The opinion of the court was delivered by: Slomsky, J.
This case involves a decedent's estate seeking a refund from the United States of America for a penalty imposed and collected by the Internal Revenue Service ("IRS") for late payment of an estate tax. Plaintiff, The Estate of John R.H. Thouron, Charles H. Norris, Executor ("Plaintiff"), seeks a refund of the tax penalty totaling $999,072.00 plus interest. (Doc. No. 1 ¶¶ 9, 10.) The Complaint alleges that the Estate of Thouron (the "Estate" or "Taxpayer") had reasonable cause for failing to timely pay the tax, which would justify not imposing the penalty, and that the IRS abused its discretion in denying the request for an abatement of the penalty imposed. (Doc. No. 1 at 6-10.) On April 24, 2012 Defendant, the United States of America ("Defendant"), in furtherance of its position that the argument of Plaintiff is without merit and that the tax penalty was properly imposed, filed a Motion for Summary Judgment (Doc. No. 20.) Defendant's Motion and Plaintiff's Response are now ripe for disposition.*fn1 For reasons that follow, the Motion for Summary Judgment will be granted.
On February 6, 2007, John R. H. Thouron ("Thouron") died at age ninety-nine. (Doc. No. 1 ¶ 1.) Thouron was predeceased by his wife and only child and was survived by two grandchildren who were not familiar with his financial affairs. (Id. at ¶¶ 12-14.) Charles H. Norris ("Norris") was appointed in Thouron's Last Will and Testament, dated October 4, 2005, as the personal representative of the Estate upon Thouron's death. (Id. at ¶ 3.) Norris retained attorney Cecil D. Smith ("Smith") of Cecil Smith & Associates, P.C. to provide legal services regarding tax compliance of the Estate. (Id. at ¶¶ 16-18.)
Under 26 U.S.C. § 6075, the Estate was required to file a Federal
Estate and Gift Tax Return ("Form 706") and pay the tax by November 6,
2007, nine months after Thouron's death. (Id. at ¶ 20.) On November 6,
2007, Taxpayer, apparently relying on Smith's advice, filed an
Application for Extension of Time to File a Return and/or Pay U.S.
Estate (and Generation-Skipping Transfer) Taxes, Form 4768,*fn2
requesting only an extension of time to file the federal
estate tax return. (Id. at ¶¶ 26, 30.) That same day, Taxpayer paid
$6.5 million in taxes, which is approximately one-third of the total tax liability ultimately owed
by the Estate. (Id. at ¶¶ 26, 30; Doc. No. 20-1, 2.) The $6.5 million
payment by the Estate was allegedly calculated by Smith under the
assumption that certain assets would qualify for treatment under
Section 6166 of the Internal Revenue Code (the "Code"), a provision
covering the deferral of taxes. (Doc. No. 25 at ¶¶ 5-7.) The Estate
did not file a request for an extension of time to pay the estate tax
when it requested an extension of time to file the tax return. (Doc.
No. 1 at ¶¶ 26, 30.) Plaintiff avers that Smith advised the Estate
that the form for an extension of time to pay the tax was not due on
November 6, 2007, but rather was due when the tax return was filed.
(Id. at ¶¶ 27-28; Doc. No. 25 at ¶ 17.)
On May 5, 2008,*fn3 the Estate filed its Form 706 estate tax return. (Doc. No. 1 at ¶ 32.) That same day, the Estate submitted Form 4768 requesting, for the first time, an extension of time to pay the estate tax under Code Section 6161. (Id. at ¶ 32 and Ex. B.) The IRS denied the Estate's request for additional time to pay the tax as untimely. (Doc. No. 25 at ¶¶ 25-26.) On October 6, 2008, Taxpayer received notice that the IRS imposed a late-payment penalty on the Estate for failure to timely pay the tax. (Doc. No. 1 at ¶ 33.) The Estate unsuccessfully appealed the penalty through the administrative process of the IRS. (Id. at ¶¶ 34-37.) As a result, on July 1, 2010, the Estate executed Form 890, the Estate Tax Waiver of Restrictions on Assessment and Collection of Deficiency and Acceptance of Overassessment, which is the form used to resolve all remaining issues with the IRS. (Id. at ¶¶ 39-40.) Thereafter, on August 23, 2010, Taxpayer paid all amounts due, including the penalty, and interest accrued on the penalty, to the date of payment. (Id.) On November 22, 2010, the Estate filed Form 843 seeking a refund and requesting an abatement of the $999,072.00 penalty plus interest. (Id. at ¶ 43.) Taxpayer did not receive a decision on the request for the refund and on June 22, 2011 filed the Complaint in this action. (Id. at ¶ 44.)
Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). In reaching this decision, the court must determine "whether the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits show that there is no genuine issue of material fact and whether the moving party is therefore entitled to judgment as a matter of law." Macfarlan v. Ivy Hill SNF, LLC., 675 F.3d 266, 271 (3d Cir. 2012) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)). A disputed issue is "genuine" only if there is a sufficient evidentiary basis on which a reasonable jury could find for the non-moving party. Kaucher v. Cnty. of Bucks, 455 F.3d 418, 423 (3d Cir. 2006) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). A factual dispute is "material" only if it might affect the outcome of the suit under governing law. Doe v. Luzerne Cnty., 660 F.3d 169, 175 (3d Cir. 2011) (citing Gray v. York Papers, Inc., 957 F.2d 1070, 1078 (3d Cir. 1992)). The Court's task is not to resolve disputed issues of fact, but to determine whether there exist any factual issues to be tried. Anderson, 477 U.S. at 247-49.
In deciding a motion for summary judgment, the Court must view the evidence in the light most favorable to the non-moving party. Macfarlan, 675 F.3d at 271; Bouriez v. Carnegie Mellon Univ., 585 F.3d 765, 770 (3d Cir. 2009). Whenever a factual issue arises which cannot be resolved without a credibility determination, at this stage the Court must credit the non-moving party's evidence over that presented by the moving party. Anderson, 477 U.S. at 255.
If there is no factual issue and if only one reasonable conclusion could arise from the record regarding the potential outcome under the governing law, summary judgment must be awarded in favor of the moving party. Id. at 250.
Defendant seeks summary judgment in its favor on Plaintiff's claim that Taxpayer is entitled to a refund of the penalty it paid, totaling $999,072.00, plus the interest also paid. In response, Plaintiff argues that Defendant is not entitled to summary judgment. For reasons set forth below, the Court will grant the Motion.
A.Applicable Code and Regulation Provisions
The Code governs the time to file an estate tax return and pay the estate tax. The provision governing the timing for filing an estate tax return provides:
(a) Estate tax returns. Returns made under section 6018(a) (relating to estate taxes) shall be filed within 9 months after ...