U.S. v. Kulhanek – Secret Estate Lien Foreclosed Upon More Than 16 Years After Estate Tax Return Filed

By Steven B. Gorin  

Thompson Coburn LLP, St. Louis, MO 

In U.S. v. Kulhanek,1  the decedent died in 1991, and the estate tax return was due in 1992. The executor made a §6166 election on the estate tax return to pay estate tax in installments.  In 1999, the closely-held business sold all of its assets, making all of the estate tax due upon the IRS' notice and demand.2  The IRS sued the transferees in 2008. The transferees argued that the action was for collection of estate tax and was untimely, because it was brought more than ten years after date of death.3  The U.S. District Court held that the collection action was timely, because it was a transferee liability case,4  not an estate tax collection case, and was brought less than ten years5  after the event that accelerated payment of the estate tax.6 

Thus, transferees of estates that have made Code §6166 elections might be liable until as long as 24 years and 9 months after death (ten years after the fourteen year deferral under Code §6166 of taxes due nine months after death).

For more information, in BNA's Tax Management Portfolios, see Gopman and McCawley, 832 T.M., Estate Tax Payments and Liabilities, and in Tax Practice Series, see ¶6180, Introduction — The Estate and Gift Taxation System, ¶6300, Credits, Deferred Tax Payments, and Tax Liabilities, ¶6350, Estate Planning.

1 No. 1:08-cv-00211 (W.D. Pa. 12/8/10). 

2 §6166(g)(1)(A). All references to the "Code" are to the Internal Revenue Code of 1986, as amended. 

3 Relying on §6324(a)(1). 

4 Relying on §6324(a)(2). 

5 Relying on §6502(a)(1). 

6 Citing U.S. v. Botefuhr, 309 F.3d 1263, 1277 (10th Cir. 2002), U.S. v. Degroft, 539 F.Supp. 42, 44 (D. Md. 1981), and U.S. v. Bevins, 2008 WL 5179099, 102 AFTR2d 2008-7268 (E.D. Cal. 2008).