The Tax Court in Brief – October 3rd – October 7th, 2022
Freeman Law’s “The Tax Court in Brief” covers every substantive Tax Court opinion, providing a weekly brief of its decisions in clear, concise prose.
For a link to our podcast covering the Tax Court in Brief, download here or check out other episodes of The Freeman Law Project.
Tax Litigation: The Week of October 3rd, 2022, through October 7th, 2022
Sander v. Comm’r, T.C. Memo. 2022-103 | October 6, 2022 | Morrison, J. | Dkt. No. 22472-16
Opinion
Short Summary: Sandra Sander (“Petitioner”) established a trust—the Sandra E. Sander Lifetime Trust—on October 25, 2014. According to the trust instrument, Petitioner and her daughter, Leda, were to serve as co-trustees. Additionally, the trust instrument, governed by Florida law, described the various powers of the trustee, including the payment and distribution of certain trust assets, the payment or ability to compromise claims of the trust, and the payment of expenses, taxes, penalties, or other charges.
On July 4, 2016, Petitioner died in Florida. Petitioner’s will nominated Leda as personal representative. Moreover, the terms of the trust instrument provided that Leda became sole trustee of the trust, and three new trusts were created for each of Petitioner’s daughters. Petitioner’s will was never probated.
On July 15, 2016, the Internal Revenue Service (“IRS”) issued a notice of deficiency to Petitioner for tax years 2013 and 2014. Leda, a resident of Missouri, filed a Petition for redetermination of the deficiencies in Petitioner’s name. Leda later moved to substitute parties and change the caption of the case to reflect Leda, as trustee of the trust, as the petitioner. The IRS filed a Motion to Dismiss for Lack of Jurisdiction, arguing that the petition was not filed by a personal representative of Petitioner’s estate or by some other fiduciary.
Key Issues:
(1) Whether Petitioner’s daughter has the authority under state law to litigate the Tax Court case on Petitioner’s behalf; and
(2) Whether the Tax Court has jurisdiction.
Primary Holdings:
(1) Petitioner does not currently have authority under state law to litigate the Tax Court case on Petitioner’s behalf; and
(2) The Tax Court deferred ruling on this issue to allow time for a probate action to be commenced for Petitioner’s estate and a personal representative appointed.
Key Points of Law:
A case shall be brought by and in the name of the person against whom the IRS determined the deficiency (in the case of a notice of deficiency) or liability (in the case of a notice of liability), or by and with the full descriptive name of the fiduciary entitled to institute a case on behalf of such person. See Rule 60(a); 23(a)(1).
A case timely brought shall not be dismissed on the ground that it is not properly brought on behalf of a party until a reasonable time has been allowed after objection for ratification by such party of the bringing of the case; and such ratification shall have the same effect as if the case had been properly brought by such party. See Rule 60(a).
The capacity of an individual, other than one acting in a fiduciary or other representative capacity, to engage in litigation in Tax Court shall be determined by the law of the individual’s domicile. Additionally, the capacity of a fiduciary or other representative to litigate in Tax Court shall be determined in accordance with the law of the jurisdiction from which such person’s authority is derived. See Rule 60(c).
The person who claims he or she is authorized to act on behalf of a taxpayer has the burden of providing that he or she is so authorized. See Fehrs v. Comm’r, 65 T.C. 346, 349 (1975).
Insight: Sander highlights the procedural mechanism under Rule 60 of the Tax Court’s Rules of Practice and Procedure. Petitioner’s daughter attempted to act on behalf of Petitioner in filing the Tax Court petition. Rule 60 defers to state law in determining whether a given party has capacity to engage in litigation in Tax Court. Here, the Tax Court found that Florida law required that a personal representative be appointed by a state court, and Petitioner’s daughter did not meet this requirement. Notably, the Court did not immediately dismiss the case for lack of jurisdiction (despite the IRS’s request) and provided additional time (six months) to allow the Petitioner to remedy the personal representative issue, pursuant to Rule 60(a).
