In Uncategorized on 09/11/2017 at 16:57

The distributees of the late Minnie Sower benefit from the portable Deceased Spousal Unused Exclusion from the estate of her late husband Frank, but IRS shrunk it from $1,256,033 to $282,690. Oh, IRS also increased the late Minnie’s tax liability by the amount of her lifetime taxable gifts (unified credit, y’know). But, being all heart, IRS did give Minnie’s estate an extra $850 in funeral expenses to deduct. Thus, Minnie’s largesse is reduced by $788,165. 149 T. C. 11, at p. 6, filed 9/11/17.

Full caption reads “Estate of Minnie Lynn Sower, Deceased, Frank W. Sower, Jr. and John R. Sower, Co-Executors v. Com’r.”

IRS has first signed off on the late Frank’s estate with a Letter 627, the famous closing letter. But then IRS went back, using only the stuff Frank’s ex’rs had given them before (nothing new, so no “second examination” per Section 7605(b)), and shrunk the exclusion. But there was no SNOD issued to the late Frank’s ex’rs, and they got a new Letter 627.

Minnie’s ex’rs argue the first Letter 627 was a Section 7121 settlement agreement. But it wasn’t.

Judge Buch: “The Commissioner has strict rules governing closing agreements. Under the applicable regulations only the prescribed forms, Form 866, Agreement as to Final Determination of Tax Liability, and Form 906, Closing Agreement on Final Determination Covering Specific Matters, qualify as closing agreements.  Sec. 601.202(b), Statement of Procedural Rules; sec. 301.7212-1(d)(1), Proced. & Admin. Regs.” 149 T. C. 11, at p. 12. The only “extraordinarily rare” exception is an exchange of correspondence comprising an offer and acceptance, and there aren’t many. This case isn’t one.

Estoppel doesn’t apply (and that’s another rare situation), because no one changed position in reliance, and no one who had no tax liability before now has one.

And the three-year Section 6501  SOL only applies if more tax is assessed against the late Frank’s estate, and here it isn’t.


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