In US v Estate of Albert Chicorel, 2018 WL 5289703 (E.D. Mich., October 25, 2018), the IRS assessed Chicorel approximately $140,000 in 2005 in income taxes for the 2002 tax year. Chicorel died in 2006 without satisfying the assessment. In 2007, the personal representative filed a claims notice for unknown creditors, but did not provide actual notice to the IRS.
“M[ichigan Compiled Laws] 700.3801 provides for a shortening of the statute of limitations for claims against the estate, but only when there is compliance with the procedural requirements of notice to known and unknown creditors. In the absence of such compliance, creditors will have up to 3 years in which to file a claim against the estate. Publication alone only works to shorten the statute of limitations (to 4 months from the date of publication) as to creditors whose claims were not known. When a claimant is “known”, then actual notice needs to be provided to that creditor within 4 months of the publication of the notice to unknown creditors.
In the Estate of Chicorel, the personal representative’s failure to provide actual notice to the IRS (who by definition in Michigan was a known creditor), resulted in the IRS having a longer period in which to file a proof of claim against the Estate. As a result, when the IRS filed a proof of claim 2 years after the decedent died, that claim was timely. [Further,] the personal representative also did not disallow the claim. In the absence of the personal representative disallowing the claim, the IRS did not need to do anything further in order to extend the period when it could levy on the Estate’s assets.
- U.S. C. §6502(a) permits the government to collect an assessed tax “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.” Of import to the outcome of the Estate of Chicorel was whether, under Michigan law, the IRS’s timely filed proof of claim constituted a “proceeding” such that statute of limitations was tolled. MCL §700.3802(3) provides that “[f]or purposes of a statute of limitations, the proper presentation of a claim … is the equivalent to commencement of a proceeding on the claim”. Because it had timely filed a proof of claim, the government’s collections proceedings commenced on March 11, 2016 (more than 10 years after the assessment) were timely and not barred. For purposes of analyzing the facts in this case the court held it is not the receipt of a judgment that determines the timeliness of the government’s levy actions, but rather that the claim was timely filed. Here, the claim was filed within 10 years of the assessment and within the claims period relative to a known creditor who was not provided with actual notice. Further, the claim was not disallowed.”
Here in Tennessee, Tenn. Code Ann. 30-2-310 provides that if a claim is not filed within twelve (12) months of the decedent’s death, those claims “shall be forever barred,” except if it is a claim for state taxes, which “shall continue to be governed by Tenn. Code Ann. 67-1-1501.”
But, don’t forget about Bacigalupo v. United States, 399 F.Supp.2d 835 (M.D. Tenn. 2005), which holds that the IRS is not subject to T.C.A. § 30-2-307, as to filing claims. In Bacigalupo, the Administrator of the decedent’s estate challenged the timeliness of the government’s claim for unpaid federal income taxes. The court held that the Tennessee statute requiring probate proceeding claims to be filed within twelve months of the decedent’s death did not apply to the federal government’s tax claim.
According to Bacigalupo, regardless of whether its claim is filed in federal or state court, the United States is not bound by state statutes of limitation in enforcing its rights. The federal government’s consent to a state statute of limitations for probate claims could not be inferred from its filing of claim in a state probate proceeding and its attempt to comply with state procedural requirements for filing claims. Absent its own consent, the United States is not bound by the twelve month time limitation governing claims filed in probate proceedings pursuant to T.C.A. § 30–2–307.
Each tax assessment has a collection statute expiration date. Internal Revenue Code section 6502 provides that the length of the period for collection after assessment of a tax liability is ten years. The collection statute expiration ends the government’s right to pursue collection of a liability.
What’s the takeaway? If the IRS is a known creditor, is there any harm in sending the creditor’s notice to the IRS? And, if you send it, you might as well send it via certified mail, return receipt requested.
LISI Estate Planning Newsletter #2679 (November 13, 2018) http://www.leimbergservices.com Copyright 2018 Leimberg Information Services, Inc. (LISI). Reproduction in Any Form or Forwarding to Any Person Prohibited – Without Express Permission.
Note that descriptions of the case, where quoted, are verbatim from the LISI summary.
Thanks to Harlan Dodson at Dodson Parker Behm & Capparella, PC for bringing this case to my attention.