this case. We do not hold, for example, that this Court lacks jurisdiction under sec. 6512(b)(1) to decide the same issue in the case of an overpayment. See, e.g.,
14. In support of its argument that we have jurisdiction over the assessed addition to tax, the estate cites our opinion in