In the case of United States v. Kohls, Case No. 3:18-cv-00225, US DC SD Ohio[1] the executor of the estate argued that the IRS had failed to file its action timely. The IRS was looking to collect over $320,000 in unpaid estate taxes, penalties and interest due on the estate tax return. The issue turns on the date when the tax had been assessed, and whether the IRS was still within the time period imposed under IRC §6502(a)(1) to collect the tax following assessment.

IRC §6502(a)(1) provides:

§ 6502. Collection after assessment

(a) Length of period. — Where the assessment of any tax imposed by this title has been made within the period of limitation properly applicable thereto, such tax may be collected by levy or by a proceeding in court, but only if the levy is made or the proceeding begun —

(1) within 10 years after the assessment of the tax

The statute date is complicated in this case because the estate had received three one year extensions of time to pay the tax from the IRS under §6161(b)(2), the first one granted when the estate agreed to the balance due at the end of the estate tax exam, followed by two additional extensions agreed to by the IRS.

The granting of extensions of time to pay the tax extends the statute under §6502(a)(1) by the amount of time granted under that provision. So, in this case, we are looking at a 13 year period for the IRS to take action to collect the tax, which in this case was looking to obtain a judgment personally against the executor for having distributed all estate assets without having paid the estate tax.

The executor did not file a response to the IRS’s arguments regarding why he should be personally liable—rather, the executor’s defense was that the IRS had waited too long to bring the action.

The executor had originally signed Form 890, Waiver of Restriction on Assessment and Collection of Deficiency and Acceptance of Overassessment — Estate Gift and Generation Skipping Transfer Tax on or about May 27, 2005. The taxpayer claimed that the IRS received this signed form on June 2, 2005. The IRS recorded the assessment on July 4, 2005.[2]

The taxpayer argued that the statute began running no later than June 2, 2005 (the date the IRS received the Form 890), so the IRS had to file its action to obtain a judgment no later than June 2, 2018. The IRS had filed the action thirty days after that date and, in the executor’s view, had lost its right to pursue collection.[3]

The IRS and the court disagreed. While the Form 890 may have given a consent to immediate assessment, the controlling date is when the IRS records the assessment in its records per IRC §6203. That date was July 4, 2005 and thus the statute continued to run beyond the date the IRS filed its action.[4]

The Court found the date the IRS records shows the assessment as being recorded is presumed to be correct. The Court did not find that the fact that this assessment indicates it was recorded on a federal holiday (Independence Day) was sufficient to overcome that presumption.[5]

As the executor had not otherwise challenged the claims made by the IRS in its complaint, the Court found that the IRS should be granted summary judgment, as the Court found that the executor had allowed the assets of the estate to be depleted even though he was aware of the outstanding tax due.[6]

[1] United States v. Kohls, Case No. 3:18-cv-00225, US DC SD Ohio, https://ecf.ohsd.uscourts.gov/doc1/14317812186 (Registration required - retrieved January 4, 2020)

[2] United States v. Kohls, pp. 3-4

[3] United States v. Kohls, p. 9

[4] United States v. Kohls, p. 9

[5] United States v. Kohls, p.10

[6] United States v. Kohls, pp. 10-12