                        T.C. Memo. 2011-135



                     UNITED STATES TAX COURT



           ESTATE OF EDWARD THOMAS COAXUM, DECEASED,
             RONALD COAXUM, EXECUTOR, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 27783-08.                Filed June 16, 2011.



     Ronald Coaxum, for petitioner.

     Randall L. Eager, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     MORRISON, Judge:   The respondent issued a notice of

deficiency determining an estate-tax deficiency of $337,193 and a

section 6651(a)(1) failure-to-file addition to tax of $84,298.1


     1
      Unless otherwise indicated, all citations of sections refer
to the Internal Revenue Code of 1986 as amended and in effect for
the date of decedent’s death, and all citations of Rules refer to
the Tax Court Rules of Practice and Procedure.
                                 -2-

Ronald Coaxum filed a petition for redetermination of the

deficiency.    After concessions by the parties, several issues

remain.    They are resolved by the Court as follows:   (1) the

decedent, Edward Coaxum, retained incidents of ownership in six

life insurance policies, rendering their values includable in the

value of the gross estate, (2) the value of the annuities owned

by the decedent is included in the value of the gross estate, and

(3) the estate is liable for the section 6651(a)(1) addition to

tax.

                          FINDINGS OF FACT

       Ronald Coaxum was a resident of South Carolina at the time

he filed the petition.    The life of the decedent, Edward Coaxum,

was insured by seven insurance policies that provided death

benefits.    One of the policies, the respondent concedes, had no

value when the decedent died.2   These policies were in force when

he died.    The decedent possessed the power to change the

beneficiaries on all six relevant insurance policies until he

died.

       At his death, the decedent owned annuities with a value of

$472,956.

       The decedent died on October 15, 2003.   His brother, Ronald

Coaxum, is the executor of the estate.    Ronald Coaxum was

required to file an estate-tax return within nine months after

       2
      The seventh policy was reported on the estate’s tax return,
but the respondent concedes that it had no value.
                                -3-

the death.3   The estate-tax return was not filed until February

27, 2006.

     The estate-tax return reported that the values of the six

insurance policies should be included in the value of the gross

estate.   The policies and the values reported on the return were:

     Life Insurance Co. of North America                    $500,000

     Metropolitan Life Insurance Co.                          56,000

     Life Insurance Co. of North America                     116,000

     State Farm Life Insurance Co.                            51,077

     Monumental Life Insurance Co.                           227,500

     Metropolitan Life Insurance Co.                         336,000

The return reported that the value of annuities includable in the

gross estate was zero.   In the notice of deficiency, the

respondent determined that the six insurance policies should be

included in the value of the gross estate using the values

reported, except that (1) the value of the State Farm Life

Insurance Co. policy should be reduced $2,893 to $48,184 and (2)

the value of the Monumental Life Insurance Co. policy should be

reduced $500 to $227,000.   The notice of deficiency thus stated

that the value of insurance on the decedent’s life was

$1,283,184.   The notice of deficiency also determined that the


     3
      The executor is required to file the return. Sec.
6018(a)(1). The return must be filed within nine months after
the date of death, unless the IRS grants an extension. Secs.
6075(a), 6081. As the IRS transcript of its transactions with
the estate shows, the IRS did not grant an extension.
                                  -4-

annuities owned by the decedent at his death should be included

in his gross estate at a value of $472,956.   In the petition, as

amended, the petitioner claimed, among other things, that the

value of the gross estate should not include the value of the

insurance policies.

     The parties make the following concessions.

     •The petitioner concedes that the value of the decedent’s

real property was underreported by $50,402.

     •The petitioner concedes that cash on hand was underreported

by $287.

     •The petitioner concedes that the actual funeral and

administrative expenses incurred by the estate are $5,780, rather

than the $288,923 reported on the estate-tax return.

     •The respondent concedes that $73,583 of workers’

compensation benefits is not an asset of the estate.   These

benefits were determined in the notice of deficiency to be assets

of the estate.

     •The respondent acknowledges that estate-tax deductions

should be increased by $18,226, the amount of an auto loan that

was not deducted on the estate-tax return but that was allowed as

a deduction in the notice of deficiency.

     •The respondent acknowledges that the value of insurance

policies includable in the value of the gross estate does not

exceed $1,283,184 (that is, $500,000 + $56,000 + $116,000 +

$48,184 + $227,000 + $336,000).
                                -5-

                              OPINION

I.   The Decedent Retained an Incident of Ownership in Each of
     the Six Life Insurance Policies.

     Section 2042 provides that the value of the gross estate

shall include the value of all property (1) to the extent of the

amount receivable by the executor as insurance under policies on

the life of the decedent and (2) to the extent of the amount

receivable by all other beneficiaries as insurance under policies

on the life of the decedent with respect to which the decedent

possessed at death any of the incidents of ownership.   One

incident of ownership is the power to change the beneficiary of

the insurance policy.   Sec. 20.2042-1(c)(2), Estate Tax Regs.

     The respondent determined that the values of the six

policies should be included in the value of the gross estate.

Under Rule 142(a)(1), the taxpayer has the burden of proving that

determinations in the notice of deficiency are incorrect.

Section 7491(a) provides that the burden of proof rests with the

IRS if the taxpayer introduces credible evidence, the taxpayer

has complied with substantiation requirements, the taxpayer has

maintained all required records, and the taxpayer has cooperated

with reasonable requests for information.   The preponderance of

the evidence demonstrates that the decedent retained the right to

change the beneficiaries on the policies until his death.

Therefore the allocation of the burden of persuasion is

immaterial.   See Martin Ice Cream Co. v. Commissioner, 110 T.C.
                                  -6-

189, 210-216 (1998).    The values of the policies are included in

the value of the gross estate.

II.   The Value of the Annuities Owned by the Decedent Is Included
      in the Value of the Gross Estate.

      At his death, the decedent owned annuities with a value of

$472,956.    Section 2039(a) provides that the value of annuities

owned by the decedent is included in the value of the gross

estate.   Therefore, the value of the annuities owned by the

decedent is included in the value of the gross estate.

      Before trial, the parties stipulated that

      Petitioner maintains that the fair market value of the
      annuities owned at the date of decedent’s death should
      be excluded from the gross estate for the sole reason
      that these amounts were reported as taxable income on
      Lonnie Coaxum’s 2004 Amended Federal income tax return
      and on Lonnie Coaxum’s 2005 Federal income tax return.

Lonnie Coaxum is the brother of the decedent.     The petitioner’s

brief does not press the argument referred to in the stipulation

that is quoted above.   The argument is therefore waived.

Instead, the petitioner argues that “decedent’s beneficiaries

will be allowed a deduction in the amount of Federal estate tax

paid on the items of IRD [income in respect of a decedent].”

This is a reference to the deduction potentially allowed by

section 691(c) to Lonnie Coaxum in calculating his income-tax

liability.   We do not have jurisdiction to determine the income-

tax liability of Lonnie Coaxum.    Therefore, we do not have
                                 -7-

jurisdiction to determine that Lonnie Coaxum is entitled to a

section 691(c) deduction.

III. The Estate Is Liable for the Section 6651(a)(1) Addition to
     Tax.

     Section 6651(a)(1) imposes an addition to tax for failing to

file a required return by the prescribed filing date.   The

respondent has made a prima facie case that the addition to tax

is appropriate.   See sec. 7491(c) (IRS has burden of producing

evidence, also known as presenting a prima facie case, that the

addition to tax is appropriate).   The petitioner has not overcome

the prima facie case.   Nor has the petitioner satisfied the

burden of persuading the Court that the failure to timely file

the return was “due to reasonable cause and not due to willful

neglect”.   See sec. 6651(a)(1); Higbee v. Commissioner, 116 T.C.

438, 447 (2001) (taxpayer has burden of persuasion to show

reasonable cause).    The addition to tax is equal to five percent

of the amount required to be shown on the return for each month

the return is late, up to a maximum of 25 percent.   Sec.

6651(a)(1), (b)(1).   The return was filed more than five months

late.   Therefore the addition is equal to 25 percent of the net

estate tax due.   Because the respondent conceded some of the
                                 -8-

positions taken in the notice of deficiency, the net estate tax

due must be recomputed under Rule 155.

     To reflect the foregoing,


                                            Decision will be entered

                                       under Rule 155.
