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Estate Tax - IRS challenge

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dyuan

Member
What is the name of your state (only U.S. law)? California

My parents opened a joint account with Merrill Lynch 25 yrs ago. My dad passed away in 2008 and unfortunately my parents did not do anything with that account before my dad passed away.

IRS is now demanding estate tax on the whole account, instead of 50%.
I would think that my mom is still living. Her half of the account should not be subject to the estate tax. IRS said my mom needs to proof that half of the account was from funds deposited from her. My dad is the sole provider of the family and my mom was a house wife, so I believe all of the funds were from my dad. Nonetheless, it is still a joint account, so should be taxed at 50%. Do we have a case on this?


DavidWhat is the name of your state (only U.S. law)?
 


curb1

Senior Member
Was this a first marriage for both your mom and dad? How was the account titled? How much was in the account when dad died?
 

nextwife

Senior Member
By rights, if they held the account jointly, it is possible the entire account should have been transferable to mom when dad died, DEPENDING on how it was set up. Was there a probate attorney who handled dad's estate? Go back to them and consult on this matter. If it was a marital asset, the salary source should not matter, as dad's income was marital income and mom had a right to 50% of it whether she worked or not.. Again, you should speak to dad's prpobate attorney. And they should have transferred the account back then.
 

dyuan

Member
Was this a first marriage for both your mom and dad? How was the account titled? How much was in the account when dad died?
This was their first marriage for both mom and dad.

I just found out that the account was titled as: Mr. XXXX and Mrs. XXXX JTWROS. I assume the JTWROS means Joint Tenancy With Right of Suvivorship.

The account had about $600K at that time.

My parent's CPA filed a IRS Form 706-NA Estate Tax and paid half of the estate tax due, but now I am thinking whether that was necessary, if they have the JTWROS set up on the account.

IRS attorney is challenging our claim and demand we pay estate tax on all the value of the account. I am thinking IRS may not know about the JTWROS on the account.


David
 

tranquility

Senior Member
The IRS challenging an estate is not an average thing and is not something you can solve over the internet. Lots of facts need to be gathered and it is likely there will be some research on the law needed to be done. The executor/trustee responsible for the return needs to retain a tax professional for assistance.

I guarantee you there is no way mom is going to send a note to the IRS listing how the account was titled and they'll say, "Sorry, our bad." Estate tax returns go to a special place at the IRS with experienced agents and which is thick with attorneys.
 

xylene

Senior Member
Why does your mom owe estate tax on a 600k account?

There must have been other items to the estate.

Your mom needs a lawyer, there is just no way around this.

Everything sound be checked, it is likely other aspects of the estate may have been mishandled, because estate tax threshold or not, 600k of funds is not a trivial amount of money to have just 'oops' on in the probate as to its true status.
 

curb1

Senior Member
I think you should call the IRS to the phone number on the letter from them. I have had 100 percent success in dealing with the IRS when I get to the "right" person. Very often, this kind of a situation can be cleared with a little effort.

As questioned above, either there is a simple misunderstanding or there is much more to this situation.

What does "parent's CPA" say about this when asked? You have asked, right?
 

tranquility

Senior Member
Do NOT do this. While the IRS is very cooperative and many simple errors occur and can be cleared up with individual tax returns, estate tax returns are very different. The answer needs to be precise and correct or you may never be able to change things. (On a minor, but important note, only the executor/trustee/signer of the return [Or, one with their POA.] will be able to talk with the IRS on the matter.)

The letter was not simply generated by a computer and all which needs to be done is to clear up a misunderstanding. The return was reviewed by an experienced agent who probably had to get approval from a staff attorney before the letter was sent. There were serious people who have sound knowledge of the law who gathered the information to question the tax return.

Get a professional.
 

davew128

Senior Member
I think you should call the IRS to the phone number on the letter from them. I have had 100 percent success in dealing with the IRS when I get to the "right" person. Very often, this kind of a situation can be cleared with a little effort.
Do you also advertise how some of your clients can get tax debt relief for pennies on the dollar?
 

curb1

Senior Member
Given the information that has been presented by the OP I think this could be solved fairly easily. If there is more to the story than has been presented, then it will be different. On a letter from the IRS such as this there is usually a contact person. If the original poster has represented this situation accurately, it should not be difficult. Again, in 35 years of business I have had zero problems dealing with the IRS.

I am interested in the reply from "parent's CPA". From information presented this CPA is not doing his/her job. That is why I suspect there is more to the story.
 

tranquility

Senior Member
Given the information that has been presented by the OP I think this could be solved fairly easily.
The IRS has access to the titling of the account, that's one reason why the return is being questioned. I think that if we're talking about the estate tax on a $600K account, I think that thinking anything here will be fairly easy is not correct. Especially when an IRS attorney is already involved.

Estate tax returns and their review do not equal personal income tax. The kinds of mistakes which computer generated letters in the personal income tax arena try to correct is very different from questions regarding estate tax. Also, with a personal income tax agent, mistakes are often made just from a lack of experience and/or knowledge of tax law. That is not the case here. Here, a guy with a lot more knowledge of the facts than anyone here and a lot more training and experience in estate tax law than most here is asking for:
IRS said my mom needs to proof that half of the account was from funds deposited from her.
Now, I don't know exactly why. But, I do know it is not some random request which won't prove anything useful which can often come from a less experienced agent. Even if the OP is in error about the letter writer being an attorney, it still comes from a very experienced agent. That attorney or agent has knowledge of the amount in the account and the titling and asked the question for a reason. Even from what we know, it is almost assured there is "more to the story".

That "more" will involve a tax bill for (depending on the facts) of what, over $150K or so? There may be accusations of fiduciary breach by the executor/trustee and malpractice by the CPA. Calling the nice man on the letter is not going to solve anything and may have the caller make representations which will be difficult to back away from.
 

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