Today NTUF’s Taxpayer Defense Center (TDC) filed a brief asking the U.S. Supreme Court to accept an appeal to halt the IRS from reopening closed estates to seek additional estate taxes, and stop one federal court from gutting the age-old rule that ambiguous tax laws should be resolved in favor of the taxpayer.
The case involves Madeline Pickens and the trust her husband set up before he died. Ms. Pickens received some money, with the rest going into a trust run by her husband’s son from another marriage. Unfortunately, the trustee failed to pay owed taxes to the government. Now the IRS is looking for any deep pockets it can find to pay the trust’s taxes–by going after Ms. Pickens 15 years after her husband’s death.
This is outrageous. She, of course, challenged the tax statute that the government used against her in federal court. But even more egregious than the IRS’s money grab was that the Ninth Circuit upheld it. In so doing, the Ninth Circuit rejected the long-established rule that ambiguities in tax statutes should be construed in favor of the taxpayer. As our brief details, the Ninth Circuit's decision stands against the Federal, Fifth, Sixth, Seventh, Eighth, Tenth, and Eleventh Circuits, and is at odds with how forty-nine state supreme courts (and the District of Columbia Court of Appeals) handle such matters. This is untenable for the future of tax litigation. The TDC gathered the relevant case law to support just how extreme the Ninth Circuit’s ruling was in Ms. Pickens’ case.
On the merits, resolution of this case is important to many taxpayers. Living trusts, such as the one at issue here, are a common method of assuring assets go where a decedent wants. More importantly, every taxpayer has a right to know when their liability to the government will end. Fifteen years is extreme, but this will only get worse if the Ninth Circuit’s decision stands. Taxpayers everywhere of almost every income level should worry that the IRS will go after their spouse, kids, or other relatives years after they’ve passed.
Ben Franklin said that “nothing is certain except death and taxes”—especially, maybe, taxes payable on death. Therefore, we urged that the Supreme Court grant review of Ms. Pickens’ case and reject the government’s money grab.