Monday, February 22, 2016

Trustee Liable for Trust's Taxes After Rendering it Insolvent

In United States v. Read, 2016 WL 310721 (D. Conn. Jan. 26, 2016) (slip copy), a U.S. district court held that a trustee was personally liable for unpaid income taxes owed by the trust, under 31 USC 3713.

The statute provides as follows:

  1. A claim of the United States Government shall be paid first when…
    (B) the estate of a deceased debtor, in the custody of the executor or administrator, is not enough to pay all debts of the debtor.
    (b) A representative of a person or an estate (except a trustee acting under title 11) paying any part of a debt of the person or estate before paying a claim of the Government is liable to the extent of the payment for unpaid claims of the Government.
    Here, the trustee distributed assets of the trust while the trust was insolvent and he knew or had "notice of facts that would lead a reasonably prudent person to inquire as to the existence of the debt" owed to the United States, and so is liable to the IRS for the unpaid taxes.

Thursday, February 4, 2016

The Right of Taxpayers to be Informed

Recently the IRS published FS-2016-7

In 2014, the Internal Revenue Service adopted a Taxpayer Bill of Rights (TBOR) that has become a cornerstone document to provide the nation's taxpayers a better understanding of their fundamental rights when dealing with the agency.

Not only has the IRS highlighted these 10 rights for taxpayers, they have also been shared extensively on a continuing basis with IRS employees since then. The TBOR adopted by the IRS in 2014 includes the same 10 fundamental rights that were placed by Congress in the Internal Revenue Code (IRC) in late 2015. IRC section 7803(a)(3) now requires the IRS Commissioner to ensure that IRS employees are familiar with and act in accordance with the 10 fundamental rights that make up the TBOR.

The TBOR takes the multiple existing rights embedded in the tax code and groups them into 10 categories, making them easier to find, understand and use. A list of your rights as a taxpayer and IRS obligations to protect them can be found in IRS Publication 1, Your Rights as a Taxpayer.

It includes -The Right to Be Informed.

Taxpayers have the right to know what they need to do to comply with the tax laws. They are entitled to clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices and correspondence. They have the right to be informed of IRS decisions about their tax accounts and to receive clear explanations of the outcomes.

What you can expect:

  • Certain notices must include the amount (if any) of the tax, interest, and certain penalties you owe and must explain why you owe these amounts.
  • When the IRS fully or partially disallows your claim for refund, it must explain the specific reasons why.
  • Help with Understanding Your IRS Notice or Letter is available online at
  • If the IRS proposes to assess tax against you, it must provide you in its initial letter, which allows for review by an independent Office of Appeals, an explanation of the entire process from examination (audit) through collection, and explain that the Taxpayer Advocate Service may be able to assist you.
  • If you enter into a payment plan, known as an installment agreement, the IRS must send you an annual statement that provides how much you owe at the beginning of the year, how much you paid during the year, and how much you still owe at the end of the year.
  • You can access current and prior year IRS forms and publications at or have hard copies mailed by calling toll-free 800-829-3676.

In addition to the Taxpayers Bill of Rights, the IRS is committed to ensuring that your civil rights are also protected. Taxpayers are not subjected to discrimination based on race, color, national origin, reprisal, disability, age, sex (including sexual orientation and pregnancy discrimination), religion, or parental status in programs or services conducted by the IRS or on its behalf. If a taxpayer believes he or she has been discriminated against, a written complaint can be emailed to or mailed to the IRS Civil Rights Division.

The ten taxpayer rights are as follows:

1. The right to be informed

2. The right to quality service

3. The right to pay no more than the correct amount of tax

4. The right to challenge the IRS's position and be heard

5. The right to appeal an IRS decision in an independent form

6. The right to finality

7. The right to privacy

8. The right to confidentiality

9. The right to retain representation

10. The right to a fair and just tax system.




Wednesday, February 3, 2016


Section 1014(f) provides rules requiring that the basis of certain property acquired from a decedent, as determined under section 1014, may not exceed the value of that property as finally determined for federal estate tax purposes, or if not finally determined, the value of that property as reported on a statement made under section 6035.

Section 6035 imposes new reporting requirements with regard to the value of property included in a decedent's gross estate for federal estate tax purposes.

Section 6035(a)(1) provides that the executor of any estate required to file a return under section 6018(a) must furnish, both to the Secretary and the person acquiring any interest in property included in the decedent's gross estate for federal estate tax purposes, a statement identifying the value of each interest in such property as reported on such return and such other information with respect to such interest as the Secretary may prescribe.
Section 6035(a)(2) provides that each person required to file a return under section 6018(b) must furnish, both to the Secretary and each other person who holds a legal or beneficial interest in the property to which such return relates, a statement identifying the information described in section 6035(a)(1).

Section 6035(a)(3)(A) provides that each statement required to be furnished under section 6035(a)(1) or (a)(2) shall be furnished at such time as the Secretary may prescribe, but in no case at a time later than the earlier of (i) the date which is 30 days after the date on which the return under ection 6018 was required to be filed (including extensions, if any) or (ii) the date which is 30 days after the date such return is filed.

Section 6035(b) authorizes the Secretary to prescribe such regulations as necessary to carry out section 6035. Section 7805(a) provides generally that the Secretary shall prescribe all needful rules and regulations for the enforcement of this title, including all rules and regulations as may be necessary by reason of any alteration of law in relation to internal revenue. Section 7805(b)(2) provides that regulations may apply retroactively if they are issued within 18 months of the date of the enactment of the statutory provision to which they relate.

Section 6081(a) provides that the Secretary may grant a reasonable extension of time for filing any return, declaration, statement, or other document required by this title or by regulations. Except in the case of taxpayers who are abroad, no such extension shall be for more than 6 months.
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For statements required under sections 6035(a)(1) and (a)(2) to be filed with the IRS or furnished to a beneficiary before February 29, 2016, the due date under section 6035(a)(3) is delayed to February 29, 2016