ROSSMAN et al

Filing 19

ORDER granting 11 Motion to Dismiss - Rule 12(b)(6). The Clerk is directed to enter judgment. Signed by Senior Judge John P. Wiese. (jwg) Copy to parties.

In the United States Court of Federal Claims
No. 11-139T
Filed: February 13, 2012

GIOVANNA CUSENZA
ROSSMAN, Executor of the
Estate of VIOLET M. CUSENZA,
Deceased,
Plaintiff,
v.
THE UNITED STATES,
Defendant.

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_______________________________________________________
ORDER
GRANTING MOTION TO DISMISS
_______________________________________________________

Plaintiff is the executor of her mother’s estate. In that capacity, plaintiff now
seeks a refund of penalties assessed against the estate for the late payment of estate
tax, claiming that pursuant to 26 U.S.C. § 6651(a)(2), the estate’s failure to pay the
tax in a timely manner should be excused because it was “due to reasonable cause
and not due to willful neglect.”
Defendant has moved to dismiss the complaint pursuant to RCFC 12(b)(6)
for failure to state a claim upon which relief can be granted. For the reasons set forth
below, defendant’s motion is granted.

I.
Violet M. Cusenza died on August 15, 2005, leaving her daughter, Giovanna
Cusenza Rossman, as the executor of her estate. By law, federal estate taxes are due
nine months after a decedent’s death, making the estate taxes for Mrs. Cusenza’s

estate due on May 15, 2006. 26 U.S.C. § 6075(a). On April 12, 2006, the estate
sought and received an extension, until November 15, 2006, to pay the estate tax.
The application for extension was filed by Margaret Treanor, a California certified
public accountant retained by Ms. Rossman to advise her on tax matters regarding
the estate.
On November 14, 2006, Ms. Treanor filed the estate’s tax return, reporting
a taxable value for the estate of $2,304,392, with interest owed in the amount of
$32,279 and tax owed in the amount of $810,276, for a total balance due of
$842,555. The return also indicated that the estate did not elect to pay the taxes in
installments. Along with the return, Ms. Treanor filed a second application for
extension, until February 15, 2007, to pay the estate tax. The request indicated that
the “executor needs more time to secure loans on real estate and/or liquify assets”
because “the estate consists mainly of illiquid investments and real estate.” The
application was granted.
A third application for extension—submitted one day before the expiration
of the February 15, 2007, deadline—was filed and signed by Ms. Rossman herself.
The request did not indicate the period for which the extension was being sought nor
did it include the required explanation for why the timely payment of tax was
“impossible or impractical.” The Internal Revenue Service (“IRS”) nevertheless
granted a six-month extension, until August 15, 2007, to pay the estate tax.
On February 21, 2007, the estate made a payment of $100,000 toward its
outstanding tax liability. As of the August 15, 2007, deadline, however, the estate
had not fully satisfied its tax obligation nor had it sought an additional extension of
time.
The IRS accordingly began to assess penalties pursuant to
26 U.S.C. § 6651(a)(2) for failure to pay the outstanding estate taxes.
Over the next two years, the estate made several payments toward the debt,
ultimately satisfying the taxes, penalties, and interest associated with the estate’s
liabilities on July 7, 2009. The amount the estate paid in penalties totaled
$51,027.60.

II.
The Internal Revenue Code imposes a penalty for failing to pay taxes in a
timely manner. 26 U.S.C. § 6651(a)(2). This penalty is not imposed, however, if
the failure to make a timely payment was “due to reasonable cause and not due to
willful neglect.” Id.

2

Plaintiff argues that the estate’s failure to meet the payment deadline was
“due to reasonable cause” as set forth in Section 6651(a)(2) and that the penalties
therefore should not have been imposed. Specifically, plaintiff maintains that
reasonable cause existed because: (1) the death of both of her parents in close
proximity in time made it emotionally difficult for her to handle the tax consequences
of settling the estate, including obtaining financing and liquidating assets; (2) the
“unprecedented credit crisis” impeded the estate’s ability to pay the estate tax; and
(3) her accountant failed to give proper advice about the option of satisfying the
estate tax liability through monthly payments.
In defendant’s view, the explanations plaintiff offers for the estate’s late
payment—the emotional distress of her situation, the poor market conditions, and
misinformation by her accountant—do not, as a matter of law, constitute “reasonable
cause.” Defendant maintains that reasonable cause requires the exercise of “ordinary
business care and prudence” in meeting payment deadlines, as indicated in Treasury
Regulations § 301.6651-1(c)(1). Defendant argues that plaintiff, by failing to seek
further extensions of time in which to pay the estate taxes, did not exercise ordinary
business care and prudence and therefore cannot rely on the “reasonable cause”
provision of 26 U.S.C. § 6651(a)(2) to avoid tax penalties.

III.
Plaintiff’s argument cannot prevail. The fact that the estate sought and
received time extensions on three separate occasions (extending the payment
deadline by a total of fifteen months and keeping the estate’s account “current”
through August 15, 2007) indicates that neither the emotional distress of her situation
nor the unfavorable market conditions initially prevented plaintiff from complying
with the tax code’s timing requirements. With plaintiff’s already having
demonstrated through her past actions the ability to meet the required standard of
“ordinary business care and prudence” set forth in Treasury Regulations
§ 301.6651-1(c)(1), we are unable to conclude that those same, already known
circumstances (whether personal or economic) can later excuse the estate’s failure
to meet the extended payment deadline.1
1

As the Supreme Court observed in United States v. Boyle, 469 U.S. 241
(1985), the IRS has articulated various reasons for a late filing that the agency
considers to constitute “reasonable cause,” all of which, in the Boyle Court’s view,
reflect the principle that “a taxpayer should not be penalized for circumstances
beyond his control.” Id. at 249 n.6; see also id. at 247 n.4 (“Congress obviously
intended to make absence of fault a prerequisite to avoidance of the late-filing
penalty.”). In particular, the Boyle Court noted, the IRS has defined “reasonable
(continued...)
3

Nor is it an answer to say that the responsibility either for seeking the initial
time extensions in the first instance or for failing to obtain additional time extensions
in the second belonged to plaintiff’s accountant. That argument, we believe, is
foreclosed by the Supreme Court’s decision in United States v. Boyle, 469 U.S. 241
(1985), the case on which defendant primarily relies.
In Boyle, an executor retained an attorney to prepare and file an estate tax
return. Although the executor periodically contacted the attorney to monitor the
attorney’s progress and was assured that he would be notified when the return was
due, the return was ultimately filed three months late as a result of the attorney’s
error. Id. at 242–43. The IRS assessed penalties against the estate. Id. at 243. The
executor paid the penalties and then sued for a refund, contending that the penalty
was unjustified because the estate’s failure to file the return on time was “due to
reasonable cause,” i.e., reliance on the attorney. Id. at 244.

1

(...continued)
cause” as including:
unavoidable postal delays, the taxpayer’s timely filing of a return with
the wrong IRS office, the taxpayer’s reliance on the erroneous advice
of an IRS officer or employee, the death or serious illness of the
taxpayer or a member of his immediate family, the taxpayer’s
unavoidable absence, destruction by casualty of the taxpayer’s records
or place of business, failure of the IRS to furnish the taxpayer with
the necessary forms in a timely fashion, and the inability of an IRS
representative to meet with the taxpayer when the taxpayer makes a
timely visit to an IRS office in an attempt to secure information or aid
in the preparation of a return.
Id. at 243 n.1 (citing Internal Revenue Manual (CCH) § 4350, (24) ¶ 22.2(2)
(Mar. 20, 1980) (Audit Technique Manual for Estate Tax Examiners)). Although the
death of an immediate family member is identified as a possible “reasonable cause”
that might justify the failure to meet a deadline, we do not believe, as discussed
above, that the deaths of plaintiff’s parents caused the estate to miss the August 15,
2007, deadline given that earlier deadlines had in fact been met. As both the majority
and the concurrence observed in Boyle, “[b]ecause the respondent here was fully
capable of meeting the required standard of ordinary business care and prudence, we
need not decide the issue of whether and under what circumstances a taxpayer who
presents evidence that he was unable to adhere to the required standard might be
entitled to relief from the penalty.” Id. at 249 n.6, 255.
4

The Supreme Court rejected the executor’s argument, holding that although
it is reasonable for an executor to rely upon an attorney in the filing of an estate
return, “[i]t requires no special training or effort on the taxpayer’s part to ascertain
a deadline and ensure that it is met.” Id. at 252. The Court further noted that
Congress has “charged the executor with an unambiguous, precisely defined duty to
file the return within nine months” and has “placed the burden of prompt filing on
the executor, not on some agent or employee of the executor.” Id. at 249–50. The
Court accordingly held that “[t]he failure to make a timely filing of a tax return is not
excused by the taxpayer’s reliance on an agent, and such reliance is not ‘reasonable
cause’ for a late filing under § 6651(a)(1).” Id. at 252.
Given this holding, plaintiff cannot make the case that any alleged action by
her accountant—whether failing to inform plaintiff about the facts and circumstances
involved with filing an extension or failing to file an agreed upon extension—
excuses plaintiff’s obligation under Boyle to inform herself about filing and payment
deadlines and to ensure that they are met.2

IV.
The court is sympathetic to the enormous task that faced Ms. Rossman in
what were for her undoubtedly very dark days. Moreover, we recognize that the
emotional distress Ms. Rossman experienced and the financial difficulties she
encountered made the discharge of her responsibilities as executor of her mother’s
estate significantly more difficult. These conditions, however, cannot exempt her
from the tax code’s filing and payment deadlines. We are therefore left with no
choice but to grant defendant’s motion to dismiss. Accordingly, the Clerk is directed
to enter judgment dismissing plaintiff’s complaint.

s/John P. Wiese
John P. Wiese
Judge

2

In both her complaint and response brief, plaintiff made passing reference
to her accountant’s alleged failure to advise her of the opportunity to pay the estate
tax in installments—an allegation that, if substantiated, could arguably be construed
as “reasonable cause” under Boyle based on “erroneous advice of counsel concerning
a question of law.” Id. at 250. Discovery by plaintiff’s counsel, however, failed to
develop any support for this allegation and the matter was not addressed further.
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