                       T.C. Memo. 1996-249



                     UNITED STATES TAX COURT



            JOHN CHRISTOPHER SINGLETON, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



    Docket No. 4164-94.               Filed May 30, 1996.



    John C. Singleton, pro se.

    T. Keith Fogg and Veena Luthra, for respondent.



            MEMORANDUM FINDINGS OF FACT AND OPINION


    JACOBS, Judge: Respondent determined that petitioner in his

capacity as a fiduciary of the Estate of Marguerite B. Greer

(sometimes referred to as the Estate) was personally liable under

31 U.S.C. section 3713(b) (1994) for unpaid estate taxes owing by

the Estate in the amount of $32,443, plus interest. Respondent
                                       -2-

reflected this determination in a notice of liability mailed to

petitioner on December 21, 1993.

       Petitioner acknowledges that he permitted Estate assets to be

distributed before all estate taxes had been paid; however, he

disputes personal liability for the unpaid estate taxes on the

basis that (1) the period of limitations for collection of the

unpaid       estate   taxes   had    expired   prior   to    the     mailing    of

respondent’s notice, and (2) he did not have knowledge of the

Government’s claim for unpaid estate taxes prior to July 24, 1981

(when    petitioner     and   the   other    co-executor    agreed    to    a   tax

deficiency of $12,701 on behalf of the Estate and signed Form 890

and by that date the greatest amount of distributions by the Estate

to others had been       made).     Accordingly, the issues we must decide

are:

       (1)    Whether the period of limitations for collection of the

unpaid estate taxes of the Estate expired prior to respondent’s

mailing of a notice of fiduciary liability to petitioner.                  We hold

that it did not.

       (2)    Whether petitioner is personally liable under 31 U.S.C.

section 3713(b)(1994) for unpaid estate taxes (and accrued interest

thereon) owing by the Estate.           We hold that petitioner is liable

for unpaid estate taxes together with interest accrued thereon to

December 21, 1993, the date respondent’s notice of liability was

mailed to petitioner.

       Except as otherwise indicated, all section references are to
                                 -3-

the Internal Revenue Code in effect as of the date of Marguerite B.

Greer’s death.   All Rule references are to the Tax Court Rules of

Practice and Procedure.   All dollar amounts have been rounded.

                          FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.     The

stipulation of facts and the attached exhibits are incorporated

herein by this reference.

Background

     Petitioner resided in Hot Springs, Virginia, at the time he

filed his petition.   He is an attorney engaged in the practice of

law in Bath County, Virginia.1

     Petitioner and Faith B. Gardiner were co-executors of the

Estate of Marguerite B. Greer; petitioner was also the attorney of

record for the Estate.    Ms. Greer died on April 29, 1976; at the

time of her death, Ms. Greer was a resident of Bath County.

     Ms. Gardiner was an adopted child of Ms. Greer and was the

sole beneficiary of Ms. Greer’s estate.      Ms. Gardiner resided in

New Jersey at all relevant times.

     During 1978, Ms. Gardiner took Estate assets to her residence

in New Jersey to have them appraised. The property was stolen

during a burglary of Ms. Gardiner’s home.    A $38,000 theft loss was

claimed on the estate tax return.

     1
          During most of the period of time relevant to this
case, petitioner was the prosecuting attorney for Bath County,
Virginia, an elected position. He had a private law practice on
the side.
                                      -4-

      The estate tax return was filed on June 4, 1979.                   The amount

of tax shown on the return to be due ($7,972) was paid at the time

the return was filed.      Subsequently, the Estate made a payment to

the Internal Revenue Service (IRS) in the amount of $1,204; the

reason for this payment is not stated in the record.

      Respondent    examined    the    estate    tax    return      in    1981   and

disallowed the $38,000 theft loss, contending that at the time of

the theft the assets stolen no longer were the property of the

Estate   but    rather   had   been    distributed      to    Ms.   Gardiner     as

beneficiary.     Petitioner and Ms. Gardiner agreed to the resulting

tax   assessment    of   $12,701      by    signing    Form   890    (Waiver      of

Restrictions on Assessment and Collection of Deficiency) on July

24, 1981.      The assessment for the $12,701 deficiency occurred on

December 7, 1981.

      In 1987, a representative of respondent requested petitioner

to sign an agreement extending the 6-year period of limitations for

collection of the deficiency against the Estate, which petitioner

refused to do.     A representative of respondent then approached Ms.

Gardiner with the same request; she signed the Form 900 agreement

(Tax Collection Waiver) on October 16, 1987, which extended the

period for collection to December 31, 1993.

      Statutory interest of $31,275 had accrued on the deficiency

through December 21, 1993 (the mailing date of the notice of

liability to petitioner).       Penalties assessed with respect to the

deficiency through December 21, 1993, totaled $191.                  Payments on
                                     -5-

the deficiency were made as follows:          $7,000 on April 22, 1982;

$4,537 on December 27, 1990; and $186 on January 17, 1991.

       The Estate made the following disbursements during the years

1976-1990:

                         Disbursements     Disbursements    Disbursements
              Total         To Ms.             To               To
           Disbursements   Gardiner1        Petitioner          IRS

1976         $156,265      $14,678           $3,500             ---
1977          103,894       56,500            3,000             ---
1978           14,395         ---             1,000           $9,176
1979           14,723         ---              ---              ---
1980            1,616         ---             1,600             ---
1981               24         ---              ---              ---
1982           16,503        9,503             ---             7,000
1986            6,000        6,000             ---              ---
1988               10         ---              ---              ---
1990           10,890         ---             5,800            4,537
       1
            Except for a $50,000 payment to Ms. Gardiner in
       1977, the payments to her were characterized on the
       Estate’s final accounting statement as fees.

Sometime after 1981, Ms. Gardiner suffered severe financial and

physical difficulties; at the time of trial, she was comatose in a

nursing home in North Carolina.       The IRS made no attempt to collect

the deficiency, interest, or penalty from Ms. Gardiner.

                                 OPINION

       The executor of an estate has the ultimate responsibility for

payment of the Federal estate tax.          Sec. 2002.     If the executor

pays the debts of the estate, or distributes any portion of the

estate to a beneficiary, before satisfying the estate’s obligation

to the Government for estate taxes, then the executor is personally

liable, to the extent of the payment to the estate’s creditors or
                                    -6-

the distribution to the beneficiary, for so much of the estate tax

as remains unpaid.      31 U.S.C. sec. 3713(b) (1994).

      In the instant case, the IRS determined that petitioner was

personally liable for unpaid estate taxes due by the Estate of

Marguerite B. Greer because he allowed the Estate to make payments

to its creditors, as well as a distribution to Ms. Gardiner as sole

beneficiary of the Estate, without first satisfying the estate tax

claim of the Government. Petitioner filed a petition in this Court

challenging the IRS’ determination.          We have jurisdiction to hear

petitioner’s case.      Secs. 6212, 6213, 6901; Rule 13(a).

      Petitioner contends that the period of collection of the

Estate’s unpaid estate taxes had expired prior to the mailing of

the notice of liability.      We hold that it did not.      The   reasoning

for our holding follows.

      Section 6901(c)(3) provides that the period of limitations for

assessment of fiduciary liability shall be not later than 1 year

after the liability arises or not later than the expiration of the

period for collection of the tax in respect of which such liability

arises, whichever is the later.            Section 6502 provides that where

the   assessment   of   tax   has   been    made   within   the   period   of

limitations properly applicable thereto (which here it has been2),

      2
          Sec. 6501(a) requires that the tax must be assessed
within 3 years of the date the tax return was filed. In the
instant case, the estate tax return was filed on June 4, 1979,
and the executors signed Form 890 consenting to the deficiency on
July 24, 1981. The assessment of the deficiency was made on
                                                   (continued...)
                                           -7-

the tax may be collected by levy or court proceeding commenced

within 6 years of the date of assessment, or within any period

agreed to by the taxpayer and the IRS if the agreement for such

different      (extension)    period       is    in   writing     made    before    the

expiration of the aforementioned 6-year period.

      Respondent claims that the Form 900 signed by Ms. Gardiner

extended    the      period   for    collection        to    December      31,    1993.

Petitioner argues that the Form 900 extension was ineffective

because it was signed nearly 3 months after the expiration of the

6-year period of limitations for collection.                      He further argues

that Ms. Gardiner could not unilaterally extend the collection

period of limitations to his detriment.

      Because the Form 900 extension was signed outside the 6-year

period running from July 24, 1981 (the date Form 890 was signed),

the   burden    of    going   forward      shifts     to    respondent.     Mecom     v.

Commissioner, 101 T.C. 374, 382 (1993), affd. 40 F.3d 385 (5th Cir.

1994). The      record   shows      that    respondent      has    met   her     burden.

Although the Form 890 was signed on July 24, 1981, the assessment

relating thereto occurred on December 7, 1981.3                          Ms. Gardiner

      2
      (...continued)
Dec. 7, 1981.
      3
          Form 890 is a waiver of restriction on assessment and
collection of the deficiency. It is not an assessment. An
assessment is made by recording the liability of a taxpayer in
the office of the Secretary in accordance with prescribed rules
or regulations. Sec. 6203. The date of assessment is the date
the summary record of assessment is signed by the assessment
                                                   (continued...)
                                  -8-

signed Form 900 on October 16, 1987.    Hence, the signing of Form

900 occurred within 6 years of the date of assessment (December 7,

1981).

     Petitioner was notified of his fiduciary liability by a notice

of liability mailed on December 21, 1993.   That date was within the

extended period for collection.

     Petitioner posits that because he refused to sign the Form

900, the agreement between Ms. Gardiner and the IRS to extend the

period of limitations on the collection of the estate tax is not

binding as to him.   Petitioner argues that one co-executor may not

unilaterally waive, extend, or revive the collection period of

limitations to the detriment of the other co-executor.     In support

of this position, petitioner cites Virginia law which provides:

          No acknowledgment or promise by any personal
          representative of a decedent shall charge the
          estate of the decedent, revive a cause of
          action otherwise barred or * * * in any case
          in which but for such acknowledgment or
          promise, the decedent’s estate could have been
          protected under a statute of limitations.

Va. Code Ann. sec. 8.01-232 par. B.

     A waiver of the period of limitations for assessment of

     3
      (...continued)
officer. Sec. 301.6203-1, Proced. & Admin. Although neither
party submitted the record of assessment, which would show, among
other things, the date of assessment, the Form 900 signed by Ms.
Gardiner indicates that the assessment date was Dec. 7, 1981.
Further, the notice of liability sent to petitioner shows the
date of assessment to be Dec. 7, 1981. Other than pointing to
the date he signed Form 890, petitioner did nothing to prove that
the assessment date was not Dec. 7, 1981.
                                       -9-

Federal tax executed by an executor is not rendered invalid by

provisions of any State law.       Bartlett v. Commissioner, 16 B.T.A.

510, 513 (1929).      We have held that one co-executor may bind an

estate irrespective of State law requirements.                       See Ewart v.

Commissioner, 85 T.C. 544, 549 (1985), affd. 814 F.2d 321 (6th Cir.

1987).    Thus, we hold that Ms. Gardiner’s execution of Form 900

effectively extended the period of collection of the Estate’s

unpaid taxes to December 31, 1993.

     A representative of an estate paying a debt of the estate

before paying a claim of the Government is liable to the extent of

the payment for unpaid claims of the Government.                 31 U.S.C. sec.

3713(b)(1994).       Here, there is no question but that petitioner

permitted the Estate to make payments to others and that at the

time the    notice    of   liability    was    mailed     to   petitioner   there

remained unpaid estate taxes.

     The Estate made payments to Ms. Gardiner not only prior to the

date the co-executors signed Form 890 (that is, prior to July 24,

1981) but also in 1982 and 1986 totaling approximately $15,500.

These    latter   payments   appear    to     be   made   to   Ms.    Gardiner   as

beneficiary, rather than as executor.              In defending his making the

latter payments, petitioner states in his post-trial brief:

     those payments were made at a time when Petitioner was
     attempting to communicate and resolve the tax liability
     with the Internal Revenue Service. As indicated by this
     Petitioner previously the State of Virginia inheritance
     tax division closed the estate and Petitioner never
     received any response to its [sic] communications to the
     Internal Revenue Service and while, with hindsight, the
                                     -10-

     payments to Faith B. Gardiner were not advisable, at the
     time, she was in necessitous circumstances and Petitioner
     could get no response from the Internal Revenue Service.

     Petitioner’s     argument   misses     the    point.    As    petitioner

apparently recognizes, the distributions to Ms. Gardiner were

inadvisable.     No   distributions     should    have    been   made   to   Ms.

Gardiner   before     the   Estate    satisfied     its    tax    obligation.

Petitioner could have avoided the situation he now faces by making

a written application for discharge of personal liability as

provided for in section 2204(a).4

     Petitioner made payments of approximately $70,000 to Ms.


     4
           Sec. 2204(a) provides:

           (a)   General Rule.

                If the executor makes written
           application to the Secretary for
           determination of the amount of the tax and
           discharge from personal liability therefor,
           the Secretary (as soon as possible, and in
           any event within 9 months after the making of
           such application, or, if the application is
           made before the return is filed, then within
           9 months after the return is filed, but not
           after the expiration of the period prescribed
           for the assessment of the tax in section
           6501) shall notify the executor of the amount
           of the tax. The executor, on payment of the
           amount of which he is notified (other than
           any amount the time for payment of which is
           extended under section 6161, 6163, or 6166),
           and on furnishing any bond which may be
           required for any amount for which the time
           for payment is extended, shall be discharged
           from personal liability for any deficiency in
           tax thereafter found to be due and shall be
           entitled to a receipt or writing showing such
           discharge.
                                     -11-

Gardiner even before the estate tax return was filed.             Petitioner

is an attorney.    He knew or should have known that distributions to

a beneficiary of an estate prior to satisfying the estate tax are

made at the executor’s peril.

     Petitioner states in his post-trial brief:

            but for the disallowance of the 1978 theft
            from the estate, this case would not be in
            court as that deficiency assessment caused the
            estate to have insufficient funds to pay all
            claims including the claim of the Internal
            Revenue Service.

Again, petitioner’s argument misses the point. It was petitioner’s

permitting the Estate to distribute funds to others which resulted

in the plight petitioner now faces, rather than the disallowance of

the claimed theft loss. Consequently, we hold petitioner liable

under 31 U.S.C. section 3713(b) (1994).

     When an executor incurs personal liability under 31 U.S.C.

section 3713(b) (1994), his liability for unpaid estate tax and

accrued interest thereon prior to the date the executor’s liability

for the estate tax arose is limited to the amount of payments made

to others. To our knowledge, there are no cases discussing whether

an executor is liable for interest accruing after the notice of

liability has been mailed.          Respondent requests us to hold that

interest    accrues   until   the    estate   tax,   and   interest   accrued

thereon, is paid. In this regard, respondent argues that we should

extend     the   rationale    this    Court    adopted     in   Baptiste   v.

Commissioner, 100 T.C. 252 (1993), affd. 29 F.3d 1533 (11th Cir.
                                 -12-

1994), affd. in part and revd. in part 29 F.3d. 433 (8th Cir. 1994)

to cover the situation involved herein.         We decline to do so.

Baptiste involved transferee liability.      We held in that case that

a transferee’s liability for interest accrued on unpaid estate tax

owed by a transferee (that is, the interest accrued on the tax

after the transferee liability arose) was not limited (under sec.

6324(a)(2)) to the value of the property transferred from the

estate to the transferee.    The Court of Appeals for the Eighth

Circuit disagreed and held that the interest accrued is limited to

the value of the property transferred.       Baptiste v. Commissioner,

29 F.3d at 438.

     In our opinion, an executor’s liability under 31 U.S.C.

section 3713(b) (1994) is different from that of a transferee. A

transferee has the benefit of enjoying the transferred property;

such is not the case with an executor.         To require an executor

(here, petitioner) to be subject to the interest on funds he did

not have the benefit of enjoying would constitute a punitive act

for which there is no legal authority.

     To reflect the foregoing,


                                             Decision will be entered

                                        under Rule 155.
