                  T.C. Memo. 1998-186



                UNITED STATES TAX COURT



            ESTATE OF IRVING NEMEROV, DECEASED,
  BERNICE MIDGORDEN, PERSONAL REPRESENTATIVE, Petitioner
    v. COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 15625-97.                Filed May 20, 1998.



     D died on June 8, 1993. In June 1994, the
fiduciary of D's estate tendered a $225,400 payment to
R for D's estimated Federal estate tax liability. In
May 1995, P filed D's Federal estate tax return and
paid the balance due. R assessed the amount of tax
shown on the return and additions to tax of $67,135.73
and $9,981.58 under sec. 6651(a)(1) and (2), I.R.C.,
respectively. Afterwards, R issued to D's estate a
notice of deficiency listing a $9,716 deficiency and a
$2,429 addition thereto under sec. 6651(a)(1), I.R.C.
D petitioned the Court to redetermine the deficiency
and the applicability of the additions to tax.
     Held: We lack jurisdiction to decide the
applicability of the $67,135.73 addition to tax under
sec. 6651(a)(1), I.R.C.
     Held, further, D's estate is liable for the
additions to tax of $2,429 and $9,981.58 determined by
R under sec. 6651(a)(1) and (2), I.R.C., respectively.
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     Peter L. Milinkovich, for petitioner.

     Gail K. Gibson, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     LARO, Judge:     Estate of Irving Nemerov, Deceased,

Bernice Midgorden, Personal Representative, petitioned the Court

to redetermine respondent's determination of a deficiency in its

Federal estate tax, and additions thereto under section

6651(a)(1) and (2).    Following concessions by the parties, we

must decide whether the estate is liable for the additions to tax

under section 6651(a)(1) and (2).    We hold it is.

     Unless otherwise stated, section references are to the

applicable provisions of the Internal Revenue Code.    Rule

references are to the Tax Court Rules of Practice and Procedure.

Estate references are to the Estate of Irving Nemerov.      Decedent

references are to Mr. Nemerov.    Commissioner references are to

the Commissioner of Internal Revenue.

                           FINDINGS OF FACT

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

The stipulation of facts and the exhibits submitted therewith are

incorporated herein by this reference.    The decedent was an

attorney residing in Hennepin, Minnesota, when he died on June 8,
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1993.   Bernice Midgorden, the estate's personal representative,

resided in Plymouth, Minnesota, when the petition was filed.

     The decedent signed his Last Will and Testament (the will)

on May 19, 1993.   Article I named Ms. Midgorden as the estate's

personal representative.   The decedent chose Ms. Midgorden to

serve in this capacity because of their close and trusting

relationship; Ms. Midgorden had limited tax and business

knowledge, and she had never before served as a fiduciary of an

estate.   On August 11, 1993, the court overseeing the probate of

the estate (the probate court) formally named Ms. Midgorden as

personal representative.

     Ms. Midgorden retained an attorney named Bradley Thorsen to

help her administer the estate.   Mr. Thorsen, a friend of the

decedent, did not agree to help Ms. Midgorden with the decedent's

tax returns, so Ms. Midgorden retained Samuel Held, the

decedent's accountant, to prepare the tax returns required by

Federal or State law.   Ms. Midgorden did not ask Mr. Held the

date by which any of these returns had to be filed or the time

that she had to remit any tax to the appropriate recipient.

Ms. Midgorden believed that the Federal estate tax return had to

be filed within 18 months of the decedent's death.   Ms. Midgorden

formed her belief based on her understanding from conversations

with Mr. Thorsen that all documents connected to the probate of

the estate had to be furnished to the probate court within
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18 months of the decedent's death.      On August 9, 1993, the

probate court provided Ms. Midgorden with a "NOTICE" stating:

"Pursuant to Minnesota Statute 525.475 an order of complete

settlement of the estate * * * must be entered within 18 months

of the date of the appointment of the personal representative."

     Due to deteriorating health, Mr. Held retired from his

practice on December 31, 1993, without preparing the decedent's

tax returns.    Another accountant named Gary Weinberg bought

Mr. Held's business, and Mr. Weinberg mailed Ms. Midgorden a form

letter on or about December 31, 1993, acknowledging his intent to

prepare the decedent's tax returns.      Ms. Midgorden did not

contact Mr. Weinberg to discuss this letter.      Nor did she contact

him to discuss the status of the returns until after she was told

at a meeting in June 1994 that the returns were overdue.      Before

this meeting, Ms. Midgorden had never attempted to learn for

herself the due date of the decedent's Federal estate tax return.

     The persons present at the meeting in June 1994 were

Ms. Midgorden, Mr. Weinberg, and a financial assistant named

Tom Miller.    Mr. Miller managed some of the decedent's

investments, and the meeting had been called for the purpose of

itemizing the estate's assets and to ascertain whether there was

enough information to start preparing the returns, which,

Ms. Midgorden believed, were not due for another 6 months.       At

the meeting, it was "decided" that the estate owed the Federal
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and State Governments estate tax, and Ms. Midgorden wrote checks

to the Commissioner and to the Minnesota Department of Revenue

for the "decided" amounts.   The check to the Commissioner, which

was in the amount of $225,400, was hand delivered to the Internal

Revenue Service (the Service) later that day.

     Mr. Weinberg completed the decedent's Federal estate tax

return in early May 1995, and Mr. Weinberg forwarded the return

to Ms. Midgorden at or about the same time.   On May 9, 1995,

Ms. Midgorden signed the return, in her capacity as personal

representative, and, on the next day, she mailed the return to

the Commissioner.   The Commissioner received the return on

May 12, 1995.

     The return reported that the value of the decedent's taxable

estate equaled $1,499,403, and that the estate's tax liability

was $298,381.   Enclosed with the return was a check for the

balance due (with interest), and a letter from Ms. Midgorden

stating in part:

     I, as personal representative of the estate, would ask
     that any penalty which would otherwise be imposed be
     waived by the IRS for the following reasons:
     Immediately upon the death of Mr. Nemerov and my
     appointment as personal representative of the estate,
     I retained an accountant to handle all tax matters for
     the estate, since I have no knowledge of tax laws for
     estates and am only a long-standing friend of the
     decedent, not a tax accountant. The accountant I
     retained had been the accountant of the decedent for
     many years. The accountant became ill and turned over
     the handling of the estate to a new accountant. For
     some reason, the old accountant told the new accountant
     that the return was being handled by an attorney and
                              - 6 -


     that he did not need to worry about the filing. This
     was not true. The reason for this misinformation being
     given is not known, but it is believed to be a
     combination of the illness and old age of the
     accountant. When the new accountant became aware that
     the proper steps to timely file the return had not been
     taken, he immediately took steps to hand deliver checks
     for the estimated amount due to the IRS, which amount
     can be seen in the return. The money to pay the
     estimate was always available, and if the true facts
     had been known, the money would have been paid in a
     timely fashion. As it turns out, there was an
     underestimate paid because of incomplete information
     available at the time, and there is a balance due on
     the return, but the estimate made at the time was a
     good faith estimate based on the available information.
     The fact that additional information kept coming to
     light after this estimate is also the reason that the
     return took so long to complete.

     The Commissioner assessed the amount of tax shown on the

return, and assessed the following additions to tax:   $67.135.73

for untimely filing under section 6651(a)(1) and $9,981.58 for

untimely payment under section 6651(a)(2).   The addition to tax

under section 6651(a)(2) is computed as follows:

      4 months x   .5% x $225,400 =    $4,508.00
     15 months x   .5% x $72,981 =      5,473.58
                                        9,981.58

On April 21, 1997, the Commissioner issued to the estate a notice

of deficiency listing a $9,716 deficiency and a $2,429 addition

thereto under section 6651(a)(1).

                             OPINION

     We must decide whether the estate is liable for the

additions to tax determined by respondent under section

6651(a)(1) and (2), bearing in mind that the estate has the
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burden of proof.    Rule 142(a); Welch v. Helvering, 290 U.S. 111,

115 (1933); Estate of DiRezza v. Commissioner, 78 T.C. 19, 32-33

(1982); Epstein v. Commissioner, 53 T.C. 459, 477 (1969).

Contrary to respondent's assertion, the Congress has authorized

us to decide the issue under section 6651(a)(2).    See sec.

6214(a); see also H. Conf. Rept. 99-841, at II-804 (1986), 1986-3

C.B. (Vol. 4) 804; S. Rept. 99-313, at 200 (1986), 1986-3 C.B.

(Vol. 3) 200.     We agree with respondent, however, that we are not

authorized to decide the applicability of the portion of the

addition to tax under section 6651(a)(1) that was assessed upon

respondent's receipt of the decedent's estate tax return.      See

sec. 6665(b); see also Estate of Young v. Commissioner, 81 T.C.

879 (1983).   That we lack jurisdiction to decide this issue is

confined to the facts herein.    We do not hold, for example, that

this Court lacks jurisdiction under section 6512(b)(1) to decide

the same issue in the case of an overpayment.    See, e.g.,

Judge v. Commissioner, 88 T.C. 1175, 1180-1187 (1987).     In this

regard, the estate does not claim that it overpaid this addition,

and we are unable to find that it did.

     Section 6651 provides:

     SEC. 6651.        FAILURE TO FILE TAX
                       RETURN OR TO PAY TAX.

          (a) Addition to the Tax.--In case of failure--

               (1) to file any return required under
          authority of subchapter A of chapter 61
          (other than part III thereof), * * * on the
                         - 8 -


     date prescribed therefor (determined with
     regard to any extension of time for filing),
     unless it is shown that such failure is due
     to reasonable cause and not due to willful
     neglect, there shall be added to the amount
     required to be shown as tax on such return
     5 percent of the amount of such tax if the
     failure is for not more than 1 month, with an
     additional 5 percent for each additional
     month or fraction thereof during which such
     failure continues, not exceeding 25 percent
     in the aggregate;

          (2) to pay the amount shown as tax on
     any return specified in paragraph (1) on or
     before the date prescribed for payment of
     such tax (determined with regard to any
     extension of time for payment), unless it is
     shown that such failure is due to reasonable
     cause and not due to willful neglect, there
     shall be added to the amount shown as tax on
     such return 0.5 percent of the amount of such
     tax if the failure is for not more than 1
     month, with an additional 0.5 percent for
     each additional month or fraction thereof
     during which such failure continues, not
     exceeding 25 percent in the aggregate; * * *

     (b) Penalty Imposed on Net Amount Due.--For
purposes of--

          (1) subsection (a)(1), the amount of tax
     required to be shown on the return shall be
     reduced by the amount of any part of the tax
     which is paid on or before the date
     prescribed for payment of the tax and by the
     amount of any credit against the tax which
     may be claimed on the return,

          (2) subsection (a)(2), the amount of tax
     shown on the return shall, for purposes of
     computing the addition for any month, be
     reduced by the amount of any part of the tax
     which is paid on or before the beginning of
     such month and by the amount of any credit
     against the tax which may be claimed on the
     return, * * *
                               - 9 -


          *        *    *      *       *    *       *

          (c) Limitations and Special Rule.--

               (1) Additions under more than one
          paragraph.--With respect to any return, the
          amount of the addition under paragraph (1) of
          subsection (a) shall be reduced by the amount
          of the addition under paragraph (2) of
          subsection (a) for any month (or fraction
          thereof) to which an addition to tax applies
          under both paragraphs (1) and (2). * * *

Pursuant to sections 6012(b)(4) and 6075(a), the fiduciary of an

estate must file the decedent's estate tax return within 9 months

after the decedent's death.   Generally, this 9-month period of

time may be extended for up to 6 months.   Sec. 6081(a); see also

United States v. Boyle, 469 U.S. 241, 245, 249-250 (1985).

     Ms. Midgorden, the fiduciary of the estate, filed the

decedent's estate tax return late, and she paid late the tax

shown thereon.   Neither party asserts that Ms. Midgorden's late

filing or late payment was due to willful neglect, and we find

that neither the late filing nor the late payment was due to

willful neglect.   The parties dispute whether Ms. Midgorden had

reasonable cause for her late filing and/or her late payment.

For purposes of section 6651(a), an estate may establish

reasonable cause for a late filing and/or a late payment if the

facts show that the fiduciary reasonably relied on erroneous

professional advice as to a due date of a return (which, in the

case of the Federal estate tax return, is generally also the due

date of the related tax).   See United States v. Boyle, supra at
                             - 10 -


251; Estate of La Meres v. Commissioner, 98 T.C. 294, 320,

324-325 (1992); see also sec. 301.6651-1(c)(1), Proced. & Admin.

Regs. (reasonable cause exception for section 6651(a)(1) and

(2) requires an exercise of ordinary business care and prudence).

A taxpayer may establish reasonable cause for a late payment when

the taxpayer "exercised ordinary business care and prudence in

providing for payment of his tax liability and was nevertheless

either unable to pay the tax or would suffer an undue hardship

* * * if he paid on the due date."    Sec. 301.6651-1(c)(1),

Proced. & Admin. Regs.

     The estate asserts that Ms. Midgorden relied reasonably on

Mr. Thorsen in that he advised her that the return was not due

until 18 months after the date the decedent died.   Alternatively,

the estate argues that the additions to tax apply only to its tax

liability that exceeds $225,400.   Under the alternative argument,

it is alleged that Ms. Midgorden had reasonable cause for not

filing the return or paying the tax up until the date that she

was told that the return was late, and, on that date, the estate

made an estimated payment of $225,400 to the Commissioner.     The

alternative argument asserts that the additions to tax should be

based on the estate's actual tax liability less $225,400, because

additions to tax under section 6651(a) are computed on the net

tax due.
                             - 11 -


     We are not persuaded by either of the estate's arguments.

First, the record fails to support the estate's assertion that

Mr. Thorsen advised Ms. Midgorden that the estate tax return was

not due for 18 months and that she relied on this advice.    Nor

does the record show that Ms. Midgorden, before the June 1994

meeting, solicited or received advice as to when she actually had

to tender payment to the Commissioner.   Ms. Midgorden was the

only witness at trial, and she testified that she retained

Mr. Held to prepare the estate tax return because Mr. Thorsen did

not agree to help her with it.   Her letter to the Service also

undercuts the estate's assertion that Mr. Thorsen erroneously

advised her about an 18-month filing period and that her late

filing was due to reliance on this advice.   On this record, we

are unable to agree with the estate that Ms. Midgorden relied on

erroneous advice from Mr. Thorsen concerning the due date of the

return and that this alleged reliance constitutes reasonable

cause for her late filing or her late payment.    See Denenburg v.

United States, 920 F.2d 301 (5th Cir. 1991); see also Estate of

Newton v. Commissioner, T.C. Memo. 1990-208.     The fact that the

return may have been too complicated for Ms. Midgorden to

complete without professional assistance, as the estate asserts,

does not mean that she had reasonable cause for filing the

return, or paying the tax, when she did.   As fiduciary of the

estate, Ms. Midgorden was obligated to ascertain when the return
                               - 12 -


and tax payment were due and to meet these due dates.    See

Estate of DiRezza v. Commissioner, 78 T.C. at 33-34; see also

Estate of Kerber v. United States, 717 F.2d 454 (8th Cir. 1983);

Smith v. United States, 702 F.2d 741, 743 (8th Cir. 1983).

Although the estate asks the Court to adopt a different rule

because Ms. Midgorden is not a tax professional, we decline to do

so.1

       Turning to the estate's alternative argument, we reject this

argument as well.    As to section 6651(a)(1), the estate is asking

us to review the $67,135 assessment which is outside our

jurisdiction.    Our jurisdiction over respondent's determination

under section 6651(a)(1) extends only to the $2,429 addition to

tax imposed on the deficiency, and, in that regard, our previous

finding is conclusive.    That is, the estate has failed to show

reasonable cause for the late filing.    The same finding also

disposes of the only argument made by the estate in regard to

section 6651(a)(2).    Because no reasonable cause was shown for

the late payment of $225,000, that amount cannot be subtracted



       1
       The estate does not claim that Ms. Midgorden is other than
an "ordinary person"; i.e., "one who is physically and mentally
capable of knowing, remembering, and complying with a filing
deadline", see United States v. Boyle, 469 U.S. 241, 253 (1985)
(Brennan, J., concurring), and we view her to be an "ordinary
person". Thus, we do not address the point made by Justice
Brennan in his concurrence in Boyle that a different rule may
apply when a fiduciary is unable to meet the standard of
"ordinary business care and prudence".
                              - 13 -


from the base on which the section 6651(a)(2) addition is

imposed.

     We hold that the estate is liable for the additions to tax

at issue herein.   We have considered all arguments made by the

estate for a contrary holding, and, to the extent not discussed

above, find them to be irrelevant or without merit.   To reflect

respondent's concessions,

                                         Decision will be entered

                                    under Rule 155.
