By Fredrick P. Niemann, Esq. of Hanlon Niemann, a Freehold, NJ Estate Administration and Probate Lawyer

I have never really given much thought to the title of this blog. If I had, I would have probably answered the question yes, but apparently at least one estate thought not, and took the issue to the Tax Court.

In the article linked to this blog, the facts state that the decedent died before filing his income tax return for the prior calendar year. Once the return was prepared and filed but after his death, it showed the decedent was due a refund of $429,315. A smaller refund was also later determined to be due for the short year of the decedent’s death.

The decedent’s estate did not include the refund amounts on the estate tax return. The estate argued that the overpayment as of the date of death was not a property interest of the decedent – it was only a mere possibility or expectancy which would not be a property interest under applicable state law. It argued that there is no property interest until the refund has been declared by the Government.

The Tax Court determined that there were other cases acknowledging that tax refunds are part of the gross estate. Further, it noted that the IRS by law “shall” refund any balance due to the taxpayer – this mandatory obligation was clearly relevant. Thus, it included the refunds in the gross estate.

The Tax Court did note that if the refund could be subject to offset by the IRS for other tax liabilities of the decedent (i.e., other unpaid taxes to the federal, state and/or local governments), then case law would permit excluding the refund. That was not the case here, however.

I invite you to read this article. It’s a quick read.

To discuss your Estate Administration and Probate matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing consultations if you are unable to come to our office.