Source: http://openjurist.org/289/f3d/684
Timestamp: 2013-12-09 01:50:06
Document Index: 688001405

Matched Legal Cases: ['§ 7430', '§ 2210', '§ 2210', '§ 2210', '§ 2210', '§ 7430', '§ 7430']

289 F3d 684 Wilkes v. United States | OpenJurist
289 F. 3d 684 - Wilkes v. United States	Home289 f3d 684 wilkes v. united states
289 F3d 684 Wilkes v. United States 289 F.3d 684
Nolan R. WILKES, Jr., Personal Representative of the Estate of Nolan R. Wilkes, Sr., deceased, Plaintiff-Appellee,v.UNITED STATES of America, Defendant-Appellant.
No. 00-16614.
Jonathan S. Cohen, Andrea R. Tebbets, Dept. of Justice/Tax Div./ App. Section, Washington, DC, for Defendant-Appellant.
Joel Barry Toomey, Peek, Cobb, Edwards & Ashton, Jacksonville, FL, for Plaintiff-Appellee.
The government appeals from the district court's award of attorneys' fees to the Wilkes Estate. The primary issue on appeal1 is whether the district court abused its discretion making the award, concluding that the government's position in the underlying estate tax case was lacking in substantial justification pursuant to 26 U.S.C. § 7430(c)(4)(B). We affirm.
Nolan Wilkes, Sr. ("decedent") died testate on October 26, 1988. A large portion of his estate consisted of 8,327 shares of stock in Suwannee Block and Building Materials Company, which comprised 87% of the total shares; the other 13% were owned by Nolan Wilkes, Jr., the son and executor. The decedent also owned some real property that was used by Suwannee. After the decedent died, the executor agreed to sell the shares to an employee stock ownership plan ("ESOP") created for Suwannee's workers. The sale took place on June 30, 1989. The total tax liability was $515,663.
The executor elected to have the provisions of IRC § 2210 apply,2 which provided that the executor was relieved of liability for a certain portion of the taxes owed by the estate if an ESOP bought the employer securities and agreed to pay that portion of the estate tax liability.3 The estate paid $168,000 in estate tax when the return was filed. The ESOP agreed to pay the remaining amount of estate tax, $347,000. Pursuant to the relevant statutes, an appropriate election was made to pay this $347,000 in annual installments over a tenyear period, beginning in July 1994. The problems giving rise to this litigation occurred because the ESOP did not pay any of the installments and guarantor Suwannee was similarly unable to pay.
After the ESOP defaulted, the IRS attempted to collect the unpaid balance of the tax from the estate. In September 1992, the estate filed an Application for Taxpayer Assistance Order ("TAO") to Relieve Hardship (Form 911), seeking an abatement of collection. In November 1992, the IRS responded to the TAO application and advised that the "enforcement of collection will be directed to the ESOP." However, the IRS later learned that the ESOP and Suwannee (the guarantor of the debt) could not pay the outstanding taxes. The IRS then pursued payment from the estate.
The estate paid the outstanding tax liability of $552,391.86 and the IRS denied the administrative refund claim filed by the estate and its subsequent protest. The estate filed suit in the district court on November 7, 1997. Both parties filed motions for summary judgment. The estate argued that the discharge of the executor under § 2210(a) discharged the executor in his representative capacity, i.e., discharged the estate. The government argued that § 2210 merely discharged the executor's personal liability, and that the estate itself remained liable.
In the underlying estate tax litigation, the district court granted the estate's motion for summary judgment, holding that § 2210 provided a discharge of the tax liability of the executor in his representative capacity, i.e., a discharge of the estate. Wilkes v. United States, 50 F.Supp.2d 1281 (M.D.Fla.1999). The estate filed a motion for attorneys' fees pursuant to § 7430,4 arguing that the government's position lacked substantial justification. Following the recommendation of the magistrate judge, the district court awarded attorneys' fees for the trial work. The government filed this appeal.
The issue before us is whether the district court abused its discretion in awarding fees, holding that the government's position in the underlying litigation lacked substantial justification. Section 7430 authorizes the award of attorneys' fees to private parties who prevail "[i]n any administrative or court proceeding which is brought by or against the United States in connection with the determination, collection, or refund of any tax, interest, or penalty." 26 U.S.C. § 7430(a).5 Prevailing party status is among the several conditions for eligibility for an award of fees. With respect to the instant award of attorneys' fees to the estate, the government challenges only certain aspects of the estate's prevailing party status. The government's primary argument