Court Opinion

ID: 9470829
Source: CourtListenerOpinion
Date Created: 2023-08-05 03:16:55.918814+00
Date Added: 2024-06-11T17:42:07.343788
License: Public Domain

POSNER, Circuit Judge,
dissenting.
The federal estate-tax return must be filed within nine months after the decedent’s death, 26 U.S.C. § 6075(a), and for each month that the return is late there is a mandatory penalty of five percent of the tax (up to a limit of 25 percent) “unless it is shown that [the failure to file on time] is due to reasonable cause and not due to willful neglect.” 26 U.S.C. § 6651(a)(1). Although in making “willful neglect” the opposite of “reasonable cause” the statute might seem to have modified the ordinary meaning of “reasonable,” a Treasury Regulation the validity of which is not questioned requires the taxpayer who would establish “reasonable cause” to show that he “exercised ordinary business care and prudence and was nevertheless unable to file the return within the prescribed time.” 26 C.F.R. § 301.6651-l(c)(l). Thus, the test is ordinary negligence.
Appellee Boyle, the decedent’s son and the executor of her estate, did not know and did not ask his lawyer when the estate tax return was due; the lawyer neglected to prepare the return in time; and as a result the return was filed three months late and the statutory penalty was assessed. The lawyer, of course, is not liable for the penalty. And he need not fear a malpractice suit, since as a result of this court’s decision his negligence has not hurt and may have benefited his client, by enabling the estate to retain for several months, without penalty, money to which the Internal Revenue Service was entitled.
Boyle is not J.P. Morgan or Baron Rothschild but he is an experienced businessman, and not the pathetic “receptionist/telephone operator . .. inexperienced in business matters” of Rohrabaugh v. United States, 611 F.2d 211, 212 (7th Cir.1979). For many years president of an earth-moving company that employed 20 persons, he now works as an engineer for a nuclear power plant. He has a year of college and was the executor of his father’s estate. He knew he had to file an estate tax return for his mother’s estate, and he must have known that the return was due within a *1257fixed period of time after the decedent’s death — that it could not be filed whenever he took a fancy to file it. See United States v. Kroll, 547 F.2d 393, 396 (7th Cir.1977). Since a reasonable man with Boyle’s business experience — experience that included signing corporate income tax returns for many years — would have asked his lawyer when the return was due, Boyle cannot appeal to a statute that requires reasonable cause for filing late.
By allowing “simple passivity” to excuse late filing, Estate of Lammerts v. Commissioner of Internal Revenue, 456 F.2d 681, 683 (2d Cir.1972) (per curiam), this court ignores the statute and regulation, goes beyond Rohrabaugh, and puts this circuit into conflict with the other circuits that have had to decide when reliance on an attorney’s or accountant’s error in preparing a timely estate tax return is reasonable cause for filing late. The Eighth and Ninth Circuits hold that the taxpayer’s duty of care requires keeping tabs on his lawyer or accountant to make sure he is acting diligently; if as in this case the taxpayer fails in this duty he is guilty of willful neglect (which under the regulation just means negligence) per se and must pay the penalty. Boeving v. United States, 650 F.2d 493, 495 (8th Cir.1981); Estate of Lillehei v. Commissioner of Internal Revenue, 638 F.2d 65 (8th Cir.1981) (per curiam); Ferran-do v. United States, 245 F.2d 582, 589 (9th Cir.1957). The Sixth Circuit once took a Rohrabaugh -like approach but has since swung round to a hard line similar to that of the Eighth and Ninth Circuits. See Estate of Duttenhofer v. Commissioner of Internal Revenue, 410 F.2d 302 (6th Cir.1969) (per curiam), and especially Estate of Gera-ci v. Commissioner of Internal Revenue, 502 F.2d 1148 (6th Cir.1974), a case much like Rohrabaugh (the “executrix, a housewife with no income of her own and little or no business experience, relied entirely on the attorney for the estate to file the return,” and the attorney mistook the due date and became incapacitated to boot) — but decided the other way.
Although the Second Circuit condemned “simple passivity” in Estate of Lammerts, supra (see also Estate of Mayer v. Commissioner of Internal Revenue, 351 F.2d 617 (2d Cir.1965) (per curiam)), a sentence in Lam-merts — “We refused to penalize the taxpayer which reasonably relied on the accountant to file,” 456 F.2d at 683 — might appear to give Mr. Boyle some comfort. But the context shows otherwise. The reference is to Haywood Lumber & Mining Co. v. Commissioner of Internal Revenue, 178 F.2d 769 (2d Cir.1950), not an estate tax case, where a penalty had been assessed against the taxpayer for failing to file a personal holding company return. The taxpayer’s secretary-treasurer had requested its experienced accountant to prepare the proper tax returns, and neither realized that the taxpayer was in fact a personal holding company. The court pointed out that to require the secretary-treasurer “to inquire specifically about the personal holding company act nullifies the very purpose of consulting an expert. We doubt if anyone would suggest that a client who stated the facts of his ease to his lawyer must, in order to show ordinary business care and prudence, inquire specifically about the applicability of various legal principles which may be relevant to the facts stated.” Id. at 771. But Mr. Boyle did not ask his lawyer whether he had to file an estate tax return and receive a negative answer; he knew he had to file one and must also have known that there was a deadline for filing.
If Boyle had asked his lawyer when the deadline was and the lawyer had misinformed him, that might be reasonable cause for the late filing. But he did not ask. Judge Campbell’s statement that “Boyle and his wife contacted Mr. Keyser [the lawyer] numerous times inquiring about the progress of the estate and the preparation of the federal estate tax return” does not accurately reflect the record as I read it; nor did the district judge refer to any such evidence in granting summary judgment for Boyle. Boyle stated in his deposition that he did not ask the lawyer when the return was due until the deadline passed, and while he did testify that his wife “talked with him [Keyser] several times, or *1258someone in the office,” he also testified that he thought she had not asked the due date either, “because she didn’t know the next fall when it was due, when we discovered that it was late.” Whatever the Boyles were discussing with Keyser in this period it was not the due date of the estate tax return that they knew had to be filed and that they must have known had to be filed within a fixed period of time and not simply at their pleasure. Boyle could not simply close his eyes and ears and still be found to have used “ordinary business care and prudence.”
The statement in Keyser’s affidavit that he told Boyle that Keyser’s firm would tell Boyle when the return was due has little if any probative value given the enormous pressure on Keyser to attest to a state of facts that would save his client from having to pay a penalty — and himself from being sued for recovery of that penalty in a malpractice suit. Rather than invite desperately self-serving declarations by negligent lawyers, we should follow the circuits that impose on the taxpayer the duty, easy enough to fulfill, of asking the date the return is due. Let us by all means, in the spirit of Rohrabaugh, allow an exception for the completely inexperienced. But let us not create a loophole for the experienced businessman to crawl through; let us not reward his and his lawyer’s carelessness. At least let us not fool ourselves that Roh-rabaugh requires such a result. Whether a decision shall be deemed a controlling precedent in a later case involving different facts is a judgment that must be made by the court deciding the later case; a broad reading of Rohrabaugh is not foreordained.
If Boyle were required to pay the penalty that the Internal Revenue Service assessed, he might well, as I have suggested, have a malpractice claim against his lawyer, whose admitted negligence was the primary cause of the late filing. Liability would thus come to rest on the person whose fault was primarily responsible for depriving the Internal Revenue Service of its due. In this way proper incentives would be created to avoid a persistent problem in the enforcement of the tax laws. Instead the court today adopts an approach that rewards both the active negligence of the lawyer and the passive negligence of his client.