Dispute whether the transaction was a gift or a contract. In Pratte vs. Bardwell (D. Ariz. No. CV-19-00239-PHX-GMS, August 4, 2021), the plaintiff, Ronald Pratte, sued his former friend and employee, Jeffrey Bardwell, alleging breach of contract, promissory estoppel and unjust enrichment . The dispute arose out of a transaction at an airport in Las Vegas. Five years after they met and became friends, Ronald met Jeffrey and four other people at the Las Vegas airport and handed them each a check for $ 2 million and told them he would transfer them. also real estate and told them they should start a home. construction company. However, Ronald alleges that in exchange for the check, Jeffrey agreed to work for him until Ronald’s death. Jeffrey disagreed and claimed the transaction was a giveaway, and no such promises were made.

Ronald paid tax on gifts related to the transaction. The court ruled that there were clearly questions of material fact to be resolved on the alleged breach of contract and promissory estoppel because the two parties presented different characterizations of the same event. Further, the court explained that the unjust enrichment claim depended on determining the issue of the contract, so no decision could be made. Finally, the court ruled that Ronald could not make a claim for the taxes paid on Jeffrey’s behalf because the responsibility for the gift tax is his alone, as the donor. In addition, he would not have had to pay any gift tax if there had been a contract drawn up, as he claimed.

Due to the contentious nature of the transaction, the court dismissed the summary judgment motions from both parties.

• The estate requests reimbursement of the penalties imposed in the event of a late declaration.-In Leighton v. United States (unpublished, Court of Federal Claims (August 9, 2021)), the executor of a deceased’s estate has requested reimbursement of penalties imposed by the Internal Revenue Service for late payment penalties and interest. The deceased’s son was the executor of the estate and worked with a lawyer, family office and accounting firm. The attorney informed the executor that an estate declaration only had to be filed if the estate’s value exceeded the deposit threshold of $ 5.49 million. The family office asked the accounting firm to fill out a questionnaire, and after a review, the entire team concluded that the estate was worth between $ 1 million and $ 2 million and it was not needed. to file a return. The team worked together throughout the administration of the estate and had a good working relationship.

Two years after the death of the deceased, the son of the deceased mentions to the prosecutor the existence of certain irrevocable trusts. The lawyer checked with the accountant and learned that a donation tax return had been filed in 2012. Taking into account the value of the lifetime gifts, the value of the estate now exceeded the threshold of. filing, and a federal estate tax return should have been filed (and tax was due). The estate filed the return and paid the tax, penalties and interest.

The estate then filed a request for reimbursement of the penalty. The IRS denied the refund request and the estate appealed. The estate claimed that his failure to file was due to reasonable cause, not willful negligence. The United States has decided to reject the allegations that counsel’s advice was unreasonable, that the executor remained responsible for filing the return on time, and that the unavailability of the donation tax return from 2012 was unreasonable.

Article 301.6651-1 (c) (1) of the Treasury Regulations provides that: [or pay the tax] within the prescribed period, the delay is due to a reasonable cause.

The court said:

As a general rule, a taxpayer can establish reasonable cause for failing to file a return in a timely manner in order to avoid a penalty by reasonably relying on the advice of an accountant or lawyer, even if he is subsequently established that this advice was wrong or wrong. Thomas v. Comm’r, 82 TCM (CCH) 449 (TC 2001), 2001 WL 919858 (citing 26 USC § 6651 (a) (1)).

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Generally, a taxpayer is not required to share details with a tax preparer that a reasonably prudent taxpayer would not know; nor is the taxpayer obligated to share details that they themselves neither know nor reasonably should know are relevant. Pankratz v. Comm’r of Internal Revenue, 121 TCM (CCH) 1178 (TC 2021) (citing 26 CFR
§1.6664-4 (c) (1) (i)).

The court ruled that the taxpayer’s claim for reimbursement could not be dismissed because additional evidence was required, as the complaint alleged sufficient facts to be resolved. The question of how and why the donation tax return was not discovered should be investigated.