United States District Court, D. New Jersey
ESTATE OF AGNES R. SKEBA, Plaintiff,
UNITED STATES OF AMERICA, Defendant.
G. SHERIDAN, U.S.D.J.
matter is before the Court on a motion for summary judgment
brought by Plaintiff, the Estate of Agnes R. Skeba
("Estate" or "Plaintiff) (ECF No. 12), and on
a motion for summary judgment brought by Defendant, the
United States of America. (ECF No. 13). Plaintiff seeks to
set aside $450, 959 in penalties assessed by the Internal
Revenue Service ("IRS") for the alleged late filing
of an Estate Tax Return.
10, 2013, Agnes R. Skeba ("Decedent") died. (ECF
No. 12-2, ¶ 1). Per the IRS Code, the initial date for
the Estate to file a federal estate tax return was nine
months after the death (March 10, 2014). (ECF No. 12-2,
about March 6, 2014, Plaintiff, through its counsel, George
White, Esq., filed an IRS form entitled Application for
Extension of Time to File a Return and/or Pay U.S. Estate
Taxes (IRS Form 4768) with a partial payment of the estate
tax in the amount of $725, 000 along with a cover letter
explaining the reasons for the application. (ECF No. 12-2,
letter to the IRS stated that he was paying all of the liquid
assets ($1, 475 million) of the Estate to the State of New
Jersey, Commonwealth of Pennsylvania, and the United States
for payment of state and federal estate taxes. White
furthered that the Estate was negotiating a mortgage on a
commercial property to satisfy the remainder the estate tax
it owed to the federal government; but this would require
additional time. More specifically, White's letter
Our office is representing Stanley L. Skeba, Jr. as the
Executor of the Estate of Agnes Skeba. Enclosed herewith is a
completed "Form 4768 - Application for Extension of Time
to File a Return and/or Pay U.S. Estate Taxes" along
with estimated payment in the amount of $725, 000 made
payable to "The United States Treasury" for the
above referenced Estate Tax.
Additionally, we are requesting a six (6) month extension of
time to make full payment of the amount due. Despite the best
efforts of this office and the Executor, the Estate had
limited liquid assets at the time of the decedent's
death. Accordingly, we have been working to secure a mortgage
on a substantial commercial property owned by the Estate in
order to make timely payment of the balance of the Estate Tax
anticipated to be due.
Currently, we have liquid assets in the amount of $1, 475
million and the estimated value of the total estate is $14.7
million. Accordingly, we have submitted payments in the
amount of $575, 000 to the State of New Jersey, Division of
Revenue, for State estate taxes payable and in the amount of
$250, 000 to the Pennsylvania Department of Revenue for State
inheritance taxes payable. We are hereby submitting the
balance of available funds to you, in the amount of $725,
000, as partial payment of the expected U.S. Estate Taxes for
We are in the process of securing a mortgage, which was
supposed to close prior to the taxes being due, in the amount
of $3.5 million that would have permitted us to make full
payment of the taxes timely. Due to circumstances previously
unknown and unavoidable by the Executor, the lender has not
been able to comply with the closing deadline of March 7,
2014. It is anticipated that the lender will be clear to
close within fourteen (14) days and then we will remit the
balance of the estimated U.S. Estate Taxes payable.
Additionally, there has been delays in securing all of the
necessary valuations and appraisals due to administrative
delays caused by contested estate litigation currently
pending in Middlesex County, New Jersey.
(ECF No. 12-2, Ex. C).
time, the Estate was valued at approximately $13.1 million of
which $10.2 million consisted of real estate (much of it was
farmland) and farming machinery. (ECF No. 12-2, ¶ 6). As
a result, there were delays in securing all of the necessary
valuations and appraisals; and there was ongoing contested
estate litigation pending in Middlesex County, New Jersey.
(Id. ¶. 7).
anticipated within the letter, the Plaintiff refinanced its
real estate, and made a second payment to the IRS in the
amount of $2, 745, 000 around March 18, 2014, only eight days
after the original due date for payment. (Id. ¶
11). This amount plus the prior payment ($725, 000) totaled
$3, 470, 000 in estate taxes having been paid to the IRS.
about June 25, 2014, D. Owens of the IRS approved Plaintiffs
application to extend the time to file the estate tax return
from March 10, 2014 until September 10, 2014 (Id.
Ex. E). The Owens letter noted that any extension of time was
subject to the caveat that the extension was "granted on
a year by year basis only." The letter reads:
Any extension will be granted on a year by year basis only.
In granting an extension of time to pay the estate tax or an
installment for a previously approved extension, the Internal
Revenue can require a performance bond, under Section 6161
(d) and 6165 of the Internal Revenue Code with a face value
of up to double the amount being deferred.
In the event the Internal Revenue Service denies your
extension request, your payment of tax is due upon receipt of
the denied extension.
about July 8, 2014, the extension of time to pay the estate
tax was granted by Gloria Olsen of the IRS until September
10, 2014. (Id., Ex. F). The Olsen approval stated
further conditions may be imposed for future extensions. Ms.
Olsen wrote in part:
The requirement to furnish a bond under IRC § 6165 is
being waived for this extension to pay request but may be a
requirement for future requests. Please note that the
granting of an extension of time for payment does not relieve
the estate from liability for the payment of interest during
the period of extension. Any future request for extension of
time to pay the liability must be applied for on or before
the date of the expiration of the previous extension.
Id. Neither the Olsen letter nor the Owens letter
acknowledged the estimated taxes that had been paid on or
about March 18, 2014; but both letters advise the Estate that
any further extension must be applied for prior to the last
day of the previous extension.
around June 30, 2015, Plaintiff filed its federal estate tax
return. It was prepared by David Lauer ("Lauer")
and Virginia Keenan ("Keenan"), CPAs, who were
engaged by the Estate and George White, Esq. to prepare the
return. The return reported the net estate tax as $2, 528,
838, and the prior estimated payment of $3, 470, 000.
Subtracting the net estate tax from the estimated payment
showed an overpayment of $941, 162. (Id., Ex. D).
August 3, 2015, the IRS responded to Plaintiffs return. It
showed an Overpayment on account before adjustment" of
$941, 162, and then it indicated there was a penalty assessed
due to the Estate's failure to file in the amount of
$450, 959.50 and a net "Overpayment" of $488,
719.34, which was refunded to the Plaintiff. The IRS Notice
stated that the "failure to file" penalty was 25%
of the "unpaid amount" of $1, 803, 838. The IRS
calculated the amount due on March 10, 2014 was $2, 528, 838
minus $750, 000 ...