In Uncategorized on 03/09/2016 at 08:41

Well, Hardly Ever

That’s the takeaway from Estate of Anthony La Sala, Deceased, Kenneth La Sala, Executor, 2016 T. C. Memo. 42, filed 4/8/16.

Ken settled a gift tax – estate tax fracas with IRS. There’s much ado about whether the amount of gift tax in question was merely “notational” (whatever that means; I think they meant “notional,” a made-up number upon which to base a calculation, like interest-swap derivatives), or real.

At all events, the late Anthony did one of those sell-the-goodies-for-an-annuity game, and IRS agreed that the annuity was good, but Ken agreed they undervalued what the late Anthony kept in his wallet. Hence the deficiency.

For more on the annuity gambit, see my blogpost “No’ Deid Yet,” 2/7/13.

Ken does get de novo review, as he never got a chance to fight over the interest, which is all that is at issue.

It’s all about the stip of settlement.

“The estate’s explicit concession that Anthony made a taxable gift in 2003 established a gift tax liability for that year. That concession was binding even though no gift tax liability was determined in the notice of deficiency commencing the estate tax case. The estate owes interest on this gift tax liability, just as it would owe interest on any other tax liability not paid at the prescribed time.” 2016 T. C. Memo. 42, at p. 13 (Citations omitted).

But when you get lawyers for both sides in the stand, it gets worse.

“Mr. B [IRS counsel] at trial credibly testified to his belief that he lacked authority to waive interest and that he could never have gotten approval for a settlement that purported to waive interest. See Internal Revenue Manual pt. (Aug. 11, 2004) (‘The Service does not settle Tax Court cases by waiving statutory interest.’). Mr. A, an experienced attorney on the other side of the negotiations, testified that he was unaware of any other instance in which the IRS had waived statutory interest as part of a settlement. Under these circumstances, we cannot construe the stipulation of settlement to include as an implied term a waiver of interest on the 2003 gift tax liability.” 2016 T. C. Memo. 42, at p. 14.

Do I need to say it again? Watch those stipulations; they’ll burn ya.


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