                            T.C. Memo. 2013-228



                       UNITED STATES TAX COURT



    ESTATE OF FRANKLIN Z. ADELL, DECEASED, KEVIN R. ADELL,
      TEMPORARY CO-PERSONAL REPRESENTATIVE, Petitioner v.
        COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 20911-12.                       Filed September 30, 2013.



     Steven S. Brown, Denis J. Conlon, and Royal B. Martin, for petitioner.

     Angela B. Reynolds, for respondent.



                         MEMORANDUM OPINION


     CHIECHI, Judge: This case is before us on respondent’s motion for

summary judgment (respondent’s motion). We shall grant respondent’s motion.
                                          -2-

[*2]                                 Background

       The record establishes, the parties agree, and/or the parties do not dispute

the following.

       On August 13, 2006, Franklin Z. Adell (decedent) died. The estate of the

decedent is being probated under the laws of the State of Michigan.

       Kevin R. Adell (Mr. Adell), the estate’s representative in this case, resided

in Michigan at the time the petition was filed.

       On July 11, 2007, the estate of the decedent (estate) filed with respondent

Form 4768, Application for Extension of Time to File a Return and/or Pay U.S.

Estate (and Generation-Skipping Transfer) Taxes (Form 4768). The following

appeared in an attachment to that form:

       The decedent’s estate owns a controlling interest in several closely
       held businesses. The estate is still awaiting proper validations [sic] of
       the business interests from a third party valuator. Based upon the
       results of the valuations, it is contemplated that the estate will make a
       Section 6166 election computing the deferred and nondeferred
       portions of the estate tax. As of the date of this extension to pay
       request, without the valuations, the executor is unable to determine
       the amount of the tax due in total as well as the deferred and
       nondeferred potions [sic] under Section 6166.

            Based on the above, the executor respectfully requests a six (6)
       month extension to pay the tax.
                                        -3-

[*3] Respondent extended to November 13, 2007, the date on which Form 706,

United States Estate (and Generation-Skipping Transfer) Tax Return (Form 706),

was required to be filed and any estate and generation-skipping transfer taxes were

required to be paid.

      On November 13, 2007, the estate filed Form 706 in which it showed on

page 1, line 20, estate tax due of $15,288,517, which respondent assessed. The

estate included with Form 706, inter alia, Schedule G, Transfers During

Decedent’s Life (Schedule G). That schedule showed that the decedent had

transferred during his life to the “Franklin Z. Adell Trust UAD 07-17-02” (Adell

trust), inter alia, certain shares of stock that he owned in Birmingham Properties,

Inc. (Birmingham Properties), STN.Com, Inc. (STN.Com), and Adell

Broadcasting Corp. (Adell Broadcasting). Schedule G showed the following

respective date-of-death values of those shares in those companies: $960,166,

$9,300,000, and $6,000,000.

      Included with Form 706 was a document titled “Election to Defer the

Payment of Estate Taxes for Five Years and Pay Estate Taxes in Installments”

(section 6166 election statement), in which the estate elected under section 61661


      1
       All section references are to the Internal Revenue Code in effect at all
relevant times.
                                          -4-

[*4] “to defer the payment of estate taxes for five years and thereafter to pay the

estate taxes in ten (10) annual installments, including the first installment.” In

support of that election, the estate represented in the section 6166 election

statement that the decedent was a U.S. citizen who died on August 13, 2006, that

Form 706 was due on or before November 13, 2007, that the estate is liable for

total estate tax of $15,288,517, that the estate was electing to defer the payment of

a portion, i.e., $7,193,960, of that total estate tax (deferred estate tax), and that the

first installment of the deferred estate tax would be paid on May 14, 2012.

      Attached to the section 6166 election statement were schedules that showed,

inter alia, the names of the following three closely held businesses, which were

also shown in Schedule G: Birmingham Properties, STN.Com, and Adell

Broadcasting. Those schedules also showed the following respective date-of-

death values of the shares of stock in those respective businesses that decedent

transferred during his life to the Adell trust, which were the same respective date-

of-death values of those shares shown in Schedule G: $960,165.87, $9,300,000,

and $6,000,000. The schedules attached to the section 6166 election statement

also showed, inter alia, total estate tax of $15,288,517, the amount reported on

page 1, line 20, of Form 706, as well as computations of the respective amounts of

the portion of that estate tax, i.e., $8,094,556.56, the payment of which was not to
                                          -5-

[*5] be deferred (nondeferred estate tax), and the deferred estate tax, i.e.,

$7,193,960.44. The estate paid the nondeferred estate tax of $8,094,5572 when it

filed the estate’s Form 706 on November 13, 2007.

      On December 19, 2007, respondent calculated on the basis of the estate tax

due of $15,288,517 shown in Form 706 that the amount of the nondeferred estate

tax was $8,094,551.19, the amount of the deferred estate tax was $7,193,965.81,

and the amount of each of the 10 annual installments of the deferred estate tax was

$719,396.58.

      On January 8, 2008, respondent sent a letter (January 8, 2008 letter) to the

estate’s representatives that stated in pertinent part:

      We received your notice of election [under section 6166] to make
      installment payments of tax for the estate of Franklin Z. Adell.

      Pending verification of the information you have sent to us and until
      further review of the particulars of your request, we have established
      the account as follows:

      Total tax assessed                                  $ 15,288,517.00
      Tax amount not qualifying for installments          $  8,094,551.19
      Tax amount qualifying for installments              $  7,193,965.81
      Annual tax installment $        719,396.58




      2
       The estate rounded the amount of the nondeferred estate tax that it paid to
the nearest dollar.
                                        -6-

[*6] The January 8, 2008 letter informed the estate that the first payment of

interest on the deferred estate tax was due on May 13, 2008, and that the first

estate tax installment with interest was due on May 13, 2012.

      On April 28, 2008, respondent assessed interest of $240,087.77 on the

deferred estate tax, which the estate paid on May 12, 2008.

      On April 27, 2009, respondent assessed interest of $170,094.85 on the

deferred estate tax, which the estate paid on May 15, 2009.

      On August 13, 2009, respondent sent a bill to the estate (August 13, 2009

statement) for interest through August 31, 2009, of $367,954.11 on the

nondeferred estate tax.

      On August 20, 2009, the estate’s representative sent a letter to respondent

that stated in pertinent part that “no interest should be due on the non-deferred tax

stated in your [August 13, 2009] statement”.

      On September 7, 2009, respondent assessed interest of $367,954.11 on the

nondeferred estate tax.

      On September 30, 2009, respondent sent a bill to the estate (September 30,

2009 statement) for interest of $369,611.01 on the nondeferred estate tax, which

included assessed interest of $367,954.11 and interest accrued to October 12,

2009, of $1,656.90. The September 30, 2009 statement explained that respon-
                                         -7-

[*7] dent’s granting an extension to the estate to pay the nondeferred estate tax

relieved the estate from being liable for the addition to tax for failure to pay timely

that nondeferred estate tax but did not relieve the estate from paying interest

thereon from the date on which the estate was originally required to pay that

nondeferred estate tax.

       On October 8, 2009, in response to the September 30, 2009 statement, the

estate’s representative sent a letter (October 8, 2009 letter) to respondent. That

letter stated in pertinent part:

              This letter is in response to your correspondence dated
       September 30, 2009 assessing interest of $369,611.01 through
       October 12, 2009, for the non-deferred portion of the estate tax * * *.
       At this point, the estate does not have sufficient liquid assets to pay
       the required interest balance. The estate made a Code Sec. 6166
       election upon filing the return due to illiquidity.

             Based upon the above, we respectfully request a one year
       extension to pay the balance owed. It is understood that interest will
       continue to accrue. However the estate does not have the ability to
       pay the amount owed at this time. The estate has made all required
       payments on the deferred [sic] portion of the tax, so a one year
       extension on the non-deferred portion of interest would be
       appreciated.
                                          -8-

[*8] On October 19, 2009, respondent assessed interest of $1,656.903 on the non-

deferred estate tax, which increased the outstanding balance of assessed interest to

$369,611.01.

      On October 23, 2009, in response to the October 8, 2009 letter, respondent

sent a letter to the estate’s representatives.4 Respondent informed those

representatives in that letter that the estate’s request for an extension of time to

pay was under review.

      On January 22, 2010, respondent sent a letter (January 22, 2010 letter) to the

estate’s representative in which respondent asked him to complete on behalf of the

estate and to submit to respondent another Form 4768 in which the estate was to

show in part III of that form “the extension date request * * * [as] 9/13/10 which is

12 months from the date of the first notice informing you of the balance due.”5



      3
      The interest of $1,656.90 that respondent assessed on October 19, 2009,
was shown on the September 30, 2009 statement as accrued interest to October 12,
2009.
      4
       At various times the estate has had one or more than one representative,
which explains why we refer at times to the estate’s representative and at other
times to the estate’s representatives.
      5
        The record before us establishes that the date of the first notice, which is
what we refer to herein as the August 13, 2009 statement, was August 13, 2009,
not September 13, 2009, as stated in the January 22, 2010 letter. The discrepancy
is not material to our resolution of the issue presented in respondent’s motion.
                                         -9-

[*9] Respondent also asked the estate in the January 22, 2010 letter to provide

respondent with the estate’s “proposal or plan on how this liability [unpaid interest

on the nondeferred estate tax] will be satisfied.”

      Thereafter, the estate submitted to respondent another completed Form 4768

that the estate’s representative signed on January 26, 2010 (January 26, 2010 Form

4768). Attached to that form was a statement in which the estate requested

“additional time * * * to pay this interest [on the nondeferred estate tax] so that the

estate can arrange to borrower [sic] the funds from the estate owned businesses.”

      On February 3, 2010, respondent sent a letter (February 3, 2010 letter) to the

estate’s representative in which respondent informed that representative that the

estate’s request to extend the time to pay had been approved and that the date for

payment was September 13, 2010. That letter stated in pertinent part:

      [T]he granting of an extension of time for payment does not relieve
      the estate from liability for the payment of interest during the period
      of extension. Any future request for extension of time to pay the
      liability must be applied for on or before the date of the expiration of
      the previous extension.

      The following information should be provided with any subsequent
      extension requests if the estate has not liquidated or borrowed from
      sufficient assets to pay a substantial portion of the balance of estate
      tax and interest by the extended due date of 9/13/2010.

      • Copy of the first three pages of Form 706 and Schedules A
        through K
                                        - 10 -

[*10] • A detailed accounting of the distribution of any assets of the estate
      • Verification of the estate’s attempts to liquidate assets to pay the
        IRS
      • The estate’s plan to pay the estate tax liability in full

        On April 26, 2010, the probate court of Oakland County, Michigan

(Oakland County probate court), appointed Joseph Ehrlich (Mr. Ehrlich) as the

successor temporary personal representative of the estate.

        On July 31, 2010, the estate filed an amended Form 706. That amended

form (1) showed zero as the date-of-death value of STN.Com, instead of

$9,300,000 as originally reported in Form 706 that the estate filed on November

13, 2007, and (2) reclassified a payment that the decedent had made on behalf of

his son, Mr. Adell, as a taxable gift instead of a loan to his son and a loan

receivable to the estate as originally reported in Form 706 filed on November 13,

2007.

        On May 3, 2010, respondent assessed interest of $131,785.59 on the

deferred estate tax.

        On May 10, 2010, respondent received another Form 4768 (May 10, 2010

Form 4768) on behalf of the estate from Mr. Ehrlich, whom the Oakland County

probate court had appointed successor temporary personal representative of the

estate a few weeks before on April 26, 2010. In that form, the estate requested
                                        - 11 -

[*11] another extension of time to pay until March 13, 2011. Attached to the May

10, 2010 Form 4768 was a statement in which the estate requested “an extension

of time in which to pay this installment * * * so as to permit sufficient time for the

new Probate Judge to hear and consider many of the pending matters and, for the

Successor Temporary Personal Representative to obtain assets to satisfy the

installment.” Mr. Ehrlich elaborated in the attachment to the May 10, 2010 Form

4768 on the “pending matters” as follows:

      The matters of the Estate of Franklin Z. Adell (Oakland County
      Probate File No. 2009-326,045-DA) and the Franklin Adell Trust
      dated July 17, 2002, (Oakland County Probate File No. 2008-
      319,178-TV) have been embroiled in protracted litigation for almost
      two years. All of the Fiduciaries who were acting when the litigation
      began and many, who were appointed subsequent to the commence-
      ment of the litigation have either resigned, been removed or continue
      under a cloud of disputed status pending further Court proceedings.
      Mr. Ehrlich is the second Temporary Personal Representative. He
      was not appointed until March 30, 2010 and did not qualify to act in
      that capacity until April 26, 2010. Mr. Ehrlich was also appointed to
      act as the Independent Successor Trustee on March 30, 2010 but has
      been unable to qualify to act in that capacity pending the resolution
      of two contested Petitions relating to his qualification which remain
      pending.

         On May 3, 2010, the Honorable Eugene Arthur Moore, who had
      been presiding over the contested matters since their inception
      recused himself from acting further in this case. This will further
      delay any potential relief which may resolve many of the pending
      issues and afford sufficient liquidity within the Estate and/or Trust
      to pay the taxes that are due and owing.
                                         - 12 -

[*12]      As of the date of the preparation of this Extension, Mr. Ehrlich
        does not have control of the assets, most of which are owned by the
        Decedent’s Revocable Trust. The Special Fiduciary appointed by the
        Court to review and investigate these matters did indicate, in her
        report filed with the Court, that various parties who received assets
        from the Estate and/or the Trust were indebted to the Estate or Trust
        which may generate sufficient funds to be used for this payment.
        Additionally, there were several other transactions relating to the
        businesses which are the subject of the IRC 6166 election that are
        suspect and subject to challenge, one of which is an inflated salary
        paid to a former Trustee who was subsequently suspended by the
        Probate Court.

            We have been advised, although Mr. Ehrlich has only had a
        limited time in which to investigate and verify the facts supporting
        this suspicion, that a new lawsuit was recently filed in the Macomb
        County Circuit Court which apparently seeks, amongst other things,
        to delay the ability of the Successor Temporary Personal Represen-
        tative to address issues relating to the payment of the tax with the
        Internal Revenue Service. If the efforts are successful, it could
        jeopardize the Estate’s and Trust’s ability to pay the tax and could
        defeat any attempt by the Internal Revenue Service to collect the full
        amount owed.

        On August 4, 2010, in response to the May 10, 2010 Form 4768, respondent

sent a letter to the estate’s representative. Respondent informed that representa-

tive in that letter that the estate’s request for an extension of time to pay was under

review.

        On August 19, 2010, respondent sent a letter to the estate’s representative in

which respondent informed that representative that the estate’s request to extend

the time to pay had been approved and that the date for payment was May 13,
                                        - 13 -

[*13] 2011. That letter, like respondent’s February 3, 2010 letter, stated in

pertinent part:

      [T]he granting of an extension of time for payment does not relieve
      the estate from liability for the payment of interest during the period
      of extension. Any future request for extension of time to pay the
      liability must be applied for on or before the date of the expiration of
      the previous extension.

      The following information should be provided with any subsequent
      extension requests if the estate has not liquidated or borrowed from
      sufficient assets to pay a substantial portion of the balance of estate
      tax and interest by the extended due date.

          • Copy of the first three pages of Form 706 and Schedules A
            through K
          • A detailed accounting of the distribution of any assets of the
            estate
          • Verification of the estate’s attempts to liquidate assets to pay
            the IRS
          • The estate’s plan to pay the estate tax liability in full

      On August 11, 2010, the Oakland County probate court entered an order

appointing Julie Verona and Laurie Fischgrund as successor co-personal

representatives of the estate.

      At a time not established by the record, respondent commenced an exam-

ination of the estate’s Form 706 and proposed certain adjustments (respondent’s

proposed adjustments) to that form, including an adjustment to increase to

$92,277,000 the date-of-death value of the shares of stock of STN.Com that the
                                         - 14 -

[*14] estate had reported in that form as $9,300,000. Around September 2010, an

estate tax attorney with respondent prepared computations of what the amount of

each of the 10 annual installments of estate tax would be if the adjustments that

respondent proposed to the estate’s Form 706 were sustained.

      The estate submitted a protest to respondent’s proposed adjustments and

requested a hearing with respondent’s Appeals Office (Appeals Office). In that

protest, the estate maintained, inter alia, that the date-of-death value of the shares

of stock that the decedent had transferred to the Adell trust was zero as reported in

the amended Form 706 that the estate had filed, and not $92,277,000 as respon-

dent had proposed or $9,300,000 as the estate had reported in Form 706 filed on

November 13, 2007.

      On November 9, 2010, respondent issued a notice of deficiency to the

estate. In that notice, respondent determined, inter alia, that the date-of-death

value of the shares of stock that the decedent had transferred to the Adell trust was

$92,277,000.6




      6
       In the notice of deficiency, respondent also determined to include
$2,960,657 in the gross estate of the estate, which respondent determined to be
the additional gift tax payable, or the so-called gross-up, with respect to the
decedent’s corrected taxable gifts for 2006.
                                       - 15 -

[*15] On May 2, 2011, respondent assessed interest totaling $152,568.09 that

comprised $124,286.37 for the year 2011 on the deferred estate tax and interest of

$28,281.72 accrued on the nondeferred estate tax.

       On June 28, 2011, respondent sent a bill (June 28, 2011 statement) to the

estate for $674,541.91, the total balance due from the estate at that time. That

total balance due comprised the following assessments that respondent had made:

interest of $344,932.22 on the nondeferred estate tax, interest of $131,785.59 for

the year 2010 on the deferred estate tax; interest of $124,286.37 for the year 2011

on the deferred estate tax, interest of $58,280.92 accrued on prior assessments, and

a penalty of $15,256.81 for the late payment of an estate tax installment.

       On July 18, 2011, respondent assessed a penalty of $15,256.81 for the late

payment of an estate tax installment and interest of $5,320.41 on the nondeferred

estate tax.

       On August 12, 2011, respondent sent a bill to the estate for $693,133.26, the

total balance due from the estate at that time. That total balance comprised the

following assessments that respondent had made: the prior delinquent amount of

$674,541.91 that was shown in the June 28, 2011 statement, interest of $3,334.54

on the nondeferred estate tax, and a penalty of $15,256.81 for the late payment of

an estate tax installment.
                                        - 16 -

[*16] On September 5, 2011, respondent assessed a penalty of $15,256.81 for the

late payment of an estate tax installment and interest of $3,334.54 on the non-

deferred estate tax.

      On October 7, 2011, respondent issued to the estate a final notice and

demand for estate tax installment payment (final notice and demand) that showed

$743,306.77 as the total balance due from the estate at that time. That total

balance due comprised the following assessments that respondent had made:

interest of $344,932.22 on the nondeferred estate tax, interest of $131,785.59 for

the year 2010 on the deferred estate tax; a penalty of $39,535.68 for the late

payment of an estate tax installment, interest of $124,286.37 for the year 2011 on

the deferred estate tax, a penalty of $37,285.91 for the late payment of an estate

tax installment, and interest of $65,481 on the nondeferred estate tax. The final

notice and demand also showed a “Payment Due Date” of October 21, 2011, and

stated in pertinent part:

      Our records indicate that you have failed to pay the Internal Revenue
      Code (IRC) section 6166 installment now due. If you fail to pay the
      delinquent installment by the payment due date shown above, the IRS
      will terminate your IRC section 6166 election and the total amount of
      estate tax deferred under IRC section 6166 will be due. The IRS will
      impose additional interest and failure to pay penalty on the total estate
      tax liability, after that time.
                                       - 17 -

[*17] On October 31, 2011, respondent assessed a penalty of $46,307.97 for the

late payment of an estate tax installment and interest of $3,865.50 on the late

payment.

      On November 21, 2011, respondent issued to the estate a preliminary

Internal Revenue Code section 6166 determination letter (preliminary determi-

nation letter) in which respondent informed the estate of respondent’s intent to

“[t]erminate the IRC section 6166 election * * * and demand immediate payment

of the entire amount of the estate tax due”. That preliminary determination letter

stated in pertinent part:

      We will deny or terminate your IRC section 6166 election within
      30 days of the date of this letter because:

      The estate defaulted on the IRC section 6166 election because it did
      not make installment payments as required under the statute. IRC
      section 6166(g)(3) provides that we may terminate the election and
      collect the entire amount of estate tax liability if any payment of
      principal or interest is not made within 6 months of the due date for
      the payment (plus any extension of time granted). An installment
      payment was due more than 6 months ago. Notice and Demand for
      payment of the installment was sent to you and no payment was
      received within 6 months of the date the payment was due. There-
      fore, the entire amount of unpaid estate tax, including any applicable
      penalty and interest, is now due.

      *           *          *          *           *          *           *

      1. You may file a formal protest and request a conference with the
         IRS Office of Appeals. * * *
                                        - 18 -

[*18] *              *       *          *           *          *           *

      You may not bypass the Office of Appeals and petition the Tax Court
      directly because IRC section 7479 requires you to exhaust your
      administrative remedies before the Tax Court may review your case.
      In addition, certain procedures and rights in court (for example, the
      burden of proof and potential recovery of litigation costs) depend on
      you fully participating in the administrative consideration of your
      case, including consideration by the IRS Office of Appeals.

      On December 20, 2011, the estate submitted to respondent a protest

(estate’s protest) to the preliminary determination letter issued and requested a

hearing with respondent’s Appeals Office (Appeals Office). That protest asserted

in pertinent part:

             In general the federal estate tax is due within nine months of a
      decedent’s death [sic] IRC §6075(a). Under §6166(a)(1) a qualifying
      estate may elect to pay the estate tax in installments over an extended
      period. In this case the estate made a valid election to defer the pay-
      ment of estate taxes over the period provided in §6166(a). It made
      the appropriate interest payments in 2007 and 2008. This election
      and the payment of the interest payments in the above-mentioned
      years were made while Kevin Adell was the trustee and representative
      of the estate.

              In 2009, however, Kevin Adell’s sisters initiated litigation
      challenging Kevin Adell’s status as a trustee of the Franklin Z. Adell
      Trust and also his status as a representative of the estate. This
      litigation is quite contentious and as a result of the actions, Kevin
      Adell was prevented by court order from making payments on behalf
      of the estate. As a result, in May 2010 and May 2011, interest
      payments for the IRC §6166 election were not made by the current
      trustees.
                                         - 19 -

[*19]          The need to maintain a valid IRC §6166 election in the
        management of an estate and the substantial assets of a closely held
        business should not be minimized. In this case, the probate court at
        the insistence of the siblings of Kevin Adell needlessly placed in
        jeopardy the benefits to the estate of the IRC §6166 installment
        payment provision.

               The history of IRC §6166 and Code §7479 which allows
        judicial review of the disallowance of the application of these
        provisions is amply explained in the Estate of P. Roski, Sr. v.
        Commissioner, 128 T.C. 113 (2007). Parenthetically, the importance
        of the provision has also been discussed in Estate of Abigail R.
        Parrish v. Ira S. Loeb, 83-1 USTC ¶13,507 (USDC, Cen. Dist. Ill.
        1982). The above-cited case of Edward P. Roski, supra[,] establishes
        that the denial of the installment payment provisions of IRC §6166 is
        a matter committed to agency discretion by law and does require the
        proper administration of that discretion.

              Here we have a situation where the maintenance of the IRC
        §6166 election has been prevented by a probate court and intervening
        family members who appear to be unaware or uninformed concerning
        the importance of maintaining the election in place.

        On December 21, 2011, the attorneys representing Julie Verona and Laurie

Fischgrund, the then co-personal representatives of the estate, submitted to

respondent a protest (personal representatives’ protest) to the preliminary determi-

nation letter and requested a hearing with the Appeals Office. The personal

representatives’ protest stated in pertinent part:

        We understand that our clients’ predecessor, Kevin Adell, as Trustee
        of the Trust, elected to defer the payment of federal estate taxes as
        reported on the return as originally filed in November 2007 in
        accordance with the provisions of IRC Section 6166. We further
                                       - 20 -

[*20] understand that the Trust has failed to make the installment payments
      as required pursuant to the agreement.

      Our clients stand ready and willing to abide by the terms of the
      agreement in connection with the 6166 election. However, they are
      unable to do so. Their predecessor trustee, Mr. Adell, has stripped
      the Trust of all of its assets and our clients continue to diligently
      pursue recovery of the assets wrongfully converted by Mr. Adell in
      the various appropriate courts. Currently, there are at least three
      separate causes of action pending against Mr. Adell in the probate
      court and numerous cases pending with the Michigan Court of
      Appeals. If you require any details regarding the current efforts
      undertaken by our clients to recover the Trust property, we are happy
      to provide you with the same.

      On March 13, 2012, the attorneys representing Julie Verona and Laurie

Fischgrund, who had been the co-personal representatives of the estate, sent by

facsimile a letter to respondent with attachments. That letter informed respondent,

and certain of those attachments established, that by order dated February 22,

2012, of the Oakland County probate court Ms. Verona and Ms. Fischgrund were

discharged as co-personal representatives of the estate. The discharge of those

persons as co-personal representatives of the estate resulted from their having

reached an agreement with Mr. Adell on January 17, 2012, under which the

various pending lawsuits involving the estate or the Adell trust were settled

pursuant to certain agreements they had reached.
                                         - 21 -

[*21] Stanley LaBuz (Mr. LaBuz), an Appeals officer, was assigned to consider

the estate’s protest to the preliminary determination letter, the estate’s protest to

respondent’s proposed adjustments to Form 706, and a related issue involving the

gift tax return that the decedent had filed for 2006. Mr. LaBuz and the estate’s

counsel agreed to consider all of those matters at the same time and that if agree-

ment could not be reached on all of them, there would be no agreement on any of

them.

        Mr. LaBuz held telephone conferences with the estate’s counsel on April

18, 2011, and February 15 and 29, 2012. Thereafter, on June 19, 2012, he met

with the estate’s counsel. At no time during those telephone conferences and that

meeting did the estate’s counsel offer any explanation or make any argument as to

why the estate believed that its election under section 6166 did not terminate under

section 6166(g) upon the issuance to the estate of respondent’s notice and demand.

        The estate rejected Mr. LaBuz’ proposed valuation of the shares of stock of

STN.Com. As a result, pursuant to the understanding between him and the

estate’s counsel, all matters that were being considered at the Appeals Office were

unagreed.

        On May 7, 2012, respondent assessed interest of $113,230.81 for the year

2012 on the deferred estate tax.
                                        - 22 -

[*22] On August 6, 2012, respondent issued a notice of final determination as

provided in section 7479 that extension of time for payment under section 6166

has ceased to apply (notice of determination). That notice of determination stated

in pertinent part: “We have determined, as provided by Section 7479 of the

Internal Revenue Code (IRC), that the extension of time for payment of tax

provided in IRC § 6166 with respect to the estate identified above has been

terminated. We regret we have been unable to reach a satisfactory agreement in

your case. The enclosed statement explains why this determination was made.”

Attached to the notice of determination was a document titled “EXPLANATION

OF ADJUSTMENTS” that stated in pertinent part: “The election to extend the

time for payment of estate tax under IRC section 6166 has been terminated

because the estate failed to make installment payments of interest due in May

2010, May 2011 and May 2012.”

      In the petition7 commencing this case under section 7479, the estate alleged

that respondent erred in terminating the election under section 6166 to extend the

time for payment of the estate tax. The sole reason advanced in the petition for

that alleged error of respondent is that “the proper amount of the estate tax, the


      7
    The petition filed was titled “PETITION FOR DECLARATORY
JUDGMENT (ESTATE TAX INSTALLMENT PAYMENT)”.
                                           - 23 -

[*23] value of a closely held business [STN.Com], and the amount of the adjusted

gross estate, are the subjects of a separate Tax Court case, Estate of Franklin Z.

Adell, Kevin R. Adell, Temporary Co-Personal Representative v. Commissioner,

Docket No. 1188-11.”

                                        Discussion

         We review for abuse of discretion respondent’s determination to terminate

the estate’s election under section 6166. See sec. 7479(a)(2); Estate of Roski v.

Commissioner, 128 T.C. 113, 127 (2007).

         The estate does not dispute any of the material facts in support of respon-

dent’s motion. We conclude that there are no genuine disputes of material fact for

trial.

         The estate did not allege in the petition that respondent acted arbitrarily,

capriciously, or unreasonably when respondent determined to terminate the

estate’s election under section 6166. However, in the response to respondent’s

motion that the estate filed, the estate argues that “the termination of * * * [the

estate’s] election under I.R.C. §6166 was an abuse of discretion in light of the

uncertainty of any additional amount of estate tax owed by the Estate, which

liability was the main subject of the negotiations and discussions between

Petitioner’s counsel and respondent’s Appeals Officer LaBuz”. According to the
                                         - 24 -

[*24] estate, we should deny respondent’s motion and strike this case for trial from

our trial session in Chicago, Illinois, commencing on October 28, 2013 and “[a]t

the time that an opinion and consequently a decision is entered in the related case

in Docket No. 1188-11, this case should be resolved accordingly between the

Parties and if not, it should again be set on a Trial Session of this Court.”

        We reject the estate’s position. That the estate maintained in the adminis-

trative proceedings before the Appeals Office, and continues to maintain here and

in the case at docket No. 1188-11, that the date-of-death value of the shares of

stock of STN.Com that the decedent transferred to the Adell trust was not

$92,277,000 as determined by respondent or $9,300,000 as originally reported in

Form 706 that the estate filed on November 13, 2007, is not material to our

resolution of the issue presented in respondent’s motion of whether respondent

abused respondent’s discretion in terminating the estate’s election under section

6166.

        The record establishes, and the estate does not dispute, that it did not pay

interest for the years 2010 and 2011 on the deferred estate tax8 when required to

        8
      The record also establishes, and the estate does not dispute, that on May 7,
2012, while the Appeals Office was considering the estate’s protest to
respondent’s preliminary determination to terminate the estate’s election under

                                                                         (continued...)
                                         - 25 -

[*25] do so and that thereafter on October 7, 2011, respondent issued a final notice

and demand for, inter alia, that interest.9 In Estate of Bell v. Commissioner, 92

T.C. 714, 723 (1989), aff’d, 928 F.2d 901 (9th Cir. 1991), we observed that the

benefits that section 6166 confers “are privileges granted to the taxpayer by

Congress as a matter of legislative grace.” As a result, we concluded in Estate of

Bell that “the provisions of section 6166 which grant such privileges should be

given a strict and narrow construction”. Id.

      Section 6166(g)(3)(A) provides that except as provided in section

6166(g)(3)(B), a provision that does not apply in this case, “if any payment of

principal or interest under this section is not paid on or before the date fixed for its

payment by this section * * * the unpaid portion of the tax payable in installments



      8
        (...continued)
sec. 6166, respondent assessed interest for the year 2012 on the deferred estate tax
that the estate did not pay when required to do so.
      9
       The notice and demand showed a “Payment Due Date” of October 21,
2011, and stated in pertinent part:

      Our records indicate that you have failed to pay the Internal Revenue
      Code (IRC) section 6166 installment now due. If you fail to pay the
      delinquent installment by the payment due date shown above, the IRS
      will terminate your IRC section 6166 election and the total amount of
      estate tax deferred under IRC section 6166 will be due. The IRS will
      impose additional interest and failure to pay penalty on the total estate
      tax liability, due after that time.
                                        - 26 -

[*26] shall be paid upon notice and demand from the Secretary.” In other words,

where the circumstances described in section 6166(g)(3)(A) exist, as they do in

this case,10 the extension of time for payment of the estate tax provided in section

6166 is terminated as a matter of law, and the unpaid portion of the estate tax that

had been payable in installments is required to be paid upon notice and demand by

respondent.

        On the record before us, we conclude that respondent did not abuse respon-

dent’s discretion in terminating the estate’s election under section 6166.

        We have considered all of the arguments and contentions of the parties that

are not discussed herein, and we find them to be without merit, irrelevant, and/or

moot.

        To reflect the foregoing,


                                                 An order granting respondent’s

                                       motion and decision for respondent will be

                                       entered.




        10
        The estate failed to make the required installment payments of interest for
the years 2010, 2011, and 2012.
