Tax Attorneys – Sometimes You’re Damned if You Do and Damned if You Don’t: Estate of Myers v. Commissioner, T.C. Memo 2017-11

Tax attorneys are often asked to do the impossible by their clients while dealing with short deadlines, highly technical Code sections, competing interests, and decisions about how to juggle them. Estates, in particular, face a range of time limits, and it can be difficult to determine which statutes of limitation apply, and when. While reading Estate of Myers v. Commissioner, T.C. Memo 2017-11, it occurred to me how complex the interplay between and among statutes of limitation and liens can be; when they can be tolled and when they are absolute; when liens attach, on whom, and what property; and the IRS’s different and competing collection methods.

Ruben Myers died in late 2005, leaving family farmland, other real property, and some liquid assets. The executor filed a federal estate tax return on February 15, 2007, and began making installment payments under §6166. There were other real property interests and liquid assets in the taxable, but not probate, estate.

The estate made timely installment payments until the beginning of 2014. In late 2014, the IRS issued a Notice of Federal Tax Lien (NTFL), and shortly thereafter, filed a Notice of Intent to Levy (NIL). The estate executor timely requested a collection due process (CDP) hearing. At the hearing, the executor or his counsel suggested collecting the outstanding tax from the transferees who had received the liquid assets from Myers’ taxable estate. The executor asserted that under Alabama state law, he did not have access to those assets. The settlement officer issued his determination on July 15, 2015, sustaining the NTFL filing and the levy notice, and finding the estate did not qualify for the hardship exception to collection. The settlement officer also indicated his recommendation to collect the outstanding taxes by first trying to seize nonprobate assets and the estate’s partial interests in nonfarm property.

The IRS had everything it needed in place to sell the family farm. It was nine years, eight months, and four days after Rubin Myer’s date of death, an unknown period since the assessment, and there were multiple deadlines looming.

Statutes of limitation, and the liens that often accompany them, are numerous and varied for estates. The Myers case involved the following:


  • Section 6501 generally requires the IRS to assess tax within three years of the taxpayer filing a return;

  • Section 6502 generally requires collection of outstanding taxes within 10 years of the assessment, but may be tolled in a variety of situations, some indefinitely;

  • Section 6166 allows extensions of time to pay estate taxes for estates with closely held business interests through both a delay in starting to make payments, and a payment plan;

  • Section 6502 generally requires collecting outstanding taxes within ten years of the assessment, but may be tolled in a variety of situations, some indefinitely; and

  • Section 6901 is a statute of limitation on collection against transferees, including beneficiaries of a taxable estate.

There are a host of exceptions, extensions and exclusions for these statutes, in addition to tolling for disputes.

Aside from the statutes of limitation, there are liens that attach to property to potentially pay outstanding taxes:


  • Section 6321 creates is a general tax lien under §6321, which applies upon assessment, and continues until the taxes are paid or the period for collection lapses;

  • Section 6324(a)(1) is a separate lien on estate assets for estate and gift taxes. It comes into being on the decedent’s date of death without filing, without notice, without any action on the part of the government, and attaches to the estate’s assets for a period of 10 years or until the taxes are paid, whichever occurs first.

  • Section 6324(a)(2) extends the liability for estate or gift tax collection generally to the estate’s fiduciaries and transferees, but unlike §6324(a)(1), attaches as of the assessment date;

Rubin Myers’ executor filed a timely appeal to the Tax Court on August 17, 2015 to review the IRS’s sustaining the NTFL and NIL. However, by so doing, the IRS ceased all collection activity, including suspending collection actions against the transferees of the nonprobate assets. The special lien under §6324(a)(1) expired November 15, 2015.

The executor was put between the proverbial rock and a hard place. After the CDP hearing in July 2015, the IRS did not appear to pursue any collection activity against the nonprobate assets. Possibly because of this inaction, the executor and his attorney filed a petition in Tax Court in August 2015. Judge Halpern noted it was unclear why the IRS did not begin collection activity against the third-party transferees. Judge Halpern surmised that it could have been because the IRS felt that there was not enough time to impose transferee liability (presumably under §6901 or §6502). With the looming November 2015 deadline, the executor and his counsel may have felt that the only way to require the IRS to proceed against the third-party transferees was to ask the Tax Court for relief.

Ironically, the executor may have also put himself in another timing dilemma by filing a Tax Court petition — the collection period under §6324(a)(2). As Judge Halpern noted in dicta, other collection opportunities might still be available under §6502 and §6324(a)(2). It is unclear when the IRS assessed the estate tax, but it was most likely assessed shortly after the estate filed Form 706. The Tax Court took 17 months to issue an opinion. Therefore, the §6324(a)(2) lien will expire sometime after February 15, 2017. As the court filed the decision on January 10, 2017, the IRS has, possibly, as little as a month to proceed against the third-party transferees, putting the IRS in the same position as after the CDP hearing.

From a strategy standpoint, what should an attorney do when faced with these applicable and competing statutes of limitation? First, thoroughly examine the often complex and difficult statutes and how they interact with each other. Even after doing some preliminary research, it is unclear to me when these provisions apply, how they interact with each other, and when they are tolled. Second, the estate attorney should check both the will or trust document, and state law from the very beginning to determine whether the estate has a right of contribution for taxes from the transferees of the nonprobate assets. Finally, an estate attorney should develop a strategy with the executor considering the pros and cons, and potential uncertainties, of each course of action.


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