                         T.C. Memo. 2006-230



                       UNITED STATES TAX COURT



       ESTATE OF MARGARET LANDERS, DECEASED, DALE SELTZER,
                  CO-ADMINISTRATOR, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos.    5791-05, 5792-05L,   Filed October 26, 2006.
                   11015-05L.



     Elliott H. Kajan and Steve Mather, for petitioner.

     Elaine T. Fuller, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     LARO, Judge:    In docket No. 5791-05, the Estate of Margaret

Landers, Deceased, Dale Seltzer, Co-Administrator, petitioned the

Court to redetermine a $13,447.46 addition to tax determined by
                                 -2-

respondent under section 6651(a)(1).1     The $13,447.46 related to

a $53,790 deficiency in the Federal estate tax of the Estate of

Margaret Landers (the estate).   The estate had paid the

deficiency before the notice of deficiency was issued.     In docket

No. 5792-05L, petitioner petitioned the Court to review a

determination by respondent’s Office of Appeals (Appeals)

sustaining a lien relating to the estate’s liability for assessed

additions to tax under section 6651(a)(1) and (2).     Those

assessed additions to tax related to the tax reported on the

estate’s Federal estate tax return (the estate tax return).     In

docket No. 11015-05L, petitioner petitioned the Court to review a

determination by Appeals sustaining a levy proposed by respondent

to collect the just-mentioned assessed additions to tax, plus

interest.

     The three cases resulting from these petitions were

consolidated for purposes of trial, briefing, and opinion.     On

May 11, 2006, the Court granted the unopposed motion to amend the

petition in docket No. 5791-05 to allege that the estate overpaid

additions to its Federal estate tax and was entitled to a refund.

The amendment alleged that the estate paid $470,098.56 for which

it was not liable, consisting of:      (1) A $340,070.40 addition to

tax under section 6651(a)(1) relating to the tax reported on the



     1
       Unless otherwise indicated, section references are to the
applicable version of the Internal Revenue Code.
                                  -3-

estate tax return and (2) a $130,028.16 addition to tax under

section 6651(a)(2).     The estate paid the $470,098.56 (but not the

related interest) on May 4, 2006.

      Following a trial of these cases, we decide whether either

the late filing of the estate tax return or the late payment of

the related tax was due to reasonable cause.     We hold that

neither was.

                           FINDINGS OF FACT

1.   Preface

      Some facts were stipulated.    We incorporate herein by this

reference the parties’ stipulation of facts and the exhibits

submitted therewith.     We find the stipulated facts accordingly.

      Margaret Landers (decedent) died on January 21, 2000.      The

coadministrators of the estate were Dale Seltzer (Seltzer) and

Mark Gershon (Gershon).     The coadministrators each vowed to

“perform the duties of personal representative according to law”.

Gershon died on December 13, 2003, and Seltzer is now the

estate’s sole administrator.     Seltzer resided in Los Angeles,

California, when the petitions were filed in these cases.

2.   Robert Landers

      Robert Landers was decedent’s husband, and he died on

January 29, 1993.     In 1984, Robert Landers and decedent

(collectively, the Landerses) established a revocable trust

(trust).   The trust held most of decedent’s property.    Seltzer
                                 -4-

and Gershon were the cotrustees of the trust, and Seltzer and his

wife were the trust’s primary beneficiaries.

3.   Seltzer

      Seltzer is the nephew of the Landerses.    In 1988, Seltzer

began working for the Landerses managing their real estate

holdings (mostly, rental properties).     Seltzer’s managerial

duties included collecting rent, handling repairs, and paying

bills.    As to the trust, Seltzer’s responsibilities included

assuring that all of decedent’s expenses were paid timely and in

full and that all of the rents were collected and deposited into

the appropriate bank accounts.

      Daly Property Management (DPM) and GlenLee, LLC (GlenLee),

are real estate management businesses in which Seltzer (or his

family) have ownership interests.      Seltzer is DPM’s president and

GlenLee’s general managing partner.

4.   Gershon

      Gershon was an enrolled agent who performed the tax and

accounting services for the rental properties owned directly or

indirectly by the Landerses.    Gershon also prepared the estate

tax return and prepared the trust’s 2000 Federal income tax

return.    The trust’s 2000 Federal income tax return was signed by

Seltzer on April 14, 2001, and received by respondent for filing

on April 18, 2001.
                                   -5-

      When decedent died, Gershon was in good health and of sound

mind.   Approximately 13 months later, on February 23, 2001,

Gershon slipped and fractured his hip.     Before this accident, the

coadministrators met two to three times a week to effect the

business of the estate.      After the accident (including during the

short period that Gershon was hospitalized for the hip injury),

the coadministrators continued to meet two to three times a week

to effect the business of the estate.     Gershon was active and

upbeat after his accident.

5.   The Estate Tax Return

      The estate tax return was originally due on October 21,

2000.   Pursuant to a request for an extension made by Gershon on

October 17, 2000, the due date for that return was extended to

April 21, 2001.   Gershon’s request was accompanied by a payment

of $2.4 million and included a request to extend the time to pay

the tax related to the estate tax return.     Pursuant to Gershon’s

request, the time to pay the tax was extended to October 21,

2001.

      The coadministrators filed the estate tax return on February

4, 2002, reporting a liability of $3,911,424 and a balance due of

$1,669,222 ($3,911,424 of estate tax - $2.4 million paid with the

extension request + reported interest due of $157,798).     The

return was accompanied by a payment of $600,000.     On April 1,

2002, respondent assessed as to the return additions to tax under
                                -6-

section 6651(a)(1) and (2) of $340,070.40 and $130,028.16,

respectively, and related interest of $192,962.20.

      As of the date of decedent’s death, the estate held assets

with an aggregate value in excess of $9 million.     After the

estate tax return was filed, the estate paid the following

amounts toward its tax liability:     $500,000 on April 29, 2002,

$500,000 on May 13, 2002, and $104,386.20 on June 11, 2002.      The

coadministrators obtained the funds to make these three payments

by refinancing some of the estate’s real property.     These three

payments paid the balance of the estate tax shown as due on the

return, plus the assessed interest.

      Seltzer knew there was a deadline to file the estate tax

return and that an extension of time had been obtained for filing

that return.   Seltzer did not ascertain the extended due date for

the return or attempt to ascertain the extended due date from

anyone other than Gershon but was content to rely on Gershon to

file the estate tax return timely.     Seltzer’s habit was to

satisfy obligations immediately, and when the estate tax return

was being prepared, Seltzer made sure that the bills of DPM and

GlenLee were paid.   Seltzer was in good health throughout the

time that the estate tax return was under preparation.

6.   The Audit of The Estate Tax Return

      Respondent audited the estate tax return and proposed a

deficiency of $53,790 and an addition to tax of $13,447.46 under
                                -7-

section 6651(a)(1).   On or about January 28, 2004, respondent

issued to the estate a 30-day letter reflecting the proposed

adjustments.   The estate paid the deficiency but disputed the

addition to tax.   By letter dated February 25, 2004, the estate

protested both the addition to tax under section 6651(a)(1)

asserted with respect to the deficiency and the additions to tax

assessed upon the filing of the estate tax return (the protest).

7.   Filing of a Lien and Proposal of a Levy

      Respondent filed a notice of Federal tax lien on February

25, 2004.   One day later, respondent issued to the estate a

Notice of Intent to Levy and Notice of Your Right to a Hearing.

On March 1, 2004, respondent sent to the estate a Notice of

Federal Tax Lien Filing and Your Right to A Hearing Under IRC

6320.   On March 23, 2004, Appeals received from the estate a

request (request) for a hearing (hearing) as to both the lien

notice and the levy notice.   By letter dated June 22, 2004,

Appeals Team Manager George Riter contacted the estate regarding

the request.

8.   The Protest

      The protest (and not the hearing) was assigned to Appeals

Officer James Christianson (Christianson).     Christianson

considered both the deficiency portion of the addition to tax

under section 6651(a)(1) and the additions to tax assessed under

section 6651(a)(1) and (2).   On January 20, 2005, respondent
                                 -8-

issued to the estate a notice of deficiency that informed it that

Christianson had rejected the protest to the extent of the

disputed deficiency portion of the section 6651(a)(1) addition to

tax.    The notice of deficiency contained no determination as to

the assessed additions to tax.

9.   The Hearing

       Following the issuance of the notice of deficiency,

respondent resumed his administrative proceeding concerning the

request.    The request was assigned to Appeals Officer Michael

Beecher.    By letter dated February 9, 2005, Beecher contacted the

estate regarding the request.    The letter noted that the estate

had had a previous hearing with Appeals regarding the section

6651(a)(1) addition to tax and invited the estate to raise any

other relevant issue and to provide financial information in

order for Appeals to consider collection alternatives.    The

estate did not respond to the February 9, 2005, letter.

       Appeals (through Christianson) determined that the lien was

not unnecessarily intrusive and on March 10, 2005, issued the

estate a notice of determination approving the lien.    Appeals

(through Christianson) determined that the proposed levy was not

unnecessarily intrusive and on May 27, 2005, issued the estate a

notice of determination approving the levy.
                                -9-

                              OPINION

     We decide whether the estate is liable for the additions to

tax respondent determined under section 6651(a)(1) and (2).    The

coadministrators filed the estate tax return late and paid much

of the related tax late.   Petitioner argues that the

coadministrators exercised ordinary business care and prudence in

trying to file the return timely and to pay the tax timely.    As

to the untimely filing, petitioner argues that Seltzer lacked the

knowledge to file the return timely, that Seltzer therefore

relied on Gershon to file the return timely, and that Gershon’s

hip fracture resulted in the return’s untimely filing.

Petitioner also argues that Seltzer’s reliance on Gershon to file

the return timely was reasonable because Cal. Prob. Code sec.

16012 (West Supp. 2006) allowed Seltzer to delegate the duty of

filing the return to Gershon as long as Seltzer regularly

monitored Gershon’s actions underlying that filing.     Petitioner

argues as to the untimely payment that Gershon’s hip fracture

also resulted in the late payment and that Seltzer could not pay

any of the estate tax owed until Gershon calculated the amount of

estate tax due.

     We disagree with petitioner that there was reasonable cause

for either the late filing or the late payment.
                                -10-

1.   Addition to Tax for Late Filing

     Section 6651(a)(1) provides an addition to tax of 5 percent

per month (up to a maximum of 25 percent) for a failure to file a

timely tax return, unless it is shown that the untimely filing is

due to reasonable cause and not due to willful neglect.

Respondent has met his burden of production under section 7491(c)

as to the applicability of section 6651(a)(1), and petitioner

bears a “heavy” burden of now proving that the coadministrators

had reasonable cause for filing the estate tax return late.

United States v. Boyle, 469 U.S. 241, 245 (1985); see Higbee v.

Commissioner, 116 T.C. 438, 446-447 (2001).      Reasonable cause may

be found if the coadministrators exercised ordinary business care

and prudence and were nevertheless unable to file the estate tax

return on time.    See United States v. Boyle, supra at 246; sec.

301.6651-1(c)(1), Proced. & Admin. Regs.

     Petitioner has failed to persuade us that the late filing of

the estate tax return was due to reasonable cause or, in other

words, to the exercise of ordinary business care and prudence on

the part of the coadministrators.      As to Gershon, he fractured

his hip approximately 2 months before the extended due date of

the estate tax return, and the record does not establish why

Gershon waited until those last 2 months to file the return.

Even so, we see no reason why Gershon could not have filed that

return timely.    Gershon continued working after fracturing his
                               -11-

hip, and he regularly met with Seltzer concerning business

matters.   Gershon also filed the trust’s return at approximately

the same time that the estate tax return was due.   The estate tax

return was filed more than 9 months late, or in other words more

than 1 year after Gershon fractured his hip.   We decline to find

on the basis of the record at hand that Gershon’s accident was

sufficiently disabling to constitute reasonable cause for failing

to file the estate tax return timely.

     Nor do we agree with petitioner that Seltzer’s actions in

this matter constitute reasonable cause.   As a fiduciary of the

estate, Seltzer was responsible for ascertaining the dates when

the return and the tax payment were due and making sure that

those dates were met.   See Estate of DiRezza v. Commissioner,

78 T.C. 19, 33-34 (1982).   Yet, Seltzer never ascertained the due

date of the estate tax return let alone made sure that the due

date was met.   These responsibilities were nondelegable duties

assumed by Seltzer when he accepted the job as coadministrator of

the estate, see United States v. Boyle, supra at 249, and

Seltzer’s claim that he tried to delegate this responsibility to

Gershon does not amount to reasonable cause.

     Petitioner reads Cal. Prob. Code sec. 16012 to conclude that

Seltzer was allowed to delegate the timely filing of the estate
                                -12-

tax return to Gershon.2   We read that section as it is written

and come to a contrary conclusion.     The fact that Seltzer’s duty

to file the estate tax return timely is an act “that the trustee

[Seltzer] can reasonably be required personally to perform” is

quickly seen from the Supreme Court’s observation in United

States v. Boyle, supra at 252, that it takes no special expertise

to ascertain the due date of a tax return or to make sure that

the due date is met.    Such is especially so given that Seltzer

was not laboring under any disability which might excuse his

failure to exercise the requisite ordinary business care and

prudence; he was in good health and even made sure that the bills

of DPM and GlenLee were paid timely and in full.    Seltzer’s

selective inability to meet his tax obligations as a

coadministrator of the estate, when he continued to conduct

normal business operations, supports our finding that the

reasonable cause exception has not been met as to him.     See Bear


     2
        Cal. Prob. Code sec. 16012 (West Supp. 2006) provides in
relevant part:

     SEC.   16012.   Delegation of duties; prohibitions;
                     exceptions

          (a) The trustee has a duty not to delegate to
     others the performance of acts that the trustee can
     reasonably be required personally to perform * * *.

          (b) In   a case where a trustee has properly
     delegated a   matter to an agent, cotrustee, or other
     person, the   trustee has a duty to exercise general
     supervision   over the person performing the delegated
     matter.
                               -13-

v. Commissioner, T.C. Memo. 1992-690, affd. without published

opinion 19 F.3d 26 (9th Cir. 1994).     While petitioner asks the

Court to adopt a different rule because Seltzer is not a tax

professional, we decline to do so.3

2.   Addition to Tax for Late Payment

      Section 6651(a)(2) provides an addition to tax of 0.5

percent per month (up to a maximum of 25 percent) for failing to

pay on or before the payment due date the taxes shown on a

return, unless that failure to pay is due to reasonable cause and

not due to willful neglect.   See United States v. Boyle, supra at

245; Crocker v. Commissioner, 92 T.C. 899, 912 (1989); sec.

301.6651-1(a)(2), Proced. & Admin. Regs.     Again, respondent has

met his burden of production under section 7491(c) as to the

applicability of section 6651(a)(2), and petitioner bears a

burden of proving that the coadministrators had reasonable cause

in paying the estate’s estate tax late.     See Higbee v.

Commissioner, 116 T.C. at 446-447.      Reasonable cause may be found

if the taxpayer exercised ordinary business care and prudence and

nevertheless either was unable to pay the tax or would have


      3
       Petitioner does not claim that Seltzer is other than an
“ordinary person”; i.e., “one who is physically and mentally
capable of knowing, remembering, and complying with a deadline”,
United States v. Boyle, 469 U.S. 241, 253 (1985) (Brennan, J.,
concurring), and we view him 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”.
                               -14-

suffered undue hardship if the tax had been paid by the due date.

See sec. 301.6651-1(c), Proced. & Admin. Regs.

     Petitioner makes no claim that the estate would have

suffered undue hardship if the estate had paid the tax by the due

date, and we do not find independently on the basis of the record

at hand that such would have been the case.   The thrust of

petitioner’s argument is that Gershon’s hip injury prevented him

from preparing the estate tax return in time to pay the estate

tax timely and that Seltzer could not otherwise pay that tax

because he needed the return to know how much tax to pay.     We are

unpersuaded.   For the reasons stated above in our discussion of

the addition to tax for late filing, we conclude that the

coadministrators did not exercise ordinary business care and

prudence in attempting to pay the tax timely.    We add that we

believe that an ordinary and reasonable person in Seltzer’s

position would have consulted another individual as to the estate

tax return had he or she known that the return was on extension

and believed that the current preparer was suffering from a

disability.
                               -15-

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

at issue.   We have considered all of petitioner’s arguments for a

contrary holding and conclude that those arguments not discussed

herein are without merit.


                                           Decisions will be entered

                                      for respondent.
