Attorney-at-Law

HOW TO AVOID PROBATE

In Uncategorized on 03/01/2016 at 23:03

And Cause a Mess of New Problems

The late James V. Costello, solicitous of his offspring, created a living trust, wherein to pour his assets, and from which these would flow to the offspring aforesaid on his departure from this vale of tears. Estate planning 101.

Now we all know that getting the assets into the hands of the trustee is the first task. The late James V.’s big assets were his IRAs, and these apparently got trapped in one of the endemic financial services mergers, sales, re-sales and general tearing around.

Howbeit, the late James V. became the late James V., the trust got distributions from the IRAs and paid these out to the aforesaid offspring.

The tale is told in Sally M. Costello, 2016 T. C. Memo. 33, filed 3/1/16, by Judge Cohen.

The offspring paid tax, the trust got audited, the trust’s deductions got whacked but the offspring’s income taxes on their distributions got reversed.

But within the magic three years, the trust filed an amended 1041, and claimed a refund, which was granted.

IRS came back to the offspring and demanded they pay back their refunds.

The offspring claim SOL, but IRS claims mitigation.

“The mitigation provisions allow for the correction of an error made in a closed tax year by extending the limitations period up to one year from the date a final determination is made. Secs. 1311, 1314(b); see Beaudry Motor Co. v. United States, 98 F.3d 1167, 1168 (9th Cir. 1996). Their intent is to take ‘the profit out of inconsistency, whether exhibited by taxpayers or revenue officials, and whether fortuitous or the result of design’, and their purpose is to prevent the Government or a taxpayer from obtaining ‘an unfair benefit * * * by assuming an inconsistent position and then taking shelter behind the protective barrier of the* * * [period] of limitations.” S. Rept. No. 75-1567, at 49 (1938), 1939-1 C.B. (Part 2) 779, 815.” 2016 T. C. Memo. 33, at pp. 7-8.

I discussed this in my blogpost “Mitigation and Inventory,” 4/20/11.

The offspring have to stump up.

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