Who Has A Right to Tax Court After a Taxpayer Dies?

A Right to Tax Court After the Taxpayer Dies

In the recent case of Sandra E. Sander at the US Tax Court, the question presented is whether or not the daughter of the decedent has the right to pursue a tax court petition after the taxpayer passed away. In this case, the daughter of the decedent was nominated as a personal representative under the will — and there is also a trust involved in which the daughter became the sole trustee. The trust assets were to be distributed into separate trusts for the benefit of the three children of the decedent, including the daughter who brought the action here. The IRS had issued multiple Notice of Deficiencies (NOD Letters) pursuant to Internal Revenue Code section 6662(a) for multiple years and in order to dispute the penalty, the daughter filed a petition for redetermination under the name of the decedent and start to substitute herself for the decedent. The court deferred the daughter’s petition. Let’s look at a few excerpts from the court ruling as to what formed the basis of the denial:

TL; DR

The Tax Court deferred the ruling for 6-months until a probate action is commenced and a personal representative is appointed.

Rule 60 (In Pertinent Part)

 (a) Petitioner:

• • • Deficiency or Liability Action

      • A case shall be brought by and in the name of the person against whom the Commissioner [i.e., the IRS] determined 7 the deficiency (in the case of a notice of deficiency) or liability (in the case of a notice of liability), or by and with the full descriptive name of the fiduciary entitled to institute a case on behalf of such person. See Rule 23(a)(1). A case timely brought shall not be dismissed on the ground that it is not properly brought on behalf of a party until a reasonable time has been allowed after objection for ratification by such party of the bringing of the case; and such ratification shall have the same effect as if the case had been properly brought by such party. . . . . . . .

    • Capacity

      • The capacity of an individual, other than one acting in a fiduciary or other representative capacity, to engage in litigation in the Court shall be determined by the law of the individual’s domicile. The capacity of a corporation to engage in such litigation shall be determined by the law under which it was organized. The capacity of a fiduciary or other representative to litigate in the Court shall be determined in accordance with the law of the jurisdiction from which such person’s authority is derived

State Law Requirements

• • • “Leda seeks recognition from the Court, through her Motion, that she is authorized to act in this case. She claims that she is so authorized as the trustee for the Sandra E. Sander Lifetime Trust. The question of whether Leda was authorized to file a Petition on behalf of Sandra depends on whether state law authorizes her to file a Petition for Sandra. See Rule 60(c); Fehrs v. Commissioner, 65 T.C. 346, 349 (1975); Estate of Peterson v. Commissioner, 45 T.C. 497, 500 (1966). Leda has the burden of proving that she was so authorized. See Fehrs, 65 T.C. at 348.

    • No personal representative has been appointed for Sandra’s estate.”

    • “The important point is that a person becomes the personal representative by being appointed by the circuit court acting in its probate capacity. See Shane Kelley & Jenna Rubin, Practice under Florida Probate Code, § 4.1 (2020) (explaining that the personal representative is the “court-appointed overseer of a decedent’s probate estate”).”

Does the Court have jurisdiction?

• • • “Under Rule 60(a) and (c), when a petition has been filed after the taxpayer is deceased, the petition must have been filed by a fiduciary entitled to bring the case on behalf of the deceased taxpayer. Fehrs v. Commissioner, 65 T.C. 346, 349 (1975). Otherwise, we are without jurisdiction. Id. at 348. In Fehrs, a taxpayer’s spouse filed a petition for redetermination on behalf of the deceased taxpayer. We dismissed the petition for lack of jurisdiction, but only after giving the spouse a chance to have a representative appointed for the taxpayer’s estate for the purpose of representing the taxpayer. Leda urges the Court to similarly defer ruling on respondent’s Motion to Dismiss for Lack of Jurisdiction: “If the Court denies petitioners’ Motion to Substitute parties, petitioner requests that the Court allow petitioner time to open a probate proceeding . . . .”

    • We agree that it is appropriate to do so. We will defer ruling on respondent’s Motion to Dismiss for Lack of Jurisdiction for six months in order to allow an opportunity for a probate action to be commenced for Sandra’s estate and a personal representative appointed.”

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