Executor Faced With A Tax Bill Without Any Funds To Pay It
NEWS FLASH: Executor of an estate was subject to federal estate tax, but didn’t have enough assets to pay the tax. (Many of the estate assets were not probate property, such as joint accounts owned with persons other than the decedent’s spouse.) The estate tax return (Form 706 was filed, but the estate tax wasn’t paid.
To satisfy the estate tax, the executor obtained a restraining order over jointly-owned accounts and sought contributions from estate beneficiaries. Eventually, contributions from two beneficiaries and funds from the joint accounts were received and then used to pay federal and state estate taxes and an amount distributable to a beneficiary.
The IRS issued a notice of fiduciary liability to the executor, saying he was liable under IRC Sec. 6901 for the amounts distributed to the state and the beneficiary. The Tax Court disagreed, determining that because the estate wasn’t insolvent at the time of the distributions, the executor wasn’t personally liable for the federal tax deficiency. Scott Singer, TC Memo 2016-48 (Tax Ct.).
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