Court Opinion

ID: 4472207
Source: CourtListenerOpinion
Date Created: 2020-01-13 23:19:55.394099+00
Date Added: 2024-06-11T14:53:49.213151
License: Public Domain

Ruwe, J., concurring: I agree with the majority’s analysis of the interplay between personal liability under section 6324(a)(2) and interest on such liability pursuant to section 6601. I think it appropriate, however, to add a few words about the liability limitation provision contained in section 6324(a)(2). Personal liability under section 6324(a)(2) does not arise until the following two conditions are met: (1) There must be an estate tax liability due and unpaid, and (2) property included in the gross estate must have been received by a transferee or other person designated by section 6324(a)(2). Thus, it is possible that personal liability under section 6324(a)(2) may arise at the time when the estate tax becomes due and remains unpaid, as in this case, or it may arise later, if a transfer occurs after the date that the estate tax becomes due and remains unpaid. The provision in section 6324(a)(2) that limits personal liability to the date-of-death value of the property received is pertinent only when the estate tax, plus interest thereon, exceeds the date-of-death value of such property. Thus, whatever the date on which liability arises under section 6324(a)(2), the liability, at that point, cannot exceed the date-of-death value of the property received. On the other hand, at the time that personal liability comes into being, and the transferee1 becomes personally liable to pay a limited amount of the estate tax liability, that limited amount of liability becomes a direct obligation of the transferee, which itself is treated as a tax under title 26. If it is not paid when due, section 6601 provides for interest on the unpaid amount. In this sense, it is interest on the transferee’s personal liability, rather than interest on the estate’s tax liability. The aforementioned approach, which is based on a literal application of the statutory provisions, is identical to the traditional approach to transferee liability under State law where the transferred assets had a value less than the transferor’s liability. In such cases, the transferee’s liability has traditionally been limited to the value of the assets received by the transferee. Despite that initial limitation, a transferee also has been traditionally liable, in his or her own right, for interest on the value of the transferred assets from the date of receipt to the date of payment. See Lowy v. Commissioner, 35 T.C. 393, 395, 396 (1960); 14 Mertens, Law of Federal Income Taxation, sec. 53.39, at 102 (1974 rev.).2  There is nothing to indicate that the liability created by Congress in section 6324(a)(2) was intended to be a radical departure from traditional concepts of transferee liability. The only difference between traditional transferee liability under State law and that provided by section 6324(a)(2) is that section 6324(a)(2) limits liability to the value of transferred property at the date of death, whereas liability under traditional State law concepts would have been fixed by the value of property on the date received by the transferee. Under State law, the valuation date could have preceded the date of death (transfers in contemplation of death), occurred on the date of death as in the instant case, or occurred after the date of death. The limitation in section 6324(a)(2) fixed the date-of-death value as the single focus for the liability limit. Were we to adopt petitioners’ view of the liability limitation contained in section 6324(a)(2), we would be radically changing the traditional concept of limited transferee liability without any indication that Congress intended that result.3 We would also be creating a system that would reward those who delay in paying their obligations. Petitioners’ liability arose in 1981, almost 12 years ago, during which period they each have had the use and enjoyment of $50,000. This may continue through post-decision appeals and other delays in the collection process. It is unlikely that Congress contemplated that such use and enjoyment could continue free of interest charges. In Poinier v. Commissioner, 86 T.C. 478 (1986), affd. in part and revd. in part 858 F.2d 917 (3d Cir. 1988), we held that a donee had limited personal liability for the donor’s gift tax under section 6324(b) and was liable for interest from the date that the Commissioner served the donee with notice of the liability. (In Pointer, respondent claimed interest only from the date of the notice and our holding was therefore limited to that amount.) The Court of Appeals for the Third Circuit reversed our holding as to interest based on the liability limitation in section 6324(b).4 Despite some distinguishing features, the result reached by the Court of Appeals in Poinier v. Commissioner, 858 F.2d 917 (3d Cir. 1988), is inconsistent with our holding in the instant case. In Poinier, the Court of Appeals for the Third Circuit stated: The Commissioner’s position, accepted by the Tax Court, is that there is an entirely independent liability for interest, placed directly on the transferee, which arises at the time of service of a notice of transferee liability. This is not an easy argument to articulate, for unlike the donee liability provision in section 6324(b), the Commissioner can point to no specific code provision imposing such an independent liability on a transferee. * * * [Id. at 920.] Our opinion today makes it clear that section 6601 is the specific Code provision that imposes interest on petitioners’ limited personal liability for the estate tax. Chabot, Swift, Jacobs, Gerber, Parr, and Laro, JJ., agree with this concurring opinion.  Any person who is personally liable under sec. 6324(a)(2) is a transferee for purposes of the assessment and collection provisions of sec. 6901. Sec. 6901(h).    The date on which interest begins to run against the transferee sometimes varies under State law. Thus, in some situations where there was no culpability on the part of the transferee, interest may not begin to run until notice and demand has been given to the transferee. See Saltzman, IRS Practice and Procedure, par. 17.0611], at 17-29 (2d ed. 1991).    Those who argue that interest on a transferee’s unpaid liability can only arise under State law miss the point that, in the instant case, all aspects of personal liability, including interest thereon, are governed by Federal law, specifically, secs. 6324(a)(2) and 6601. Thus, statements in prior cases such as Lowy v. Commissioner, 35 T.C. 393, 395 (1960), to the effect that transferee interest can only arise under State law, are inapposite because those cases were dealing with transferee liability that arose under State law.    Sec. 6324(b), which creates limited personal liability for unpaid gift tax is, for purposes of this analysis, identical to sec. 6324(a)(2).