Estate of Gore v. Comm'r , 94 T.C.M. 602 ( 2007 )

T.C. Memo. 2007-370
UNITED STATES TAX COURT
ESTATE OF SYLVIA GORE, DECEASED, PAMELA POWELL,
PERSONAL REPRESENTATIVE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent*
Docket No. 468-02. Filed December 19, 2007.
Paul R. Hodgson, Edith F. Moates, and James E. Poe, for
petitioner.
Elizabeth Downs, for respondent.
*
This opinion supplements our previously filed opinion in
Estate of Gore v. Commissioner, T.C. Memo. 2007-169.
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SUPPLEMENTAL MEMORANDUM OPINION
MARVEL, Judge: Petitioner and respondent filed computations
for entry of decision under Rule 155.1 We must decide which
party’s method of computation is appropriate in determining the
amount of petitioner’s estate tax deficiency.
Background
On June 27, 2007, the Court filed its opinion, Estate of
Gore v. Commissioner, T.C. Memo. 2007-169, in this estate tax
case and the related gift tax case consolidated therewith, Estate
of Gore v. Commissioner, docket No. 467-02 (gift tax case), but
withheld entry of decision so that the parties could submit
computations under Rule 155.2 On September 5 and 7, 2007,
respectively, petitioner and respondent filed their computations
for entry of decision in this estate tax case. Because
petitioner’s and respondent’s computations conflicted, we
scheduled a hearing on the unagreed Rule 155 computations and
ordered the parties to file statements detailing the items of
disagreement and the reasons for the dispute.
On October 5, 2007, petitioner filed a detailed statement of
the items of disagreement. Petitioner contends that respondent’s
1
Unless otherwise indicated, all Rule references are to the
Tax Court Rules of Practice and Procedure.
2
The parties entered into an agreement resolving the
computation of petitioner’s gift tax liability, and decision was
entered in the gift tax case on Dec. 14, 2007.
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Rule 155 computation raises a new issue because it eliminates the
$1,183,029 gift tax deduction that respondent allowed in
calculating the estate tax deficiency he determined in the
September 26, 2001, estate tax notice of deficiency. Petitioner
argues that, because respondent did not contest the gift tax
deduction before submitting his Rule 155 computation,
respondent’s attempt to disallow the gift tax deduction raises a
new issue, which is prohibited by Rule 155(c).3 Accordingly,
petitioner’s Rule 155 computation begins with the deficiency set
forth in the September 26, 2001, estate tax notice of deficiency,
$1,071,650. From that amount, petitioner subtracts the
following:
Credit allowed for taxes paid to Oklahoma
State as of statutory notice ($88,737.00)
Total State death tax paid as of 8/28/07 284,406.50
Balance of State death tax credit 195,669.50 ($195,669.50)
Additional expense submitted to IRS
and accepted 296,292.55
Executors fee paid to Pamela Powell 20,814.00
Interest to Oklahoma (negotiated to
one-half of billed amount) 103,812.00
Total additional expenses without
Federal interest included 420,918.55
Tax on above amount at 55 percent (231,505.20)
Balance on tax 644,475.30
On October 9, 2007, respondent filed his statement regarding
the Rule 155 computation dispute. Respondent’s computation
3
Rule 155(c) provides that “no argument will be heard upon
or consideration given to the issues or matters disposed of by
the Court’s findings and conclusions or to any new issues.”
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reflects an increased deficiency over the amount determined in
the estate tax notice of deficiency because in calculating the
estate tax deficiency in the notice, respondent claims, he
erroneously allowed a $1,183,029 gift tax deduction.4 Respondent
argues that no gift tax liability existed because decedent’s
transfer of the Marital Fund assets to the Gore Family Limited
Partnership (GFLP) was incomplete for gift tax purposes.
Respondent contends that in Estate of Gore v. Commissioner, T.C.
Memo. 2007-169, we held that the alleged transfer did not
constitute a gift because decedent did not relinquish control
over the Marital Fund assets. In addition, respondent argues
that the decision in the gift tax case, which petitioner
stipulated, reflects that petitioner had no gift tax deficiency
and provides that all gift tax payments be credited against
petitioner’s estate tax deficiency. Removing the gift tax
deduction from his computation and incorporating certain credits
and deductions claimed by petitioner,5 respondent determined an
4
Respondent apparently assumed that the gift tax deficiency
that was the subject of the gift tax case would be sustained by
this Court and calculated the gift tax deduction accordingly.
Though the deduction has turned out to be erroneous, at the time
of its allowance it was consistent with respondent’s position in
the gift tax case. It seems that respondent’s error, if he
committed any, was in not taking an inconsistent position in the
estate tax case to protect the revenue.
5
In his determination, respondent found that petitioner had
not substantiated the $20,814 claimed as executor’s fees or
$55,000 of the $284,406.50 petitioner claimed as death taxes paid
(continued...)
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estate tax deficiency of $1,361,004.03. Respondent, however,
limited the deficiency asserted in his Rule 155 computation to
$1,071,650, the amount determined in the estate tax notice of
deficiency.
On October 15, 2007, we conducted a hearing on the Rule 155
computation issue. Counsel for both parties appeared and were
heard. At the hearing, respondent’s counsel conceded deductions
by petitioner for the $20,814 in executor’s fees, the additional
$55,000 in Oklahoma estate taxes, and $12,495 in attorney’s fees.
The only remaining issue is whether the erroneous gift tax
deduction allowed in the September 26, 2001, estate tax notice of
deficiency should be included in the Rule 155 computation of
petitioner’s estate tax deficiency.
Discussion
Under Rule 155(a), after the Court files its opinion
determining the issues in a case, the Court may withhold its
decision to allow the parties to submit computations of the
correct amount of the taxpayer’s deficiency to be entered as the
decision pursuant to the findings and conclusions of the Court.
If the parties disagree on the amount of the deficiency to be
entered as the decision, either or both of them may file a
computation of the deficiency they believe to be in accordance
5
(...continued)
to the State of Oklahoma.
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with the findings and conclusions of the Court. At the Court’s
discretion, the parties may then be given an opportunity to be
heard in argument thereon, and the Court will determine the
correct deficiency. Rule 155(b). However, parties may not raise
new issues or matters in their Rule 155 computations. See supra
note 3; see also Rule 155(c); Bankers Pocahontas Coal Co. v.
Burnet, 287 U.S. 308, 312 (1932). The starting point for the
computation is the notice of deficiency from which the parties
compute the redetermined deficiency on the basis of matters
agreed to by the parties or determined by the Court. See Home
Group, Inc. v. Commissioner, 91 T.C. 265, 269 (1988), affd. 875
F.2d 377 (2d Cir. 1989).
Petitioner contends that the issue regarding the gift tax
deduction is a new issue which respondent may not assert in his
Rule 155 computation. Respondent concedes that he failed to
recognize his computational error in the notice of deficiency and
that he failed to plead an increased deficiency during
litigation. Nevertheless, respondent argues that the question of
whether decedent’s transfer of the Marital Fund assets to GFLP
constituted a completed transfer for gift tax purposes was
directly at issue in this estate tax case and in the gift tax
case.
We agree with respondent. While the notice of deficiency
serves as a starting point for the Rule 155 computation, the
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parties must compute the deficiency on the basis of the matters
decided by the Court. See id. Petitioner cannot reasonably
contend that the validity of the alleged transfer giving rise to
the gift tax deduction was not at issue. At trial, petitioner
asserted various arguments relating to the transfer of assets to
GFLP, but we ultimately held that decedent did not complete the
transfer as claimed. Because the attempted transfer of the
Marital Fund assets to GFLP was not completed and did not
constitute a gift, a gift tax liability attributable to the
transfer of Marital Fund assets did not arise, and no gift tax
deduction is warranted. In the gift tax case, petitioner
acknowledged this result by entering into an agreement
recognizing that petitioner was not liable for any gift tax
deficiency and crediting all gift taxes paid against petitioner’s
estate tax deficiency. The allowance of a gift tax deduction for
$1,183,029 would not reflect the findings of the Court in this
estate tax case or result in a correct computation of
petitioner’s estate tax deficiency.
Respondent’s computation incorporates the parties’
stipulations and the findings of the Court and accounts for the
appropriate credits and deductions claimed and substantiated by
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petitioner.6 Consequently, we adopt respondent’s computation and
conclude that petitioner’s estate tax deficiency is $1,071,650.
To reflect the foregoing,
Decision will be entered
in accordance with respondent’s
computation.
6
Although respondent conceded several credits and
expenditures at the Oct. 15, 2007, hearing that he did not
include in his initial Rule 155 computation, we note that whether
or not respondent takes these additional expenses into account is
irrelevant because the resulting estate tax deficiency would
still exceed $1,071,650.