United States of America v. Ringling et al
Filing
61
ORDER granting 43 Motion for Summary Judgment. Signed by U.S. District Judge Karen E. Schreier on 2/21/19. (SKK)
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
SOUTHERN DIVISION
UNITED STATES OF AMERICA,
4:17-CV-04006-KES
Plaintiff,
vs.
ORDER GRANTING
PLAINTIFF’S MOTION FOR
SUMMARY JUDGMENT
DONNA RINGLING,
JOANN JANDREAU,
KATHRYN STANDY,
and KORY STANDY,
Defendants.
Plaintiff, the United States of America, moves for summary judgment
against defendants, Donna Ringling, Joann Jandreau, Kathryn Standy, and
Kory Standy under Federal Rule of Civil Procedure 56. Docket 43. Defendant
Ringling opposed the motion. Docket 57. Defendants Jandreau, Kathryn
Standy, and Kory Standy did not file any opposition. For the following reasons,
the court grants plaintiff’s motion for summary judgment against defendants.
FACTUAL BACKGROUND
The undisputed facts are as follows:
Defendants Donna Ringling, JoAnn Jandreau, and Kathryn Standy are
the daughters of the late Harold and Margery Arshem. Margery predeceased
Harold. Defendant Kory Standy is the son of Kathryn Standy and the grandson
of Harold Arshem (Arshem).
Arshem died testate on December 24, 1999. In his Last Will and
Testament, executed on February 20, 1998, Arshem bequeathed his estate (the
Estate) in equal parts to his three daughters. His will also contained a specific
bequest of real property to Ringling as part of her one-third portion of the
Estate. In his will, Arshem also nominated and appointed Ringling, Jandreau,
and Kathryn Standy to serve as co-personal representatives of the Estate. The
Estate included real property located in Charles Mix County and Lyman
County, South Dakota, stocks and bonds, co-op shares, cash, CDs, bank
accounts, two contracts for deeds, a retained life estate in real property located
in Charles Mix County, life insurance proceeds, crops, household goods, farm
machinery, equipment, and vehicles.
Prior to his death, Arshem bought several government H/HH series
bonds. Thirteen of those bonds were jointly owned by Arshem and Ringling, but
Ringling did not make any contribution toward the bonds. At the time of
Arshem’s death, the thirteen bonds were valued at $12,000. Arshem also
jointly owned ten bonds with Jandreau. Jandreau did not make any
contributions toward the bonds. At the time of Arshem’s death, the ten bonds
were valued at $12,500. Additionally, Arshem jointly owned seven bonds with
Kathryn Standy. Like her sisters, Kathryn Standy did not contribute anything
toward the bonds. At the time of Arshem’s death, the seven bonds were valued
at $6,500.
Along with the bonds, Arshem owned other property jointly with his
daughters. Prior to his death, Arshem purchased two vehicles, a 2000 Dodge
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Ram Pickup Truck and a 1994 Dodge Van. The pickup truck was titled in the
name of Arshem and his three daughters. None of the daughters made any
contribution toward the pickup truck. The van was titled in the name of
Arshem and Kathryn Standy. Kathryn Standy made no contribution toward the
van. At the time of his death, the pickup truck was valued at $25,000, and the
van was valued at $8,000. Prior to his death, Arshem also added Kathryn
Standy as a joint owner on his checking account at Community First Bank.
Kathryn Standy never made any contribution to the checking account.
Arshem purchased two life insurance policies on his life prior to his
death, New York Life Insurance Company Policy #xxx7361 and Continental
General Insurance Company Annuity Policy #xxx8783. All three daughters
were listed as the beneficiaries on the policies. At the time of his death, Arshem
owned both policies outright, and the policies had a total value of $21,616.20.
Prior to his death, Arshem was involved in several transactions with his
grandson, Kory Standy. The first transaction occurred on March 27, 1996,
when Kory Standy entered into a contract for deed with Arshem to purchase
real property located in Charles Mix County. 1 According to the contract, Kory
Standy was to pay Arshem $32,000 for the property with an initial $100 due at
or before the execution of the contract, $1,900 due on December 20, 1996, and
the remaining balance paid in fifteen annual installments. On December 14,
The property’s legal description is: “The West Half of the Southeast Quarter
(W½SE¼) in Section Thirty-two (32) in Township Ninety-nine (99) North, Range
Sixty-six (66), West of the 5th P.M.” Docket 45 ¶ 27.
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1999, Arshem forgave the remaining balance of $27,600.96 due on the
contract.
The second transaction between Kory Standy and Arshem occurred on
May 9, 1996. In this transaction, Arshem conveyed a warranty deed to Kory
Standy for the family farm located in Charles Mix County along with irrigation
equipment and permits. In his conveyance, Arshem retained a life estate and
the right to receive the rent income and profits during his lifetime. After
Arshem’s death, on January 24, 2000, the family farm’s fair market value was
appraised at $345,700.
The third transaction occurred on December 18, 1999. Kory Standy and
Arshem entered into a contract for deed for real property in Charles Mix
County. 2 According to the contract for deed, Kory Standy was to pay $90,000
to Arshem with an initial $10,000 due at or before the contract’s execution and
the remaining $80,000 paid in twenty annual installments. Kory Standy would
not take possession, or receive the rent, issues, and profits until March 1,
2000. At Arshem’s death, Kory Standy still owed $80,093.30 on the contract for
deed.
Additionally, Kory Standy received other types of property from Arshem.
On December 19, 1999, Arshem endorsed a certificate of deposit (CD) to pay off
a note in the name of Arshem and Kory Standy. On the date the CD was
The legal description is “The North Half of the Northeast Quarter (N½NE¼) in
Section Twenty-eight (28) and the North Half of the Northwest Quarter
(N½NW¼) in the Southwest Quarter of the Northwest Quarter (SW½NW¼) of
Section Twenty-seven (27), all in Township Ninety-seven (97) North, Range
Sixty-seven (67), West of the 5th P.M.” Docket 45 ¶ 34.
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cashed in, the value was $32,989.49. Of that amount, $28,845.44 was used to
pay off the note and $3,779.21 (the remaining balance after the penalty for
early withdrawal) was paid to Kory Standy. Also, in December of 1999, Arshem
gave Kory Standy approximately 6,000 bushels of corn. At Arshem’s death,
these bushels were valued at $10,200.
In the First Judicial Circuit Court of the State of South Dakota, Ringling,
Jandreau, and Kathryn Standy filed an application for informal probate and
appointment of personal representative on December 31, 1999. On January 3,
2000, the First Judicial Circuit issued Letters of Representative to the
daughters and docketed the probate case. In September of 2000, the Estate
reported Arshem’s real and personal property interests at the time of his death
to the State of South Dakota as part of the probate proceeding. Attorney James
Haar prepared the South Dakota Inheritance Tax Report and Information for
Judicial Determination of Inheritance Tax. Kathryn Standy signed the
document on behalf of the Estate. This report, however, incorrectly used
county assessed values for the real property, instead of appraised values.
In June 2003, Stan Whiting was appointed by the court to serve as a
special administrator over the probate proceeding after Ringling filed a petition.
As special administrator, Whiting’s duties included investigating issues
contained in Ringling’s petition, like whether a federal estate tax return was
required. Around August 4, 2003, Whiting filed a motion in the probate
proceeding asking for permission to file a federal estate tax return and to
amend the state inheritance tax return. In his motion, Whiting stated that the
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value of the real property should have been determined by the fair market
values instead of the county assessed values. On August 13, 2003, the First
Judicial Circuit ordered Whiting to file a federal estate tax return and amend
the state inheritance tax return.
On April 14, 2008, on behalf of the Estate, Ringling signed Form 706, the
federal estate tax return, and reported a gross estate of $834,336.00 and a net
estate tax due of $28,939.00. Whiting mailed the form to the IRS on May 5,
2008. The IRS received it around May 15, 2008. When the Estate filed the
Form 706, it did not make any payments. On the Form 706, the Estate
reported its assets as: three pieces of real property, co-op shares, stocks,
bonds, two contracts for deeds, cash, bank accounts, CDs, two life insurance
policies, the corn crop gifted to Kory, the pickup truck, the van, and other
miscellaneous property. The Estate also reported the values of the assets each
defendant received. Kathryn Standy and Jandreau each received $121,988.00,
Ringling received $121,987.00, and Kory Standy received $416,116.00.
On July 14, 2008, a delegate of the Secretary of the Treasury made
assessments against the Estate totaling $65,874.80. The estate tax owed was
$28,939.00, the late filing penalty was $6,511.27, the failure to pay penalty
was $7,234.75, and the interest was $23,189.78. On that same day, the IRS
sent the Estate a notice of assessments and demanded payment. About a
month later, on August 18, 2008, the IRS sent the Estate a notice of intent to
levy after the Estate failed to pay the tax liability. The IRS sent an additional
notice of balance due and request to pay to the Estate on November 10, 2008.
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On December 11, 2008, Whiting filed a petition in the probate proceeding
for payment and an order releasing him of further duties. At that time, Whiting
had filed a federal estate tax return, amended the state inheritance tax return,
and advised the heirs the amount each owed for the federal estate tax. The IRS
accepted the tax return as filed on December 17, 2008. On November 16, 2009,
the IRS sent a third notice of balance and request to pay to the Estate.
On January 29, 2010, Ringling sent a request to the IRS to abate the
penalties and interest on the Estate’s tax liability. The IRS denied Ringling’s
request based on its finding that the information submitted did not establish
reasonable cause or show due diligence. The IRS’s letter also provided
information on how to file a claim for refund or seek further IRS administrative
review. Neither the Estate nor Ringling filed such a claim. For the next three
years in November (2010, 2011, 2012), the IRS sent additional notices of
balance due and requests to pay.
On April 18, 2011, Dennis Duncan, an attorney, forwarded a check to
Ringling, Jandreau, and Kathryn Standy and attached a letter that advised the
daughters that the federal estate tax remained due by the Estate. On July 15,
2013, each defendant received an IRS Form 10492, entitled “Notice of Federal
Taxes Due,” with respect to the Estate. A Notice of Federal Tax Lien was filed in
Charles Mix County against the Estate on July 24, 2013. The notice was also
sent to the Estate. No one requested a hearing on the lien on behalf of the
Estate.
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Since 2010, defendants have made some payments to reduce the Estate’s
tax liability. Ringling made two payments, one on February 22, 2010, for
$4,300.49, and a second payment on March 22, 2010, for $241.32. Jandreau
made a payment of $4,514.48 on September 5, 2017. Kathryn Standy made a
payment of $4,514.48 on September 11, 2017. Kory Standy made a payment of
$15,135.09 on October 2, 2017. As of May 25, 2018, the Estate had a
remaining balance of $63,479.08 due on its tax liability.
The United States filed this case against defendants seeking a judgment
against each defendant for personal liability for unpaid federal estate tax debt
of Arshem’s Estate under 26 U.S.C. § 6324(a)(2). Docket 1. Defendants Ringling
and Jandreau each filed separate answers. Dockets 10, 15. On April 25, 2017,
the Clerk of Court entered defaults against Kathryn Standy and Kory Standy
under Federal Rule of Civil Procedure 55(a) for failure to answer the complaint
or otherwise defend within the time limit under Federal Rule of Civil Procedure
12(a)(1). Docket 19. On May 4, 2017, Kory Standy sent a letter that was
docketed as his Answer. Docket 20. On May 8, 2017, Kathryn Standy sent a
letter to the court that was docketed as “Letter.” Docket 21. Kathryn and Kory
Standy have not made a request for the court to vacate the default. The United
States now moves for an order granting summary judgment against all
defendants under Federal Rule of Civil Procedure 56. Docket 43.
SUMMARY JUDGMENT STANDARD
Summary judgment is appropriate if the movant “shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment
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as a matter of law.” Fed. R. Civ. P. 56(a). The moving party can meet its burden
by presenting evidence that there is no dispute of material fact or that the
nonmoving party has not presented evidence to support an element of its case
on which it bears the ultimate burden of proof. Celotex Corp. v. Catrett, 477
U.S. 317, 322-23 (1986). To avoid summary judgment, “[t]he nonmoving party
may not ‘rest on mere allegations or denials, but must demonstrate on the
record the existence of specific facts which create a genuine issue for trial.’ ”
Mosley v. City of Northwoods, 415 F.3d 908, 910 (8th Cir. 2005) (quoting Krenik
v. Cty. of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995)). Summary judgment is
precluded if there is a genuine dispute of fact that could affect the outcome of
the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). When
considering a summary judgment motion, the court views the facts and the
inferences drawn from such facts “in the light most favorable to the party
opposing the motion.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475
U.S. 574, 587 (1986).
DISCUSSION
I.
Liability under 26 U.S.C. § 6324(a)(2)
The United States claims that defendants are liable for unpaid federal
estate tax, penalties, and interest under 26 U.S.C. § 6324(a)(2). Docket 1. The
United States moves for summary judgment on its claims arguing that no
genuine dispute of material facts exists and it is entitled to judgment as a
matter of law. Docket 43.
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Defendants Jandreau, Kathryn Standy, and Kory Standy failed to
respond to the United States’s motion for summary judgment. Under Local
Rule 56.1, “All material facts set forth in the movant’s statement of material
facts will be deemed to be admitted unless controverted by the opposing party’s
response to the moving party’s statement of material facts.” D.S.D. Civ.
LR 56.1(D). Thus, in regard to defendants Jandreau, Kathryn Standy, and Kory
Standy, the court accepts all of the facts contained within the United States’s
Statement of Undisputed Material Facts as undisputed. Ringling filed a
response in opposition to the motion for summary judgment. Docket 57.
Ringling also filed a Statement of Disputed Material Facts. Docket 58. The
court will address the alleged disputes in the discussion that follows.
If an imposed federal estate tax is not paid when due, a transferee,
surviving tenant, or beneficiary, who receives, or has on the date of the
decedent’s death, property included in the gross estate under sections 2034 to
2042, is personally liable for such tax. 26 U.S.C. § 6324(a)(2). To establish
liability under section 6324(a)(2), the government must prove: (1) the estate tax
was not paid when due and (2) the transferee, surviving tenant, or beneficiary
received property included in the gross estate under sections 2034 to 2042.
Nason v. Comm'r, 51 T.C.M. (CCH) 1455 (T.C. 1986); Groetzinger v. Comm’r, 69
T.C. 309, 316 (T.C. 1977).
A.
Arshem’s estate tax was not paid when due.
The first element the United States must prove is that the estate tax was
not paid when due. Nason, 51 T.C.M. at 1455. Estate tax returns must be filed
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within nine months from the date of the decedent’s death. 26 U.S.C. § 6075.
Here, the estate tax return for the Estate was filed eight years after Arshem’s
death. Arshem died on December 24, 1999. Docket 45-2. On April 14, 2008,
Ringling, on behalf of the Estate, signed the Form 706 and reported a gross
estate amount and a net estate tax amount. Docket 45-13 at 1; Docket 45-45
at 14. On July 14, 2008, a delegate of the Secretary of the Treasury made
assessments against the Estate for a total of $65,874.80. Docket 45-46 ¶¶ 4, 5;
Docket 45-20 at 1. This amount included the original estate tax, two penalties,
and interest. Docket 45-46 ¶¶ 4, 5; Docket 45-20 at 1. On December 16, 2008,
the IRS sent the Estate an Estate Tax Closing Letter to notify the Estate that its
return was accepted as filed. Docket 45-23. Since the initial assessment,
interest continued to accrue, and defendants made some payments. The
payments made in 2010 and 2017 totaled $24,165.05. Docket 45-46 ¶¶ 7-8. As
of May 25, 2018, the Estate’s estate tax liability was not fully paid, and the
remaining liability was $63,479.08. Id. ¶ 9.
Ringling does not contest any of the amounts contained within the
evidentiary support of the United States’s motion. See Docket 57. In her
response, Ringling’s main contention is based on an error contained in the
United States’s motion for summary judgment and memorandum. Id. at 3.
Ringling notes that the remaining tax liability amount in the United States’s
memorandum was $63,470.08 (Docket 44 at 6), but the evidence supporting
the United States’s motion stated the liability amount was $63,479.08 (Docket
45-46). Docket 57 at 3. Ringling argues that this “discrepancy is material and
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forbids summary judgment.” Id. In its reply, the United States admits that
there were inconsistencies between its motion/memorandum and the
supporting evidence, but states that the inconsistencies were due to a systemic
typographical error. Docket 59 at 3.
Once the moving party has met its initial burden, the nonmoving party
must establish “that a fact . . . is genuinely disputed” either by “citing to
particular parts of materials in the record,” or by “showing that the materials
cited do not establish the absence . . . of a genuine dispute.” Fed. R. Civ.
P. 56(c). Rule 56 requires Ringling to support her assertions that a fact is
disputed by citing to materials in the record like depositions, documents,
affidavits, declarations, stipulations, admissions, interrogatory answers, or
other materials. Fed. R. Civ. P. 56(c)(1). Here, Ringling only points to an
inconsistency contained in the United States’s motion/memorandum. These
two documents are not included within the list of citable materials in Rule 56
and cannot be used to support Ringling’s factual position. See, e.g., British
Airways Bd. v. Boeing Co., 585 F.2d 946, 952 (9th Cir. 1978) (stating legal
memorandums are not evidence and “cannot by themselves create a factual
dispute sufficient to defeat a summary judgment motion where no dispute
otherwise exists”); Skyline Corp. v. NLRB, 613 F.2d 1328, 1337 (5th Cir.
1980) (“Statements by counsel in briefs are not evidence.”).
Additionally, to deny summary judgment, “there must be evidence on
which the jury could reasonably find for the [non-moving party].” Anderson,
477 U.S. at 252. Here, the incorrect liability dollar amount in the
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motion/memorandum would not be admissible evidence for a jury to consider.
Conversely, the United States cites to admissible evidence that contains the
correct liability dollar amount. Docket 44 at 6 n.24. In her declaration,
Revenue Officer Advisor, Sheryl McCanlies, states the Estate’s balance as of
May 25, 2018, is $63,479.08. Docket 45-46 at 3.
Overall, Ringling has not provided any evidence that the liability amount
of $63,479.08 contained in McCanlies’s declaration is disputed. Ringling
incorrectly states that Form 4340 states the unpaid liabilities as of May 25,
2018, was $61,399.99. Docket 57 at 3. Form 4340 actually states that balance
of $61,399.99 was the amount due as of August 8, 2014. Docket 45-47 at 4.
Based on these reasons, the court rejects Ringling’s argument that this
typographical error creates a genuine dispute of material fact and precludes
summary judgment. The court finds that the undisputed facts show Arshem’s
estate tax was not paid when due.
B.
Defendants received property included in the gross estate.
The second element the United States must prove is that the transferee,
surviving tenant, or beneficiary received property included in the gross estate.
Nason, 51 T.C.M. at 1455. The gross estate includes all property, real or
personal, tangible or intangible, wherever situated, at the time of the
decedent’s death. 26 U.S.C. § 2031(a). Sections 2035 through 2042 list the
different types of property and how each type is included in the gross estate
valuation. 26 U.S.C. §§ 2035-2042. Each defendant is liable based on the
property each defendant received from the Estate, to the extent of the
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property’s value measured at the time of the decedent’s death. 26 U.S.C.
§ 6324(a)(2).
The United States states it is undisputed that defendants are transferees,
surviving tenants, or beneficiaries who had property on the date of Arshem’s
death or received property as a result of his death. Docket 44 at 7. None of the
defendants contest the United States’s Statement of Undisputed Material Facts
as they relate to this second element.
First, the United States states the undisputed facts show Arshem made
transfers of a corn crop and a certificate of deposit to Kory Standy, and that
Arshem forgave the balance due on a contract for deed in a transaction
between him and Kory Standy. Docket 44 at 12. The United States argues
these gifts are includible in the gross estate under section 2035 because the
transfers were made within the last month of Arshem’s life. Id. at 13. The court
agrees. The gross estate includes property the decedent transferred within
three years of his death. 26 U.S.C. § 2035(c)(1).
The undisputed facts show Kory Standy received these three gifts within
the three-year time period before Arshem’s death. First, Kory Standy admitted
in his deposition that he received the corn crop in 1999 from Arshem. Docket
45-43 at 26. Second, Arshem signed the certificate of deposit over to Kory
Standy and executed the CD’s authorization on December 13, 1999. Id. at 22,
24. Kory Standy stated Arshem wanted to sign the CD over to him, instead of
having Kory Standy pay the Estate. Id. at 21-22. Kory Standy stated he
received $3,779 from the CD. Id. at 22-24. Lastly, Kory Standy stated that one
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month before Arshem’s death, Arshem deeded the property over to Kory
Standy, even though Kory Standy still owed Arshem money for it. Id. at 13;
Docket 45-31 (Contract for Deed). Kory Standy said his grandfather wanted to
“will it, give it . . . sign it over to [him].” Docket 45-43 at 13. Because these
transfers from Arshem to Kory Standy occurred within the last year of
Arshem’s life, these gifts are includible in the gross estate under section 2035
and are considered section 6324(a)(2) property. Kory Standy, as a transferee of
section 6324(a)(2) property, is liable for the unpaid portion of the Estate’s
liability in an amount that takes into account the value of the gifts.
Next, the United States states the undisputed facts show Arshem
retained a life estate in the family farm during a transaction with Kory Standy.
Docket 44 at 11-12. The United States argues the family farm should be
included in the gross estate under section 2036. Id. at 11. The court agrees.
The gross estate includes all property the decedent has transferred in which he
retained an interest for his life or for any period that does not end before his
death. 26 U.S.C. § 2036. This retained interest can be the possession or
enjoyment of the property, the right to the income from the property, or the
right to designate the people who possess or enjoy the property. Id.
The undisputed facts show that Arshem retained a life estate in the
family farm when he transferred it to Kory Standy. In 1995, Arshem signed a
warranty deed, transferring the family farm to Kory Standy. Docket 45-43 at 9.
Kory Standy stated Arshem retained a life estate to the family farm and resided
there until shortly before his death. Id. at 11. Additionally, the warranty deed
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from Arshem to Kory stated, “Grantor retains a life estate and to receive the
income rents and profits during his life time.” Docket 45-30 at 2. Because
Arshem retained a life estate, the family farm is includible in the gross estate
and is considered section 6324(a)(2) property. Kory Standy, as a transferee of
section 6324(a)(2) property, is liable for the unpaid portion of the Estate’s
liability in an amount that takes into account the value of the family farm.
The United States states the undisputed facts show Ringling, Jandreau,
and Kathryn Standy each jointly owned property with Arshem at the time of his
death. Docket 44 at 9. The United States argues this property is in includible
in the gross estate under section 2040. Id. The court agrees. The gross estate
includes all property the decedent and any other person held as joint tenants
with right of survivorship except such property that has been shown to
originally belong to the joint owner and never was received or acquired by the
joint owner from the decedent for less than adequate and full consideration. 26
U.S.C. § 2040(a).
The undisputed facts show the daughters owned various pieces of
property jointly with Arshem. First, Arshem jointly owned government bonds
with each of his daughters. Ringling admits she received thirteen bonds.
Docket 45-45 at 12. Jandreau stated she jointly owned ten bonds with Arshem
and received those bonds as part of her one-third share of the Estate. Docket
45-42 at 16. The South Dakota Inheritance Tax Reports lists the bonds as
jointly owned by Arshem and Ringling (13 bonds), Jandreau (10 bonds), and
Kathryn Standy (7 bonds). Docket 45-6 at 11. Also, none of the three daughters
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provided any contribution for the bonds. Whiting advised the daughters the
bonds would likely be fully taxable in the Estate because the daughters made
no contribution to them. Docket 45-12 at 1.
Second, Arshem also jointly owned his pickup truck with his daughters.
The South Dakota Inheritance Tax Reports lists the pickup truck as jointly
owned by Arshem and Ringling, Jandreau, and Kathryn Standy. Docket 45-6
at 11. Ringling admitted she received 1/3 of the pickup truck. Docket 45-45 at
12. After Kathryn Standy sold the truck for $25,000, Ringling, Jandreau, and
Kathryn Standy received a third of the proceeds. Docket 45-42 at 17; Docket
45-45 at 14. Additionally, Arshem jointly owned his van with Kathryn Standy.
The South Dakota Inheritance Tax Reports lists the van as jointly owned by
Arshem and Kathryn Standy. Docket 45-6 at 11. Ringling stated Kathryn
Standy received the van, which was valued at $8,000. Docket 45-45 at 14.
Whiting also advised the defendants that the pickup truck and van would be
fully taxable because the daughters made no contribution to the purchase of
either vehicle. Docket 45-12 at 1.
Third, Arshem jointly owned one of his checking accounts with Kathryn
Standy. Kathryn Standy was listed as a co-owner with rights of survivorship of
Arshem’s checking account at Community First Bank. Docket 45-44 at 7;
Docket 45-36. After she was added in December of 1999 and after Arshem’s
death, she continued to write checks and have access to the account. Docket
45-44 at 7.
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Thus, the property jointly owned by defendants Ringling, Jandreau, and
Kathryn Standy and Arshem at the time of his death is includible in the gross
estate and is considered section 6324(a)(2) property. Ringling, Jandreau, and
Kathryn Standy, as surviving tenants, are liable for the unpaid portion of the
Estate’s liability in an amount that takes into account the value of the bonds,
two vehicles, and checking account.
Lastly, the United States states Ringling, Jandreau, and Kathryn Standy
received proceeds from life insurance policies. Docket 44 at 10. The United
States argues the two life insurance policies of Arshem should be included in
the gross estate under section 2042. Id. The court agrees. The gross estate
includes life insurance policies that the decedent possessed at his death. 26
U.S.C. § 2042. The undisputed facts show Arshem purchased a life insurance
policy from New York Life Insurance Company in the 1940s. Docket 45-6 at 4.
This insurance policy was valued at $3,337.65, and the beneficiaries were
Kathryn Standy, Ringling, and Jandreau. Id. Arshem also purchased an
annuity policy from Continental General Insurance Company in 1987. Id. This
policy was valued at $18,278.55, and the beneficiaries were Kathryn Standy,
Ringling, and Jandreau. Id. Thus, the two life insurance policies are includible
in the valuation of the gross estate and are considered section 6324(a)(2)
property. Ringling, Jandreau, and Kathryn Standy, as beneficiaries, are liable
for the unpaid portion of the Estate’s liability in an amount that takes into
account the value of the two life insurance policies.
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Defendants Jandreau, Kathryn Standy, and Kory Standy failed to refute
any of the United States’s Statement of Undisputed Material Facts by not
responding to the United States’s motion for summary judgment. Ringling’s
response (Docket 57) only disputed one factual issue, which the court resolved
above in favor of the United States. Thus, the court deems the United States’s
facts to be undisputed. As discussed above, the undisputed facts establish
defendants’ liability under 26 U.S.C. § 6324(a)(2).
II.
Affirmative Defenses
In her answer, Ringling asserted several affirmative defenses. Docket 10.
Ringling alleged that the United States’s claims were barred by the doctrines of
accord and satisfaction, waiver, estoppel, statute of limitations, and reasonable
care. Id. ¶¶ 8-11. The United States filed a motion to strike the affirmative
defenses (Docket 22), which the court denied (Docket 32). Additionally, Ringling
filed a response to the United States’s motion for summary judgment (Docket
57) and provided additional facts in her Statement of Disputed Material Facts
(Docket 58). The United States filed objections to Ringling’s Additional Material
Facts. Docket 60.
A nonmoving party can resist a motion for summary judgment by
“ ‘asserting affirmative defenses which it has the burden to prove’ and
supporting those defenses with specific facts.” Hiland Partners GP Holdings,
LLC v. Nat'l Union Fire Ins. Co., 847 F.3d 594, 601 (8th Cir. 2017) (quoting
Midwest Oilseeds, Inc. v. Limagrain Genetics Corp., 387 F.3d 705, 714 (8th Cir.
2004)). The nonmoving party must “identify specific facts in the record showing
19
its defenses raised a triable issue against its liability.” Midwest Oilseeds, Inc.,
387 F.3d at 714. The nonmoving party cannot rely solely on its pleadings to
support its affirmative defenses. See McLaughlin v. Esselte Pendaflex Corp., 50
F.3d 507, 513 (8th Cir. 1995).
A.
Estoppel, Waiver, Accord and Satisfaction
For an equitable estoppel defense, “[t]he claimant bears the ‘heavy
burden’ of establishing that the government engaged in affirmative
misconduct.” Bartlett v. U.S. Dep’t of Agric., 716 F.3d 464, 475 (8th Cir. 2013)
(quoting Morgan v. Comm’r, 345 F.3d 563, 566 (8th Cir. 2003)). If affirmative
misconduct is shown, then the claimant must prove the four traditional
elements of estoppel:
(1) a “false representation by the government;” (2) government intent
to induce the claimant to act on the misrepresentation; (3) a lack of
knowledge or inability to obtain true facts on the part of the
claimant; and (4) the claimant’s “reliance on the misrepresentation
to his detriment.”
Id. at 475-76 (quoting Rutten v. United States, 299 F.3d 993, 995 (8th Cir.
2002)).
To prove waiver, there must be “evidence of a voluntary and intentional
relinquishment or abandonment of a known right.” Haghighi v. Russ.-Am.
Broad. Co., 173 F.3d 1086, 1088 (8th Cir. 1999). To prove accord and
satisfaction, there must be:
(1) an accord or agreement, in which one of the parties agrees to
extend to the other, in satisfaction of a claim, something other than,
or different from, that to which the other party considers himself
entitled; and (2) a satisfaction, consisting of the actual execution or
performance of the accord.
20
Goldstein Oil Co., v. Sun Oil Trading Co., 624 F. Supp. 730, 733 (E.D. Mo.
1985).
In her Statement of Disputed Material Facts, Ringling offered additional
facts. Docket 58 at 14. One of Ringling’s offered material facts was that in
2014, defendants had one or more meetings with an IRS employee about the
Estate’s deficiency. Id. Ringling alleges that the IRS employee made statements
to defendants that led them to believe that the interest and penalties would be
waived. Id. The United States denies this alleged fact and argues that Ringling
provides no evidentiary support for the statement. Docket 60 at 2.
Rule 56(e) states that “[i]f a party fails to properly support an assertion of
fact . . . the court may grant summary judgment if the motion and supporting
materials—including the facts considered undisputed—show that the movant is
entitled to it[.]” As the nonmoving party, Ringling cannot “rest on mere
allegations or denials, but must demonstrate on the record the existence of
specific facts which create a genuine issue for trial.” Mosley, 415 F.3d at 910
(internal quotation omitted).
Here, Ringling failed to properly support her assertion of facts as
contained in her Statement of Disputed Material Facts, because she provided
no citations to the record. Instead, Ringling cited to her brief in response to the
United States’s motion to strike (Docket 26). Docket 58 at 14. Her brief
contains mere allegations that defendants met with an IRS employee. Docket
26 at 2. Even in her brief, Ringling provided no evidentiary support. She does
not cite to any depositions of defendants or affidavits discussing any of these
21
facts or cite to any other material in the record that could support such
allegations. Ringling cannot rely on allegations in order to overcome the United
States’s motion for summary judgment. See Celotex Corp. v, 477 U.S. at 324
(stating Rule 56 allows a summary judgment motion to be opposed by any kind
of evidentiary material listed in Rule 56(c), “except the mere pleadings
themselves”).
Ringling alleges that the United States must resolve all of the factual
issues supporting Ringling’s defenses. Docket 57 at 7. But case law holds that
the moving party does not need to support its motion with affidavits or other
evidence negating the nonmoving party’s claim. Celotex Corp., 477 U.S. at 323.
“The moving party is ‘entitled to a judgment as a matter of law’ because the
nonmoving party has failed to make a sufficient showing on an essential
element of her case with respect to which she has the burden of proof.” Id.
Ringling has the burden of proof to establish that the elements of her
affirmative defenses are disputed. She has not done that here. Instead, she
relied on allegations contained in her brief and provides no evidence at all to
support her alleged facts. Ringling cannot rely on her pleadings “but must set
forth specific facts” that prove the elements of her claim. McLaughlin, 50 F.3d
at 513. There is no evidence in the record that defendants had a meeting with
an IRS employee. The court finds that Ringling failed to meet her burden in
establishing these affirmative defenses and therefore cannot use them to resist
the United States’s motion for summary judgment.
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B.
Reasonable Cause
If someone fails to file a tax return or fails to pay a tax before its due
date, an additional amount can be added to the tax liability. 26 U.S.C. § 6651.
A person can avoid this additional liability if the taxpayer can show that such
failure was due to reasonable cause. Id. Reasonable cause can be established
when “a taxpayer shows that he reasonably relied on the advice of an
accountant or attorney that it was unnecessary to file a return, even when
such advice turned out to have been mistaken.” United States v. Boyle, 469
U.S. 241, 250 (1985).
In her answer, Ringling asserted an affirmative defense of reasonable
cause to avoid the penalties and interest that were added to the Estate’s tax
liability. Docket 10 ¶¶ 10-11. Ringling alleged that she exercised due care in
engaging a tax attorney to advise them on whether the Estate owed an estate
tax. Id. ¶ 11. Additionally, in her Statement of Disputed Material Facts,
Ringling offers an additional fact that she and the other co-personal
representatives did not initially pay the federal estate tax based on their good
faith reliance on the Estate’s tax attorney’s advice. Docket 58 at 14. The United
States objects and argues that Ringling provided no evidentiary support for this
statement. Docket 60 at 1. Ringling offers a second material fact that she paid
what she believed to be her share of the remaining unpaid tax deficiency, after
she was informed that a balance remained. Docket 58 at 14. The United States
admits that Ringling made a payment toward the Estate’s liability, which the
undisputed facts show. Docket 60 at 2. The United States, however, objects to
23
the remainder of Ringling’s alleged fact because it is not supported by the
record. Id.
To resist the United States’s motion for summary judgment, Ringling has
the burden to prove the elements of reasonable cause and support them with
specific facts. Hiland Partners GP Holdings, LLC, 847 F.3d at 601. In her
response to the motion for summary judgment, Ringling argues that “the
record is clear that Ringling did not file a Federal estate return because of her
good faith reliance on a tax attorney.” Docket 57 at 6. But she provides no
citation to the record to support this allegation. “[A] district court is not
‘obligated to wade through and search the entire record for some specific facts
which might support the nonmoving party's claim.’ ” Jaurequi v. Carter Mfg.
Co., 173 F.3d 1076, 1085 (8th Cir. 1999) (quoting White v. McDonnell Douglas
Corp., 904 F.2d 456, 458 (8th Cir. 1990)).
Ringling attempts to provide factual support for this defense by providing
additional facts in her Statement of Disputed Material Facts (Docket 58). But
Ringling did not support the facts with any evidence in the record. Similar to
the alleged fact discussed above, Ringling attempts to support her allegation
that she relied on the Estate’s attorney’s advice by citing to her answer (Docket
10) and her brief in response to the United States’s motion to strike (Docket
26). Both documents contain mere allegations that Ringling paid what she
believed to be her share of the deficiency and that Ringling relied on the
Estate’s attorney’s advice. Neither document provides any citations to the
record. Because Ringling did not identify any facts in the record to prove the
24
elements of reasonable cause, she has failed to meet her burden and cannot
use the reasonable cause defense to resist the United States’s motion for
summary judgment.
C.
Statute of Limitations
In her answer, Ringling alleges that the United States’s claim is barred
by the statute of limitations. Docket 10 ¶ 9. In her response, Ringling provides
no argument or facts that support this defense. As a matter of law, personal
liability under section 6324(a)(2) can be asserted by the United States ten years
from the date the assessment is made against the Estate in accordance with
section 6502(a). 26 U.S.C. § 6502(a)(1); United States v. Botefuhr, 309 F.3d
1263, 1277 (10th Cir. 2002) (listing case law that discusses section 6324’s
statute of limitation is determined by sections 6501 and 6502).
Here, the IRS made its assessment against the Estate on July 14, 2008.
Docket 45 ¶ 43; Docket 45-46 ¶ 4. The United States filed this case within the
ten-year statute of limitation, on January 23, 2017. Docket 1. Ringling has not
provided any evidence to dispute these facts. Thus, she has failed to meet her
burden to prove this affirmative defense and cannot use it to resist the United
States’s motion for summary judgment.
CONCLUSION
Defendants are liable for the Estate’s unpaid tax liability under 26 U.S.C.
§ 6324(a)(2). The undisputed facts show the Estate’s federal estate tax was not
paid when due and each defendant received property includible in the gross
estate. Ringling cannot resist the United States’s motion for summary judgment
25
with her affirmative defenses. She did not meet her burden because she failed to
identify any specific facts in the record that supported her defenses. Thus, it is
ORDERED that the United States’s motion for summary judgment (Docket
43) is granted.
IT IS FURTHER ORDERED that the United States must file a proposed
order by February 26, 2019, that contains the total judgment amount due as of
March 1, 2019, including penalties and interest, and the not to exceed amount
for which each defendant may be held jointly and severally liable. Defendants
may file objections by February 28, 2019.
Dated February 21, 2019.
BY THE COURT:
/s/ Karen E. Schreier
KAREN E. SCHREIER
UNITED STATES DISTRICT JUDGE
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