                        T.C. Memo. 2005-20



                      UNITED STATES TAX COURT



   MARY A. SAIGH, a.k.a. MARY SAIGH, TRANSFEREE, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 11599-03.              Filed February 8, 2005.


     John R. Holsinger, for petitioner.

     William C. Bogardus, for respondent.



                        MEMORANDUM OPINION


     HAINES, Judge:   Respondent determined a liability of

$170,000 plus interest for petitioner as transferee of assets in

the Federal estate tax of the Estate of Mary Kabbash (the

estate).   After concessions, the issue to be decided is whether

petitioner is liable for interest on a $170,000 liability as a
                                 - 2 -

transferee of the property from the due date of the estate tax

return.

     Unless otherwise noted, section references are to the

applicable version of the Internal Revenue Code, and Rule

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

Amounts are rounded to the nearest dollar.

                            Background

     The parties submitted this case fully stipulated pursuant to

Rule 122.   The stipulation of facts and the attached exhibits are

incorporated herein by this reference. At the time the petition

was filed, petitioner resided in Palm Beach Gardens, Florida.

     Petitioner is the daughter of Mary Kabbash (decedent), and

she is the sister of William Kabbash, Samuel Kabbash, and Joyce

Samaha.   In early 1989, decedent gave William Kabbash a general

power of attorney to make gifts to her children on her behalf.

     As power of attorney for decedent, William Kabbash gifted

the following to petitioner:

                Date                       Amount
                Aug. 27, 1989              $ 10,000
                Sept. 28, 1989               10,000
                Nov. 10, 1989               150,000

Petitioner received an additional $115,000 from decedent or the

estate from January 1989 to September 1992.

     Decedent died on November 15, 1989.    At the time of her

death, decedent had a will that controlled the disposition of her

assets and that named William Kabbash and Samuel Kabbash as
                                 - 3 -

coexecutors of the estate.   The estate had a value in excess of

$4 million at the date of her death.

     Form 706, United States Estate Tax Return (estate tax

return), for decedent was due on August 15, 1990, 9 months from

the date of death.   The coexecutors failed to file an estate tax

return and to make any payments for estate taxes.    On or about

July 26, 1993, respondent filed a substitute for return for the

estate.

     On March 7, 1994, petitioner received a summons from

respondent dated February 25, 1994, for testimony and records

regarding the estate tax return.    Petitioner did not appear or

respond to the summons.   In 1996, petitioner received a call from

respondent informing her that the estate tax return had not been

filed and that the estate taxes had not been paid.    Petitioner

responded that the call was the first time that she was made

aware that the estate taxes had not been paid.

     On August 2, 1996, respondent issued a notice of deficiency

to the estate.   On October 24, 1996, the estate filed a petition

to redetermine the deficiency.

     On December 2, 1997, Mary Tom was appointed to serve as

Administratix of the estate.   In January 1999, Mary Tom

instituted a suit against William Kabbash and Samuel Kabbash for

alleged waste and mismanagement of the estate.    On February 3,

2000, the complaint filed by Mary Tom was amended to add
                               - 4 -

petitioner as a defendant as the recipient of $285,000 of alleged

improper payments from the estate from January 1989 to September

1992.   Judgments were entered against William Kabbash and Samuel

Kabbash, but Mary Tom recovered only $866 on behalf of the

estate.

     On March 20, 2002, pursuant to an agreement of the parties,

we entered a decision that the estate owed a deficiency of

$1,987,249.   The deficiency was assessed on May 20, 2002.   The

period of limitation for assessment of the estate tax liability

was set to expire on November 15, 2002.

     There are no assets remaining in the estate from which the

estate tax liability may be satisfied.    As of June 2004, an

estate tax liability in excess of $8,219,795 remains unpaid.

     On April 29, 2003, respondent sent petitioner a notice of

transferee liability, in which respondent determined that

petitioner owed $170,000, plus interest as transferee, trustee,

and beneficiary of the property of the estate.     On July 18, 2003,

petitioner filed a timely petition with the Court disputing this

notice of transferee liability.

                            Discussion

     In a transferee liability case, the burden of proof is on

respondent to show that petitioner is liable as a transferee of

property of a taxpayer, but not to show that the taxpayer was

liable for the tax.   Sec. 6902(a); Rule 142(d).
                                - 5 -

       Petitioner concedes that she is liable for the $170,000

determined in the notice of transferee liability, as transferee,

trustee, and beneficiary of property of the estate.    The only

issue remaining is whether petitioner is liable, as transferee of

property of the estate, for interest on the $170,000 liability

from the due date of the estate tax return.

       Petitioner argues that she is liable for no interest, or,

alternatively, that interest should begin to run when petitioner

was notified of the liability by the notice of transferee

liability in 2003.    Petitioner further argues that we should

follow precedent in the U.S. Court of Appeals for the Third

Circuit because all events, pertinent to her case, occurred in

New Jersey.

       Respondent argues that petitioner, similar to the transferee

in the case of Baptiste v. Commissioner, 29 F.3d 1533 (11th Cir.

1994), affg. 100 T.C. 252 (1993), is liable for interest on the

amount of the transfer from the date the estate tax return was

due.    We disagree with petitioner and hold for respondent on the

basis of controlling precedent.

       Section 6601(a) provides that interest on unpaid tax shall

be paid for the period from the last date prescribed for payment

of the tax to the date paid.    Section 6601(b)(5) defines the last

date for payment when the date is not otherwise prescribed as

“the date the liability for tax arises (and in no event shall be
                               - 6 -

later than the date notice and demand for the tax is made by the

Secretary).”1   Section 6601(e)(1) further provides that the

interest prescribed under this section “shall be assessed,

collected, and paid in the same manner as taxes.”

     Section 6324(a)(2) provides, in relevant part:

     If the estate tax imposed by chapter 11 is not paid when
     due, then the * * * transferee * * *, who receives, or has
     on the date of the decedent’s death, property included in
     the gross estate under sections 2034 to 2042, inclusive, to
     the extent of the value, at the time of the decedent’s
     death, of such property, shall be personally liable for such
     tax. * * *

That is, if an estate tax is unpaid when due, then certain

transferees, who receive property includable in the gross estate

under sections 2034 to 2042, are personally liable for the unpaid

tax to the extent of the value of such property at the time of

the decedent’s death.   Sec. 6324(a)(2); see Armstrong v.

Commissioner, 114 T.C. 94, 98 (2000).

     Further, section 6901(a) provides that such liabilities of

the transferee shall be assessed, paid, and collected in the same

manner as the taxes with respect to which the liabilities were

incurred.   Thus, section 6901(a) sets forth the procedures to be

followed in transferee liability cases; the existence and extent

of a transferee’s substantive liability are established under




     1
       Sec. 6601(b) does not otherwise specify the last date for
payment of a transferee’s liability for unpaid estate tax.
                                 - 7 -

section 6324(a)(2), in the cases to which it applies.       Armstrong

v. Commissioner, supra at 97.

     Petitioner argues that, because all of the operative facts

took place in New Jersey and this case would be appealable to the

Third Circuit had she resided in New Jersey rather than in

Florida when she filed her petition, fairness compels the use of

Third Circuit precedent.     We disagree.   We generally follow a

decision squarely on point of a circuit to which a case is

appealable.    See Golsen v. Commissioner, 54 T.C. 742 (1970),

affd. 445 F.2d 985 (10th Cir. 1971).     Absent the parties’

stipulation to the contrary, we determine where appeal will lie

on the basis of a taxpayer’s residence when she filed the

petition with this Court.     Sec. 7482(b)(1)(A) and (2).

Therefore, we defer to the decisions of the Eleventh Circuit

because petitioner’s residence was in Florida at the time she

filed the petition.

     In Baptiste v. Commissioner, 100 T.C. 252 (1993), affd. in

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

1533 (11th Cir. 1994), the taxpayers each received $50,000 as

beneficiaries of the life insurance policy of the transferor-

decedent.2    Id. at 253.   The transferor-decedent’s estate tax

     2
        At the time of the filing of the petitions, one taxpayer
resided in Lincoln, Neb., and the other taxpayer resided in Fort
Pierce, Fla. Baptiste v. Commissioner, 100 T.C. 252, 253 n.3
(1993), affd. in part and revd. in part 29 F. 3d 433 (8th Cir.
1994), affd. 29 F.3d 1533 (11th Cir. 1994).
                                - 8 -

liability plus interest was unpaid.     Id.   The Commissioner mailed

separate notices of transferee liability to the taxpayers,

asserting a transferee liability against each taxpayer of $50,000

plus interest.    Id.

     The issue in the case was whether the taxpayers were liable

for interest on the amount of their personal liabilities for

unpaid estate tax from the due date of the estate tax return.

Id. at 254.    We held that each taxpayer was liable for interest

on the amount of his personal liability for unpaid estate tax

from the due date of the estate tax return.

     On the appeal of our decision in Baptiste v. Commissioner,

supra, the Court of Appeals for the Eleventh Circuit affirmed our

decision.3    Baptiste v. Commissioner, 29 F.3d 1533 (11th Cir.

1994).    The Court of Appeals reasoned that the obligation imposed

by section 6324(a)(2) is not a tax liability but “a personal

liability of the general sort imposed by federal law” because

otherwise, there would be no need for the Code to provide a

separate procedure under section 6901(a) to collect transferee

liabilities in the same way it collects tax liabilities.      Id. at

1541.    The Court of Appeals stated that if a transferee liability

under section 6324(a)(2) were a tax liability, then section


     3
        Our decision was also appealed to the U.S. Court of
Appeals for the Eighth Circuit, which reversed it in part. See
Baptiste v. Commissioner, 29 F.3d 433 (8th Cir. 1994), affg. in
part and revg. in part 100 T.C. 252 (1993).
                                 - 9 -

6901(a) would be “superfluous and wholly unnecessary.”        Id.

Thus, the Court of Appeals concluded that the liability under

section 6324(a)(2) is an independent personal obligation that may

be collected in a manner similar to the collection of tax

liabilities, pursuant to section 6901(a).      Id. at 1542.

       Further, the Court of Appeals concluded that section 6901(a)

authorized the imposition of interest on the obligation of the

transferee under section 6601 as if it were a tax liability and

that the limitation imposed under section 6324(a)(2) applied only

to the underlying tax obligation, not on the independent interest

obligation imposed on the taxpayer under section 6324(a)(2) by

way of sections 6901(a) and 6601(a).     Id.   The Court of Appeals

held that this liability arose under section 6324(a)(2) when the

tax was not paid by the estate and the taxpayer was in possession

of the transferred assets; i.e., when the estate tax return was

due.    Id.   From a policy standpoint, the Court of Appeals noted:

            This result comports with economic reality. The
       limitation of section 6324(a)(2) was designed to prevent a
       transferee from being liable for the estate taxes of another
       beyond the benefit he received from the estate. In the case
       of the disputed interest, however, Baptiste has had the use
       and enjoyment of the $50,000 from the time he received it
       until the present. There is no unfairness in requiring him
       to pay for this use, and the denial of its use to the
       government. Baptiste has had the opportunity to invest and
       earn a return on the $50,000 similar to that which he is now
       obligated to pay the government, and the government has been
       refused that opportunity. To hold otherwise would create a
       system which encourages transferees to retain assets of the
                                - 10 -

      estate, at the expense of the government, for as long as
     possible with no adverse consequences.

Id. at 1542-1543 n.9.

     The facts in the instant case mirror the facts in Baptiste

v. Commissioner, supra; i.e., the transferee received amounts

from a decedent less than the estate tax liability, the estate

tax was unpaid, and respondent sought to impose the estate tax

liability on the transferees.    On the basis of our holding and

the holding of the Court of Appeals in Baptiste v. Commissioner,

supra, we hold that petitioner is liable for interest on the

$170,000 determined in the notice of transferee liability as a

transferee of the property of the estate from the due date of the

estate tax return pursuant to sections 6601(a), 6324(a)(2), and

6901(a).

     In reaching our holding herein, we have considered all

arguments made, and, to the extent not mentioned above, we

conclude that they are moot, irrelevant, or without merit.

     To reflect the foregoing,

                                               Decision will be

                                          entered for respondent.
