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United States v. Kohls

United States District Court, S.D. Ohio, Western Division

January 2, 2020

UNITED STATES OF AMERICA, Plaintiff,
v.
DOUGLAS M. KOHLS, individually and in his capacity as Executor of the Estate of Corwin J. Kohls, Deceased, Defendant.

         DECISION AND ENTRY SUSTAINING MOTION FOR SUMMARY JUDGMENT OF PLAINTIFF (DOC. #7} AND OVERRULING MOTION FOR SUMMARY JUDGMENT OF DEFENDANT (DOC. #8); JUDGMENT TO ENTER IN FAVOR OF PLAINTIFF AND AGAINST DEFENDANT INDIVIDUALLY AND IN HIS CAPACITY AS EXECUTOR OF THE ESTATE OF CORWIN J. KOHLS IN THE AMOUNT OF $322, 875.43, PLUS STATUTORY ADDITIONS FROM AND AFTER MAY 8, 2018, INCLUDING INTEREST, PURSUANT TO 26 U.S.C. §§ 6601, 6621, 6622, AND 28 U.S.C. § 1961(C), FOR UNPAID FEDERAL ESTATE TAXES (FORM 706); TERMINATION ENTRY

          WALTER H. RICE, UNITED STATES DISTRICT JUDGE

         This matter is before the Court pursuant to a Motion for Summary Judgment ("Motion") filed by Plaintiff, United States of America ("United States" or "Plaintiff"), against Defendant, Douglas M. Kohls, in his individual capacity and in his fiduciary role as the executor of the estate of his father, Corwin J. Kohls, deceased. Doc. #7. The United States seeks judgment against Defendant on three claims alleged in its Complaint. Two of the claims are asserted against Defendant individually and one of the claims is asserted against him as the executor of his father's estate. Defendant filed no response to Plaintiff's Motion.

         Defendant has also filed a Motion for Summary Judgment, Doc. #8, asserting that the claims alleged against him, individually and as executor, are time-barred pursuant to 26 U.S.C. § 6502. The United States filed a response to Defendant's motion. Doc. #9.

         I. Background

         Corwin J. Kohls died testate on September 10, 2001. On September 12, 2001, Douglas M. Kohls, his son, opened an estate in the Common Pleas Court of Montgomery County, Ohio, Probate Division ("Probate Court") and was named the executor. Estate of Corwin J. Kohls, 2001 EST 336607, Montgomery County Common Pleas Court, Probate Division ("Estate"). Following an extension, the Estate filed its Form 706, United States Estate (and Generation Skipping Transfer) Tax Return ("706 Return"), with the Internal Revenue Service ("IRS") on December 10, 2002. Doc. # 8, PAGEID#176. As a result of prior payments to the IRS, the 706 Return, signed by the executor, showed an overpayment in the amount of $7, 520.00.[1]

         Approximately one month later, on or about January 16, 2003, the IRS opened up an audit of the 706 Return.

         In March of 2004, the Estate filed a report with the Probate Court. The report, signed by the executor, stated that the administration needed to be continued "until a determination is made by the Internal Revenue Service regarding a family-owned business interest deduction on the federal estate tax return ... the Internal Revenue Service has not completed the review of the tax return." Doc. #7-3, PAGEID#1325. On November 19, 2004, the Estate, through the executor, transferred Estate property, located at 1535 Willamet Road, in Kettering, Ohio (the "Willamet Road Property"), to Defendant in his individual capacity. The property had a net equity, as of the September 10, 2001, date of death, of $182, 747. The Estate received no money for this transfer. Doc. # 7-3, PAGEID##113-1144.

         In December 2004, the Estate filed another report with the Probate Court in which the executor stated that "he had been unable to distribute the assets and finalize the administration of the estate due to the.. . protracted review of Form 706" Doc. #7-3, PAGEID#133. The December report again referenced the "family-owned business deduction" and stated this time that "if the deduction is not approved, additional assets will have to be sold to pay any additional federal estate tax that may be due." Id.

         The IRS audit of the 706 Return was completed and, on or about May 27, 2005, the executor signed a Form 890, Waiver of Restriction on Assessment and Collection of Deficiency and Acceptance of Overassessment - Estate Gift and Generation Skipping Transfer Tax ("Assessment Waiver"). In the Assessment Waiver, the executor consented to the immediate assessment and the collection of a $199, 077 estate tax deficiency. On that same date, the executor also signed a Form 4768, Application for Extension of Time to File a Return and/or Pay U.S. Estate (and Generation Skipping Transfer) -Taxes" ("Application for Extension"). Pursuant to 26 U.S.C. § 6161(b)(2). The IRS granted the Estate a one-year extension for payment so that the federal estate tax of $199, 077, plus interest, was now due on or before May 27, 2006.

         Pursuant to 26 U.S.C. § 6203, on July 4, 2005, the IRS made an assessment against the Estate of the $199, 077 estate tax deficiency. Doc. #7-2, PAGEID##49-50; Doc. #7-1, PAGEID#35.

         On August 12, 2005, and October 12, 2005, the Estate, through the executor, transferred two properties for no consideration. Specifically, on August 12, 2005, the Estate transferred property located at 8305-8311 Woodgrove Drive in Centerville, Ohio, ("Woodgrove Drive Property") to Defendant's sister, Cynthia L. Rogers. On October 12, 2005, property in the Estate located at 4627-4629 Far Hills Avenue, Kettering, Ohio, ("Far Hills Avenue Property") was transferred to Defendant individually. Using the date of death values and subtracting the mortgages, the net equity of the Woodgrove Drive Property was $53, 439 and the net equity of the Far Hills Avenue Property was $571, 001. Doc. #7-1, PAGEID#37.

         On May 27, 2006, the executor signed a second Application for Extension seeking another one-year extension to pay the Estate's taxes. This extension was also granted and payment of the tax deficiency was extended until May 27, 2007.

         Although the federal tax deficiency was unpaid, the Estate was closed in February 2007. On May 27, 2007, the third and final Application for Extension was signed by the executor and granted by the IRS. As a result, payment of the Estate's tax and interest was due on May 27, 2008, As of May 8, 2018, the amount of the Estate's federal estate tax liabilities, "taking into account the assessments of taxes, penalties and ...


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