Opinion ID: 2451452
Heading Depth: 1
Heading Rank: 3

Heading: penalties and interest charges levied against the estate

Text: Plaintiffs' petition sought the removal of Melvin as personal representative of Mrs. Smith's estate alleging that he failed to file proper and timely estate tax returns which resulted in the imposition of interest and penalties against the estate. The trial court found Melvin legally accountable for the failure to file timely returns and the resulting consequences. The trial court therefore ordered the $3,461 in interest and penalties which had been levied against the estate to be surcharged against any amount which might be distributed to Melvin under his mother's will. Melvin alleges that the trial court erred in finding him personally liable for the interest and penalties levied against the estate because the failure to file timely and proper returns resulted from the negligent and unethical conduct of the accountant upon whom he relied. Under the provisions of section 473.810(11), RSMo 1986, the personal representative is responsible for timely filing and paying estate taxes. Recognizing, however, that the preparation and filing of complicated estate tax returns often requires the services of a professional, section 473.810(14), RSMo 1986, authorizes the personal representative to: Employ persons, including attorneys, auditors, investment advisors, or agents, to advise or assist the independent personal representative in the performance of his administrative duties; act without independent investigation upon their recommendations; and instead of acting personally, employ one or more agents to perform any act of administration, whether or not discretionary. Nevertheless, the trial court, relying on United States v. Boyle, 469 U.S. 241, 105 S.Ct. 687, 83 L.Ed.2d 622 (1985), found that the failure to file timely estate tax returns was not excused by the personal representative's reliance on the accountant to whom he had delegated the responsibility. In this the court erred. In Boyle the executor of decedent's estate sued for a refund of the penalty imposed for the late filing of the estate tax return by the estate's attorney. Summary judgment was entered for the executor and the court of appeals affirmed. The United States Supreme Court reversed holding the executor's reliance on the estate attorney to file the return did not constitute reasonable cause for the failure to file a timely return. Boyle , however, involved whether a penalty for late filing was owed; it did not address the question who would be responsible for the penalty imposed, the estate or the executor. Furthermore, although Boyle stands for the proposition that a taxpayer has a nondelegable duty to ascertain and meet unambiguous statutory deadlines for filing, the Court emphasized that the principle of non-delegation does not extend to situations in which a taxpayer reasonably relies on expert advice concerning substantive questions of tax law, such as whether a liability exists in the first instance. Boyle, 469 U.S. at 251, 252, 105 S.Ct. at 692, 693. In this case, the evidence shows that the additional taxes, penalties and interest assessed against the estate resulted from the erroneous advice and ineffective assistance given to Melvin by Ms. Taylor, the estate's accountant. Melvin was aware that the federal estate tax had to be filed and paid within a specific time and asked Ms. Taylor if an extension could be obtained. She advised him that obtaining an extension would be no problem. Although she filed a request for an extension of time in which to file the return, she neglected to file a request for an extension of time in which to pay the tax. Another example of the order of error committed by Ms. Taylor concerned the filing of the Missouri estate tax return. Melvin asked Ms. Taylor if such a return needed to be filed and was advised that it was unnecessary. In these circumstances, the failure to file timely returns was not due to a lack of diligence or dereliction of duty on the part of Melvin with regard to ascertaining and meeting filing deadlines, but rather due to his reliance on Ms. Taylor's erroneous advice and assistance regarding substantive issues. In re Estate of Gangloff v. Borgers, 743 S.W.2d 498, 503 (Mo.App.1987), specifically rejects the applicability of Boyle to a determination whether the estate or the personal representative is responsible for a penalty imposed as a result of a delay in filing an estate tax return where the personal representative has retained and relied on a professional to prepare and file the return. In Gangloff the trial court entered judgment ordering the personal representative to pay over $8,000 in penalties and interest assessed against the estate because of delayed filing of the estate tax return. The personal representative appealed, arguing it was error to have charged him with the penalties and interest assessed because he had acted on the advice of the attorney who had been engaged to prepare and file the return. In reversing the trial court's judgment, the Court of Appeals, Eastern District, emphasized that Missouri's probate code expressly permits the personal representative to delegate responsibility to and rely on the advice of a professional. Gangloff, 743 S.W.2d at 503; § 473.810(14). The court held that a personal representative was not to be held strictly liable to the estate for the errors, omissions or malfeasance of the estate's agents in the absence of evidence that the personal representative's delegation or reliance was unreasonable. Gangloff, 743 S.W.2d at 503. The record demonstrates that Melvin's delegation and reliance on Ms. Taylor were reasonable. Having no experience or familiarity with estate tax preparation, he retained the services of Ms. Taylor, a certified public accountant. Melvin relied upon Ms. Taylor to prepare and file the required tax returns for the estate. Melvin had no reason to question Ms. Taylor's competency until Mr. Sumner, the accountant who replaced her, discovered various problems with the estate taxes. Accordingly, the trial court's order directing the $3,461 in taxes, interest and penalties which had been levied against the estate to be surcharged against any amount which might be distributed to Melvin under his mother's will is for reversal. The estate is not without a remedy for the damages it has sustained as a result of Ms. Taylor's malpractice; Melvin, as personal representative, can bring a malpractice action on behalf of the estate against her.