Court Opinion

ID: 4473080
Source: CourtListenerOpinion
Date Created: 2020-01-14 19:35:05.591772+00
Date Added: 2024-06-11T14:53:41.099266
License: Public Domain

Chabot, J., concurring: I join in the majority opinion, and write separately merely to note a few additional considerations in support of the majority opinion’s analysis and conclusions. I. Treasury Regulations Respondent argues that only those expenses which are reported on the estate tax return may be deducted from the gross estate in computing the amount of the underpayment. Correspondingly, respondent further argues that expenses which arise after the filing of the tax return may not be used to reduce the underpayment of the estate tax. However, section 2053(a), in determining the value of the taxable estate, permits the deduction of claims against the estate which are allowable by applicable State laws. There are some types of claims whose effect on the decedent’s estate must necessarily be determined by subsequent events, such as those claims which require further action before they become a fixed obligation of the estate. See cases discussed in Estate of Smith v. Commissioner, 108 T.C. 412, 418-419 (1997), supplemented by 110 T.C. 12 (1998); Estate of Kyle v. Commissioner, 94 T.C. 829, 848-851 (1990); Estate of Sachs v. Commissioner, 88 T.C. 769, 779-783 (1987), affd. in part and revd. in part 856 F.2d 1158, 1162—1163 (8th Cir. 1988); Estate of Van Horne v. Commissioner, 78 T.C. 728, 735-738 (1982), affd. 720 F.2d 1114 (9th Cir. 1983). Section 20.2053-1(b)(3), Estate Tax Regs.,1 forbids the deduction on the estate tax return of an item unless the amount of the liability “is ascertainable with reasonable certainty, and will be paid.” The provision closes with the reassurance that, if the matter is not resolved by the time of the final audit, then relief would be available in the Tax Court or in a refund suit. Respondent’s contentions in the instant case fly in the face of this reassurance. Having forbidden by regulation the taking of a deduction, even by way of estimate, on a timely filed estate tax return, respondent in the instant case proposes to limit the relief otherwise flowing from the deduction merely because the taxpayer obeyed the regulation, waited until the event occurred, and sought the promised relief at an appropriate time in the instant Tax Court proceeding. In United States v. Olympic Radio & Television, 349 U.S. 232, 236 (1955), the Supreme Court directed that “We can only take the Code as we find it and give it as great an internal symmetry and consistency as its words permit.” Thus, if the phrase “tax required to be shown on a return” were to be interpreted in a temporal sense in section 6663(a), then it ought to have the same meaning wherever it appears. This means that it would have the same meaning where it appears in section 6662(a), and would have the same impact on those of the section 6662 additions that apply to the estate tax. Respondent’s contentions in the instant case might well lead prudent executors to load up estate tax returns with speculative deductions in order to satisfy this newly proclaimed requirement that only items claimed on the estate tax return may be taken into account in determining the base for additions to tax under sections 6662 and 6663. Thus, respondent’s contentions in the instant case appear to conflict with Treasury regulations and may well complicate the practical administration of the estate tax laws. II. Legislative History The majority opinion explains that the phrase “tax required to be shown on a return” has a clear classification meaning in the places in the Code where the phrase appears, but a temporal meaning which would support respondent’s position would not fit in many such places. An examination of the legislative history of the enactment of the Internal Revenue Code of 1954, where this phrase appears to have been introduced into the fraud provision, lends further support to the majority opinion’s analysis and conclusions. Under the Internal Revenue Code of 1939, the civil fraud addition to tax for income tax was imposed by section 293(b), with a special rule in section 51(g)(6)(B) in certain joint tax return situations; for gift tax by section 1019(b); and generally for other taxes where tax returns or lists were filed by section 3612(d)(2). As to the applicability of section 3612(d)(2) to estate taxes, see sec. 871(i). The civil fraud addition to tax for various stamp taxes was imposed by section 1821(a)(3). When the Internal Revenue Code of 1954 was enacted, the foregoing 1939 Code provisions were replaced by the following: SEC. 6653. FAILURE TO PAY TAX. (b) Fraud. — If any part of any underpayment (as defined in subsection (c)) of tax required to be shown on a return is due to fraud, there shall be added to the tax an amount equal to 50 percent of the underpayment. In the case of income taxes and gift taxes, this amount shall be in lieu of any amount determined under subsection (a). (e) Failure To Pay Stamp Tax. — Any person (as defined in section 6671(b)) who willfully fails to pay any tax imposed by this title which is payable by stamp, coupons, tickets, books, or other devices or methods prescribed by this title or by regulations under authority of this title, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty of 50 percent of the total amount of the underpayment of the tax. The text of these provisions as enacted is identical to the text of these provisions as reported by the Senate Finance Committee. The Senate Finance Committee’s technical explanation of these fraud provisions, S. Rept. 83-1622, at 591-592 (1954), is as follows: Section 6653. Failure to pay tax For all taxes for which returns are required, this section prescribes additions to the tax, corresponding to those of existing law relating to the income tax, for underpayments of tax resulting from fraud (50 percent of the underpayment). Existing law imposes a 50 percent addition in the case of fraud applicable to all taxes, but, in the case of taxes other than income, estate, and gift, that addition is based on the total amount of tax imposed. This section further provides that if the 50 percent penalty resulting from the fraud is assessed, the addition to tax under section 6651 for failure to file a return will not be assessed with respect to the same underpayment. Another change provided in this section is the substitution, for the penalty provided in existing law of an amount equal to the amount of any stamp tax evaded or not paid, of an addition to the tax of 50 percent of the total amount of the underpayment of such tax. To the same effect is the House Ways and Means Committee’s report. H. Rept. 83-1337, at A419 (1954). Thus, it is clear that in 1954 the Congress intended to consolidate and revise many of the 1939 Code fraud provisions. The phrase “tax required to be shown on a return” is described in the committee report as “all taxes for which returns are required”. S. Rept. 83-1622 at 591. That phrase is used to set off the section 6653(b), I.R.C. 1954 rules from the rules applying to “any tax imposed by this title which is payable by stamp, coupons, tickets, books, or other devices”, which are collectively referred to in the committee report as “any stamp tax” S. Rept. 83-1622, at 591, and which appear in the statute at section 6653(e), I.R.C. 1954. The classification interpretation is clear from the legislative events of 1954 and the committee reports. One searches in vain for any legislative events of 1954 or explanations in the course of the enactment of the 1954 Code that suggests that the phrase in dispute should be given a temporal interpretation, whether as to fraud or in general. Swift, Parr, Whalen, Laro, Vasquez, Gale, and Marvel, JJ., agree with this concurring opinion.  Sec. 20.2053-l(b)(3), Estate Tax Regs., provides as follows: § 20.2053 — 1. Deductions for expenses, indebtedness, and taxes; in general. * * * ******* (b) Provisions applicable to both categories. ******* (3) Estimated amounts. An item may be entered on the return for deduction though its exact amount is not then known, provided it is ascertainable with reasonable certainty, and will be paid. No deduction may be taken upon the basis of a vague or uncertain estimate. If the amount of a liability was not ascertainable at the time of final audit of the return by the district director and, as a consequence, it was not allowed as a deduction in the audit, and subsequently the amount of the liability is ascertained, relief may be sought by a petition to the Tax Court or a claim for refund as provided by sections 6213(a) and 6511, respectively.