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<DIV><FONT size=4>I have thought that a PR can avoid taxes if there is a legal
way to do that, but if not, the obligation of a PR is to pay all debts before
assets are distributed, but certainly to pay them out of available
assets.</FONT></DIV>
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<DIV><STRONG><SPAN style="FONT-SIZE: 18pt; COLOR: #004080">Joshua F.
Grant</SPAN></STRONG><SPAN style="COLOR: #004080"><BR></SPAN><SPAN
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O. Box 619<BR>Wilbur, WA 99185<BR>509 647 5578</SPAN><SPAN
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<DIV style="font-color: black"><B>From:</B> <A
title=jamess@brothershenderson.com
href="mailto:jamess@brothershenderson.com">James W. Spencer</A> </DIV>
<DIV><B>Sent:</B> Friday, November 16, 2018 10:35 AM</DIV>
<DIV><B>To:</B> <A title=wsbapt@lists.wsbarppt.com
href="mailto:wsbapt@lists.wsbarppt.com">WSBA Probate & Trust Listserv</A>
</DIV>
<DIV><B>Subject:</B> [WSBAPT] Unpaid Taxes and Fiduciary Duty to
Beneficiaries</DIV></DIV></DIV>
<DIV> </DIV></DIV>
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<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>
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