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<p class="MsoNormal"><span style="color:#1F497D">James,<o:p></o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D">I would advise filing as the PR could become personally liable to the tax man. There is no way I would not file in these circumstances. The beneficiaries should celebrate the fact they got something! Good
Luck!<o:p></o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D"><o:p> </o:p></span></p>
<p class="MsoNormal">Under 31 USC section 3713(b), the executor is personally liable for any unpaid taxes of the decedent to the extent of the value of other debts paid by the executor over the outstanding priority claims of the United States.
<b><u>A debt for this purpose includes a distribution of a bequest or a portion of the residuary estate to the named beneficiaries under the decedent’s will</u></b> or under the law of intestate distribution. This personal liability attaches even where there
may be a beneficiaries’ agreement to pay the unpaid tax, or where the executor is contractually indemnified by the beneficiaries. (There are federal reimbursement statutes that may be applicable as to property subject to estate tax that passes outside of probate;
see IRC sections 2204–2207.) The liability amount is based on the excess value of the transferred property over the unliquidated claim for taxes, plus penalties and interest, as of the date of the offending transfer. Interest is then added to such amount from
the applicable transfer date. The statute of limitations is six years.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">G=<span style="color:#1F497D"><o:p></o:p></span></p>
<p class="MsoNormal"><span style="color:#1F497D"><o:p> </o:p></span></p>
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<p class="MsoNormal"><b><span style="font-size:10.0pt;font-family:"Tahoma","sans-serif"">From:</span></b><span style="font-size:10.0pt;font-family:"Tahoma","sans-serif""> wsbapt-bounces@lists.wsbarppt.com [mailto:wsbapt-bounces@lists.wsbarppt.com]
<b>On Behalf Of </b>James W. Spencer<br>
<b>Sent:</b> Friday, November 16, 2018 10:36 AM<br>
<b>To:</b> WSBA Probate & Trust Listserv<br>
<b>Subject:</b> [WSBAPT] Unpaid Taxes and Fiduciary Duty to Beneficiaries<o:p></o:p></span></p>
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<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Greetings Listmates:<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">I have a… um, theoretical… situation.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">The facts are pretty simple (and likely quite common): Decedent dies in 2018. During the administration of Decedent’s estate, it is discovered that Decedent hasn’t filed annual income tax returns, likely for a decade or two. This is probably
not really an issue, as Decedent apparently didn’t work and had no W-2 income. However, in 2016, Decedent sold a home, and the proceeds are well outside of the $250,000 individual capital gains tax exemption for the sale of a primary residence. Unpaid capital
gains taxes are likely in the $75,000 - $100,000 range (depending on the final determination of the tax basis in the residence). Estate accountant is advising PR that the PR should file a tax return for 2016 and pay the capital gains tax. While beneficiaries
have already received some notable portion of the estate, this will (more than) eat up all remaining funds in the estate, leaving nothing else for the beneficiaries.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">I would love some opinions on the nexus between the PR’s fiduciary duties to the estate’s beneficiaries and the PR’s responsibility to properly administer the estate, including dealing with taxes. The underlying questions is whether it
a breach of fiduciary duty for the PR to file a tax return that will deny the beneficiaries significant funds where there is a very real possibility that the IRS will never come after those taxes if no return is filed.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">I have some opinions on this, but would really appreciate some feedback from the hivemind.<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Thanks,<o:p></o:p></p>
<p class="MsoNormal">James<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal" style="background:white">James W. Spencer<o:p></o:p></p>
<p class="MsoNormal">Attorney at Law<o:p></o:p></p>
<p class="MsoNormal">Brothers & Henderson, P.S.<o:p></o:p></p>
<p class="MsoNormal" style="background:white">2722 Eastlake Avenue East, Suite 200<o:p></o:p></p>
<p class="MsoNormal" style="background:white">Seattle, Washington 98102<o:p></o:p></p>
<p class="MsoNormal" style="background:white">Phone: (206) 324-4300 x106<o:p></o:p></p>
<p class="MsoNormal" style="background:white">Fax: (206) 324-3106<o:p></o:p></p>
<p class="MsoNormal" style="background:white"><span style="color:black">e-mail: </span>
<a href="mailto:jamess@brothershenderson.com"><span style="color:blue">jamess@brothershenderson.com</span></a><o:p></o:p></p>
<p class="MsoNormal" style="background:white"><a href="http://www.brothershenderson.com/"><span style="color:blue">www.brothershenderson.com</span></a><o:p></o:p></p>
<p class="MsoNormal" style="background:white"><img border="0" width="196" height="56" id="Picture_x0020_1" src="cid:image001.jpg@01D47D9C.63E83700" alt="cid:image001.jpg@01D33AF1.1F3913C0"><o:p></o:p></p>
<p class="MsoNormal"><span style="color:black">The information transmitted in this e-mail message and attachments is attorney-client information, is privileged or confidential material and is intended only for the use of the individual or entity named above.
You are hereby notified that any disclosure, copying, distribution, review by or taking of any action in reliance on the contents of this e-mail information by unauthorized persons is strictly prohibited. All personal messages are solely the views of the sender
and are not to be attributed to Brothers & Henderson, P.S. If you have received this transmission in error, immediately notify the sender by reply e-mail and permanently delete this transmission and all copies including attachments.</span><o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
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