By Laurie A. Hunter, Esq.
In U.S. v. Mangiardi, (DC FL 07/19/2013) 112 AFTR 2d 2013-5108, the district court refused to dismiss a transferee liability action brought by the IRS against a decedent’s daughter who received funds from his IRA after his death. The gross estate consisted primarily of $4.5 million in a revocable trust and $4 million in an IRA. Tax due was $2.4 million after audit (actually reduced by $200,000!), but the estate requested and received extensions of time to pay, arguing that the securities had greatly depressed values due to the recession. In fact, the decedent’s daughters engaged in active trading of the securities and paid themselves hundreds of thousands of dollars in fees. The IRS levied for the unpaid taxes; the probate estate is insolvent. The IRA was distributed to decedent’s nine children as named beneficiaries. The Court noted that if the estate tax is not paid after notice and demand, a lien (which lasts for 10 years) arises automatically against all property in the estate. In addition, a "transferee of property" in the estate has personal liability to the extent of the value of the property received. The Court agreed with the IRS that the transferee liability suit can be brought within the 10-year time period of the lien against the transferor, and was not limited to the three-year plus one statute of limitations in Code section 6901 that concerns transferee liability. Point to remember: recipients of assets on death are liable for taxes if unpaid by the estate.
