Robert J. Spenlinhauer, Transferee of the Estate of Georgia M. Spenlinhauer

United States Tax Court

T.C. Memo. 2025-134

ESTATE OF GEORGIA M. SPENLINHAUER, DECEASED, ROBERT

J. SPENLINHAUER, EXECUTOR,

Petitioner

v.

COMMISSIONER OF INTERNAL REVENUE,

Respondent

ROBERT J. SPENLINHAUER, TRANSFEREE OF THE ESTATE OF

GEORGIA M. SPENLINHAUER,

Petitioner

v.

COMMISSIONER OF INTERNAL REVENUE,

Respondent

__________

Docket Nos. 4998-18, 11286-18. Filed December 30, 2025.

__________

Robert J. Spenlinhauer, pro se.

Carina J. Campobasso, Nina P. Ching, Molly H. Donohue, and Daniel

P. Masciello, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

ASHFORD, Judge: In these consolidated cases the Internal

Revenue Service (IRS or respondent) determined that (1) the Estate of

Georgia M. Spenlinhauer (estate) is liable for an estate tax deficiency of

Served 12/30/25

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[*2] $3,984,344, an addition to tax pursuant to section 6651(a)(1) 1 of

$996,086, and an accuracy-related penalty pursuant to section 6662(a)

and (b)(5) of $524,520 and (2) Robert J. Spenlinhauer (petitioner) is

liable for the estate tax deficiency, the addition to tax, and the accuracy-

related penalty as a transferee pursuant to section 6901.

After concessions by the parties, 2 the issues remaining for

decision are the following:

(1) whether the estate timely elected to use an alternate

valuation date pursuant to section 2032 to value decedent’s gross estate;

(2) whether the estate may exclude $200,000 from the value of

property located at 90 and 90-A Industrial Park Road, Hingham,

Massachusetts (Hingham Property), for a qualified conservation

easement contribution;

(3) whether the fair market value of the Hingham Property was

$5,815,000 on the date of decedent’s death, rather than $3.9 million as

reported on the estate tax return;

(4) whether the fair market value of decedent’s 1% interest in

Spencer Press, Inc. (Spencer Press), was $377,000, rather than $150,000

as reported on the estate tax return;

(5) whether the value of decedent’s gross estate should include

the value of property located at 172 Old Farm Road, Milton,

Massachusetts (Milton Property), and a promissory note issued by

Parsonsfield Group, LLC (Parsonsfield);

1 Unless otherwise indicated, statutory references are to the Internal Revenue

Code, Title 26 U.S.C., in effect at all relevant times, regulation references are to the

Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and

Rule references are to the Tax Court Rules of Practice and Procedure. Some monetary

amounts are rounded to the nearest dollar.

2 By way of a Stipulation of Facts and a Partial Stipulation of Settled Issues,

the parties agree that (1) $1,500 in cash from decedent’s personal bank account and

$13,000 in decedent’s jewelry and personal effects are includible in decedent’s gross

estate; (2) the estate is not entitled to a charitable contribution deduction totaling

$200,000 for specific bequests to each of decedent’s grandchildren; and (3) the estate is

not liable for the accuracy-related penalty (which flows through to the transferee

liability asserted against petitioner). Additionally, on brief respondent conceded that

the amount paid with respect to valid expenses is $37,700 based on the amount of

expenses reported on the estate tax return less the amount that the IRS disallowed.

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[*3] (6) whether the estate is liable for tax on gifts totaling $1.08

million, rather than $104,000 as reported on the estate tax return;

(7) whether the estate is entitled to deductions of $5,000 for

executor’s commissions, $75,000 for attorney’s fees, $515,329 for

litigation fees to Peabody & Arnold, and $300,000 for an unsecured

letter of credit;

(8) whether the estate is liable for the addition to tax pursuant

to section 6651(a)(1) for failing to timely file an estate tax return; and

(9) whether petitioner is liable as a transferee for the estate tax

deficiency and the addition to tax.

FINDINGS OF FACT

Some of the facts are stipulated and so found. The Stipulation of

Facts and the attached Exhibits are incorporated herein by this

reference. Petitioner resided in Maine when he timely filed his Petitions

with the Court. These cases were consolidated for purposes of trial,

briefing, and opinion pursuant to Rule 141(a).

I. Background of the Estate

On February 4, 2005, petitioner’s mother, Georgia M.

Spenlinhauer (decedent), died at the age of 95. In her will she appointed

petitioner to serve as the executor and bequeathed to him the residue of

the estate. After distributing specific bequests and paying expenses,

petitioner transferred the remaining assets to himself as the residual

beneficiary under the will, including: $535,000 in cash from the proceeds

of decedent’s life insurance policy, $377,000 in cash from the conversion

of decedent’s 1% interest in Spencer Press, $1,500 in cash from

decedent’s personal bank account, $13,000 in decedent’s jewelry and

personal effects, and the Hingham Property. Except for the Hingham

Property, petitioner reported the assets to the Massachusetts Probate

and Family Court, Norfolk Division (Probate Court). The estate had no

remaining assets after the transfer, and the Probate Court closed the

case on March 28, 2009.

Petitioner requested and received an extension to May 4, 2006, to

file the estate tax return. He sought advice from his estate planning

attorney, Robert Galvin, and his accountant, David Erb, and decided not

to file the return. Mr. Erb cautioned petitioner that he did not have

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[*4] expertise in estate tax and did not file estate tax returns as part of

his practice.

On December 16, 2013, petitioner filed for bankruptcy protection

in the U.S. Bankruptcy Court for the District of Massachusetts. The

IRS contacted petitioner to initiate an examination regarding the estate

after it learned through the bankruptcy proceedings that petitioner had

not filed a tax return with respect to the estate.

On February 8, 2017, after being contacted by the IRS, petitioner,

acting as executor for the estate, filed Form 706, United States Estate

(and Generation-Skipping Transfer) Tax Return, reporting a “Total

gross estate less exclusion” of $4,385,251 (electing an alternate

valuation) 3 and “total allowable deductions” of $3,338,029. Petitioner

reported that the “Total gross estate less exclusion” consisted of the

following assets:

Asset Value at Date of Alternate Alternate Value

Decedent’s Death Valuation Date

GMS Realty Trust $4,000,000 2/5/2005 $3,900,000 4

(i.e., the Hingham

Property)

Decedent’s 1% interest 377,000 5 2007 150,000

in Spencer Press

Milton Property 225,000 Date of Death -0-

Mortgage

3 The exclusion is for a qualified conservation easement contribution and is

also an election. See § 2031(c)(1), (6).

4 In Part 5—Recapitulation of the return, petitioner reported the alternate

value of Schedule A—Real Estate as $3.9 million; however, on Schedule A he reported

the alternate value as $3.8 million. At trial petitioner testified (and contends on brief)

that the value is $3.9 million.

5 In Part 5—Recapitulation of the return, petitioner reported the date of death

value of Schedule B—Stock and Bonds as $377,000 and the alternate value as

$150,000; however, on Schedule B he reported the date of death and alternate values

as just the opposite—$150,000 and $377,000, respectively.

5

[*5]

JNF Life Insurance 535,251 6 N/A (Not 535,251

Company Policy Applicable)

Qualified 200,000 — 200,000

Conservation

Easement Exclusion

relating to the

Hingham Property

Petitioner reported that the “total allowable deductions” consisted of the

following expenses or items:

Expense Amount

Funeral Expenses $23,700

Executor’s Commissions 5,000

Attorney’s Fees 75,000

Accountant’s Fees 2,500

Peabody & Arnold Litigation Fees 515,329

Other Miscellaneous Fees 11,500

Debts of the Decedent 1,000 7

TD Bank, N.A. Secured Mortgage and TD 2,500,000 8

Bank, N.A. Unsecured Letter of Credit

Charitable Gifts and Bequests 204,000

6 In Part 5—Recapitulation of the return, petitioner reported the date of death

value of Schedule D—Insurance on the Decedent’s Life as $535,251; however, on

Schedule D he reported the date of death value as $535,251.54, thus reflecting in Part

5—Recapitulation that with respect to the value of the insurance policy he rounded

down rather than rounded up to the nearest dollar.

7 In Part 5—Recapitulation of the return, petitioner reported Schedule K—

Debts of the Decedent as $1,000; however, on Schedule K he reported the item as zero.

8 In Part 5—Recapitulation of the return, petitioner reported Schedule K—

Mortgages and Liens as $2.5 million ($2.2 million for the secured mortgage and

$300,000 for the unsecured letter of credit); however, on Schedule K he reported the

item as zero and also incorrectly reported the item on Schedule C of the return.

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[*6] A. Hingham Property

Decedent owned the Hingham Property through her revocable

trust, GMS Realty Trust. The trust terminated upon her death, and the

property was transferred through the estate to petitioner as the residual

beneficiary under decedent’s will. At the time of decedent’s death the

property was encumbered by a mortgage held by TD Bank, N.A., with a

principal amount of $2.2 million.

The Hingham Property was transferred to petitioner on or about

July 20, 2006. Before the transfer, petitioner obtained an appraisal of

the property which valued it as of May 16, 2006, at $9.48 million without

a tenant or $9.65 million with a tenant. Petitioner did not provide this

appraisal to his estate planning attorney, Mr. Galvin.

As indicated supra p. 4, on the estate tax return petitioner

reported the value of the Hingham Property on the date of decedent’s

death as $4 million. At trial, respondent presented the testimony of his

real estate appraisal expert, Michael Hart. Mr. Hart inspected the

property, examined public records, and concluded on the basis of

comparable property sales and the income produced by the property that

its value was $5,815,000 on the date of decedent’s death. The Hingham

Property was eventually sold in foreclosure in 2015.

B. 1% Interest in Spencer Press

Decedent owned a 1% interest in her family’s closely held

corporation, Spencer Press, at the time of her death. In December 2004

a competitor of Spencer Press made an offer to purchase the company

which would have resulted in petitioner’s receiving an estimated

$350,000 as his pro rata share of the purchase price through the estate.

Petitioner, acting as executor for the estate, informed the other

shareholders, his two brothers, that he would not accept the amount and

demanded $3 million for decedent’s interest. Petitioner also rejected

their subsequent offers of $500,000 and $750,000 to purchase decedent’s

interest. The other shareholders decided to move forward with the sale

through a cash-out merger and informed petitioner that the estate’s

share would be $375,000. Petitioner responded by initiating litigation

against the other shareholders disputing the sale of Spencer Press.

In Spenlinhauer v. Spencer Press, Inc., 959 N.E.2d 436 (Mass.

App. Ct. 2011), the Appeals Court of Massachusetts affirmed the

decision of the lower court to appraise decedent’s interest as a

percentage of the net sale price in proportion to her interest, or

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[*7] $361,540. As indicated supra p. 5, on the estate tax return

petitioner claimed a deduction of $515,329 for litigation fees to the law

firm Peabody & Arnold for representing him in the matter. At trial of

the instant cases petitioner produced invoices that showed he had made

payments totaling $334,700 for Peaboby & Arnold’s services between

2005 and 2010.

As indicated supra pp. 3–4, petitioner reported the value of

decedent’s 1% interest in Spencer Press to the Probate Court as

$377,000, and on the estate tax return he reported the value of

decedent’s interest on the date of her death as $377,000 and an alternate

value of $150,000.

C. Milton Property

Decedent purchased the Milton Property in 1988 to use as her

personal residence. On July 22, 1998, she conveyed the property (via a

quitclaim deed) to petitioner in exchange for a 30-year promissory note

with a stated principal amount of $460,000 and an interest rate of 7%.

Decedent and petitioner understood the purpose of the transaction was

in furtherance of decedent’s objective to dispose of all of her assets before

her death. After the conveyance, decedent continued to use the property

as her personal residence until her death.

On July 22, 2004, decedent (who was 95 years old at the time) and

petitioner amended the promissory note to increase the interest rate to

9%, amortize the principal over 30 years, and add a provision that

provided that upon decedent’s death the outstanding balance would be

canceled.

At trial petitioner asserted that he made regular payments on the

note, though he could not recall the amounts paid or the exact balance

of the note at the time of decedent’s death. Petitioner estimated that

the payments were around $1,000 per month paid quarterly, though he

presented no evidence to substantiate that any payments were made.

As indicated supra p. 4, on the estate tax return petitioner reported an

estimated balance of $225,000 on the promissory note.

Additionally at trial, respondent presented the testimony of his

expert in the valuation of promissory notes, David Levenson, and the

testimony of Mr. Hart. Mr. Levenson concluded that the fair market

value of the promissory note on the Milton Property on the date of its

execution would have been $164,581. This conclusion was based on,

among other factors and assumptions, the inclusion of the self-canceling

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[*8] provision and the assumption that petitioner made payments

pursuant to the terms of the original note (i.e., $3,080 per month). Mr.

Hart concluded that, on the basis of sales of comparable properties, the

value of the Milton Property was $510,000 on the date of the transfer

and $850,000 on the date of decedent’s death.

D. Parsonsfield Note

Petitioner formed Parsonsfield to purchase property in

Parsonsfield, Maine, from his bankruptcy estate and to prevent any of

his creditors from reaching the property to satisfy his debts. To finance

the purchase, Parsonsfield borrowed the funds from decedent and

provided a promissory note, dated January 5, 1996, with a principal

amount of $158,500. At trial petitioner asserted that either he or

Parsonsfield made payments on the note and satisfied the debt;

however, petitioner provided no documentary evidence to substantiate

that payments were made. Petitioner did not include the note in the list

of the estate’s assets reported to the Probate Court or on the estate tax

return.

E. Other Taxable Gifts

As relevant here, during her life decedent reported to the IRS

taxable gifts of $95,000 for 1986 and $985,000 for 1998; however, on the

estate tax return petitioner reported “Adjusted taxable gifts” of

$104,000.

II. Notices of Deficiency and Liability

After examination of the estate tax return, the IRS sent

petitioner, as the estate’s personal representative, a Notice of Deficiency

dated January 25, 2018. In the Notice of Deficiency, the IRS, in

pertinent part (1) disallowed the elections for a qualified conservation

easement exclusion and an alternate valuation for the Hingham

Property; (2) adjusted the values reported for the Hingham Property,

the 1% interest in Spencer Press, and the taxable gifts; (3) included in

the gross estate the value of the Milton Property and the value of the

note from Parsonsfield; (4) disallowed the deductions for executor’s

commissions, attorney’s fees, the Peabody & Arnold litigation fees, and

the TD Bank, N.A. unsecured letter of credit; and (5) determined a

section 6651(a)(1) addition to tax for failure to timely file the estate tax

return.

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[*9] On March 26, 2018, the IRS made a jeopardy assessment against

the estate pursuant to section 6861. The IRS then notified petitioner,

in a Notice of Liability dated May 8, 2018, that he was liable for the

estate’s liabilities as a transferee.

OPINION

I. Burden of Proof

Generally, the Commissioner’s determinations set forth in a

Notice of Deficiency are presumed correct, and the taxpayer bears the

burden of showing that the determinations are erroneous. Rule 142(a);

Welch v. Helvering, 290 U.S. 111, 115 (1933). Section 7491(a) provides

an exception that shifts the burden of proof to the Commissioner as to

any factual issue relevant to the taxpayer’s tax liability if the taxpayer

introduces credible evidence with respect to the issue and meets certain

other conditions. See § 7491(a)(2). Petitioner does not allege that the

burden of proof should shift to respondent pursuant to section 7491(a).

Therefore, the burden remains with petitioner to prove that the

determinations are erroneous.

The Commissioner bears the burden of production with respect to

the addition to tax pursuant to section 6651, see § 7491(c), but the

taxpayer bears the burden of proving that the Commissioner’s

determination with respect to the addition to tax should not be

sustained, see Wheeler v. Commissioner, 127 T.C. 200, 207–08 (2006),

aff’d, 521 F.3d 1289 (10th Cir. 2008).

The Commissioner bears the burden of proof as to the taxpayer’s

transferee liability, but not as to whether the taxpayer is liable for the

tax. § 6902(a); Rule 142(d).

II. Decedent’s Taxable Estate

Section 2001 imposes a tax on the transfer of a taxable estate.

The taxable estate is the value of the gross estate less applicable

deductions. § 2051. The gross estate includes the value of any property

that a decedent had an interest in at the time of her death. § 2033.

A. The Time of Death as Valuation Date

Section 2031(a) provides that the gross estate is generally valued

at the time of the decedent’s death. Section 2032 allows the executor of

an estate to elect an alternate valuation date. The executor must make

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[*10] the election on the estate tax return no later than a year after the

time prescribed by law (including extensions) for filing. § 2032(d).

Here, the estate tax return was due on May 4, 2006. Petitioner

attempted to make the election on the return filed on February 8, 2017.

Because petitioner failed to file the return within a year of the due date

(including extensions) for filing, no election may be made and the gross

estate must be valued at the time of decedent’s death. Accordingly, we

sustain the IRS’s disallowance of this late election.

B. The Hingham Property

1. Qualified Conservation Easement Exclusion

An executor of an estate with land subject to an easement may

elect to exclude the applicable percentage of the value of the land from

the gross estate pursuant to section 2031(c) if the executor makes the

election on the estate’s tax return on or before the due date (including

extensions) for filing. § 2031(c)(1), (6). Because petitioner failed to file

the estate tax return before the due date as extended, he is barred from

making this election. Accordingly, we sustain the IRS’s disallowance of

this late election. 9

2. Value of Property

The value of property included in the gross estate is the property’s

fair market value, or the price at which an exchange would occur

between a willing buyer and willing seller, neither under any

compulsion to buy or sell, and both having reasonable knowledge of the

relevant facts. Treas. Reg. § 20.2031-1(b). We have long recognized that

the value at which property is assessed for local tax purposes may not

be a reliable indicator of fair market value. See Lippincott v.

Commissioner, 27 B.T.A. 735, 740 (1933) (“We do not consider that the

amount for which the property was assessed for purposes of local

taxation is necessarily a reliable criterion to be used in estimating its

9 Alternatively, we sustain the IRS’s disallowance of the election on the

grounds that (1) as reported on the estate tax return, the Hingham Property was

encumbered by a mortgage held by TD Bank, N.A., see § 2031(c)(4) (providing that the

section 2031(c) election is not allowed with respect to land that is debt-financed

property), and (2) petitioner made no showing, as required by section 2031(c)(8), that

a conservation easement was in fact placed on the Hingham Property or that, if such

a conservation easement does encumber the property, it is a qualified conservation

contribution within the meaning of section 170(h)(1) encumbering a qualified real

property interest within the meaning of section 170(h)(2).

11

[*11] fair market value.”), rev’d on other grounds, 72 F.2d 788 (3d Cir.

1934). The regulations provide that property “shall not be returned at

the value at which it is assessed for local tax purposes unless that value

represents the fair market value as of the applicable valuation date.”

Treas. Reg. § 20.2031-1(b).

Petitioner contends that the value of the Hingham Property in

2005 was $3.9 million. In support of his position petitioner produced at

trial a June 19, 2018, email from the Assessing Technician for the Town

of Hingham, Maureen Carlson, that stated that the Hingham Property’s

assessed value for fiscal year 2005 was $3,821,400. Petitioner did not

present any evidence to demonstrate that the assessment represented

the fair market value of the property at decedent’s death. See id. The

only appraisal petitioner obtained around the time of decedent’s death

(the appraisal was as of May 2006, 15 months after decedent’s death)

valued the property at more than double the amount of the assessment

(the appraisal value was $9.48 million without a tenant or $9.65 million

with a tenant).

Respondent’s real estate appraisal expert, Mr. Hart, valued the

Hingham Property at $5,815,000 at the time of decedent’s death. Mr.

Hart based his conclusion on sales of comparable properties and the

income produced by the property. We find Mr. Hart’s testimony in this

regard credible and thus the value of the Hingham Property as of the

date of decedent’s death is $5,815,000. Accordingly, we sustain the IRS’s

inclusion of the Hingham Property in decedent’s gross estate to the

extent of this value of the property.

C. Value of Decedent’s 1% Interest in Spencer Press

Treasury Regulation § 20.2031-2(a) provides that the value of

stock is the fair market value per share on the applicable valuation date.

If there is a market for the stock, the value may be determined by

calculating the mean between the highest and lowest quoted selling

prices on or within a reasonable period before and after the valuation

date. Id. para. (b).

Petitioner contends that decedent’s 1% interest in Spencer Press

had little or no value at the time of her death. He reported the value of

the shares on that date to the Probate Court and on the estate tax return

as $377,000, but he also reported on the estate tax return an alternate

value of the shares as $150,000.

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[*12] In December 2004, before decedent’s death, Spencer Press

received an offer to purchase its shares, which would have resulted in

an estimated pro rata share of $350,000 for decedent’s interest. At the

time petitioner believed this offer was too low, and he instead countered

with a demand of $3 million. He also rejected offers from the other

shareholders of $500,000 and $750,000. When the other shareholders

decided to move forward with the sale through a cash-out merger and

petitioner was informed that the estate’s share would be $375,000, he

instituted litigation against the other shareholders disputing the sale,

allegedly spending over $500,000 in legal fees for the services of Peabody

& Arnold to represent him in the matter. Petitioner’s actions

unmistakably show that even he did not believe at the time that the

shares were worth as little as he now contends. After Spencer Press was

sold, petitioner received $377,000 for decedent’s interest. Petitioner has

not presented any evidence indicating that the shares were worth less

than what they ultimately sold for. Accordingly, we sustain the IRS’s

adjustment of the value of decedent’s 1% interest in Spencer Press.

D. Inclusion of the Milton Property in the Gross Estate

Section 2036(a)(1) provides that, except in the case of a bona fide

sale for an adequate and full consideration in money or money’s worth,

the value of the gross estate shall include any property of which the

decedent has made a transfer under which she has retained an interest

for her life or any period not ascertainable without reference to her death

or for any period which does not in fact end before her death the

possession or enjoyment of, or the right to the income from, such

transferred property. In other words, the value of transferred property

is included in the gross estate if the decedent makes an inter vivos

transfer for less than adequate and full consideration and retains an

interest or right in the property. Estate of Bongard v. Commissioner,

124 T.C. 95, 112 (2005). Property is included in the decedent’s gross

estate if she retained actual possession or enjoyment of it even if she

may not have had any enforceable right to do so. Estate of Rapelje v.

Commissioner, 73 T.C. 82, 86 (1979); Estate of Honigman v.

Commissioner, 66 T.C. 1080, 1082 (1976). The decedent retains

possession and enjoyment of the property when there is an express or

implied understanding to that effect among the parties at the time of

transfer, which may be inferred when intrafamily arrangements are

involved. Estate of Rapelje, 73 T.C. at 86. Here, there is no dispute that

decedent made an inter vivos transfer of the Milton Property to

petitioner and continued to retain possession and enjoyment of the

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[*13] property for the remainder of her life. The issue is whether

petitioner paid adequate and full consideration for the property.

Petitioner contends that the IRS improperly included the Milton

Property in decedent’s gross estate and that it was transferred to him in

a bona fide sale in which he provided a promissory note in exchange for

the property. The existence of a note or other evidence of a legally

enforceable debt is not conclusive evidence of bona fide debt, and it must

be clearly shown that the parties intended to create a debtor-creditor

relationship. Estate of Van Anda v. Commissioner, 12 T.C. 1158, 1162

(1949), aff’d per curiam, 192 F.2d 391 (2d Cir. 1951). Respondent’s

experts testified that the value of the Milton Property around the time

of the transfer was $510,000, while the value of the promissory note

would have been $164,581 if petitioner had made payments in

accordance with the note’s terms. Petitioner presented no evidence

other than his own testimony to demonstrate any payment was made

toward the debt. Petitioner’s testimony demonstrated that he was

paying far less than what was required by the terms of the note.

Petitioner also testified that the purpose of the sale was to make sure

decedent did not hold any property in her name when she died. These

facts suggest that the parties did not intend to form a debtor-creditor

relationship.

The addition of the self-canceling provision provides further

support for finding that the parties did not intend to form a debtor-

creditor relationship. A few months before her death, the note on the

Milton Property was amended to add a provision that the note would be

canceled, and the remaining debt would be forgiven, upon decedent’s

death. Self-canceling installment notes made between family members

are presumed to be gifts and not bona fide debt. Estate of Costanza v.

Commissioner, 320 F.3d 595, 597 (6th Cir. 2003) (citing Estate of

Labombarde v. Commissioner, 58 T.C. 745, 755 (1972)), rev’g T.C. Memo.

2001-128. Furthermore, the parties could not have reasonably expected

the debt would ever be paid in full, given that decedent would have

needed to live to the age of 125 for that to happen.

We find that petitioner and decedent never intended to create a

debtor-creditor relationship and decedent did not receive adequate and

full consideration for the property. Accordingly, we sustain the IRS’s

inclusion of the Milton Property in decedent’s gross estate to the extent

of the value of the property as determined by respondent’s expert, Mr.

Hart (i.e., $850,000).

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[*14] E. Inclusion of the Parsonsfield Note in the Gross Estate

Treasury Regulation § 20.2031-4 provides that the fair market

value of notes is the amount of unpaid principal, plus interest accrued

to the date of death, unless the executor establishes that the value is

lower or that the notes are worthless. Petitioner contends that he or

Parsonsfield satisfied the debt on the Parsonsfield Note held by

decedent. But petitioner failed to produce any evidence beyond his own

self-serving testimony to demonstrate that payments were made or that

the note was discharged. See Tokarski v. Commissioner, 87 T.C. 74, 77

(1986) (stating that we are not bound to accept a taxpayer’s self-serving

testimony). Accordingly, we sustain the IRS’s inclusion of the

Parsonsfield Note in decedent’s gross estate.

F. Decedent’s Taxable Gifts

The amount of adjusted taxable gifts made by a decedent after

December 31, 1976, must be included in the computation of the estate

tax. § 2001(b)(1)(B). Here, decedent made taxable gifts totaling $1.08

million and reported those gifts on Forms 706. Petitioner does not

dispute whether these gifts were made or should be included in the

computation of the estate’s tax. Accordingly, we sustain the IRS’s

adjustment of taxable gifts.

G. Estate Expenses

Section 2053(a) allows a deduction from the gross estate for

funeral expenses, administration expenses, claims against the estate,

and unpaid mortgages or indebtedness on property, the value of which

is included in the gross estate. Tax deductions are a matter of legislative

grace, and the taxpayer bears the burden of proving entitlement to any

deduction claimed. Rule 142(a); INDOPCO, Inc. v. Commissioner, 503

U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440

(1934). This burden requires the taxpayer to demonstrate that the

claimed deductions are allowable pursuant to some statutory provision

and to substantiate the expenses giving rise to the claimed deductions

by maintaining and producing adequate records that enable the

Commissioner to determine the taxpayer’s correct liability. § 6001;

Higbee v. Commissioner, 116 T.C. 438, 440 (2001).

1. Executor’s Commissions

Treasury Regulation § 20.2053-3(b) allows for the deduction of

executor’s commissions paid or reasonably expected to be paid at the

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[*15] time of filing the estate tax return. If this amount is not fixed by

court decree, the deduction is allowed to the extent the IRS is reasonably

satisfied that the commissions claimed will be paid, the amount is

allowable pursuant to the laws of the jurisdiction in which the estate is

being administered, and the amount is in accordance with the usually

accepted practice of the jurisdiction for estates of similar size and

character. Id. subpara. (1). Petitioner did not provide any evidence to

support a deduction for executor’s commissions. Accordingly, we sustain

the IRS’s disallowance of the claimed deduction for executor’s

commissions.

2. Attorney’s Fees and Peabody & Arnold Litigation

Fees

Treasury Regulation § 20.2053-3(a) limits administration

expenses to such expenses as are actually and necessarily incurred in

the administration of the decedent’s estate (i.e., in the collection of

assets, payment of debts, and distribution of property to the

beneficiaries). Expenditures not essential to the proper settlement of

the estate, but incurred for the individual benefit of the beneficiaries,

may not be deducted. Id.

The executor of the estate may deduct reasonable attorney’s fees

that have been paid or may reasonably be expected to be paid. Id. para.

(c)(1). Attorney’s fees incurred by beneficiaries incident to litigation as

to their respective interests are not deductible if the litigation is not

essential to the proper settlement of the estate. Id. subpara. (3).

In the estate tax return petitioner reported $75,000 in attorney’s

fees and $515,329 in litigation fees to Peabody & Arnold. Petitioner

failed to provide any substantiation for the reported $75,000. While

petitioner provided some evidence that he incurred litigation fees from

Peabody & Arnold and paid a portion of those fees, the litigation was not

necessary for the proper settlement of the estate. The price at which

decedent’s 1% interest in Spencer Press would eventually sell could have

only benefited petitioner. Accordingly, we sustain the IRS’s

disallowance of the claimed deduction for both the attorney’s fees and

the Peabody & Arnold litigation fees.

3. Unsecured Letter of Credit

Treasury Regulation §§ 20.2053-1(a)(1)(iv) and 20.2053-7 provide

that a deduction is allowed from a decedent’s gross estate for any unpaid

mortgages upon, or indebtedness in respect of, property included in the

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[*16] gross estate. Petitioner contends that the claimed deduction for

the $300,000 unsecured letter of credit is proper. Petitioner provided no

evidence to support his contention or demonstrate that the letter of

credit is related to the Hingham Property. Accordingly, we sustain the

IRS’s disallowance of the claimed deduction for the unsecured letter of

credit.

III. Section 6651(a)(1) Addition to Tax

Section 6651(a)(1) authorizes the imposition of an addition to tax

for a taxpayer’s failure to file a required tax return on or before the

specified filing date, including extensions. The Commissioner bears the

burden of production with respect to the addition to tax, but the

taxpayer bears the burden of proving that the determination with

respect to the addition to tax is incorrect. See § 7491(c); Wheeler, 127

T.C. at 207–08. The Commissioner satisfies his burden of production by

providing sufficient evidence to show that the taxpayer filed the

required tax return late. Higbee, 116 T.C. at 447. Here, the estate tax

return was due by May 4, 2006; however, the return was not filed until

February 8, 2017, nearly 11 years after the extended deadline to file.

Respondent has met his burden of production with respect to the

addition to tax.

Application of the section 6651(a)(1) addition to tax may be

avoided if the taxpayer shows that the failure to timely file was due to

reasonable cause and not due to willful neglect. Petitioner does not

claim nor does the record support a finding that the failure to timely file

was due to reasonable cause. Even if petitioner’s accountant, Mr. Erb,

advised petitioner that no estate tax return was due and petitioner

relied on that advice, it was not reasonable because Mr. Erb cautioned

petitioner that he did not have expertise in estate tax and did not file

estate tax returns as part of his practice. Further, petitioner failed to

provide all necessary and accurate information to him (i.e., the 2006

Hingham Property appraisal). See Neonatology Assocs., P.A. v.

Commissioner, 115 T.C. 43, 98–99 (2000), aff’d, 299 F.3d 221 (3d Cir.

2002). Accordingly, we sustain the addition to tax under section

6651(a)(1) against petitioner.

IV. Transferee Liability

Section 6901 provides that the IRS may assess and collect unpaid

estate tax from the transferee of a decedent’s property, including donees,

heirs, devisees, and distibutees. See § 6901(a), (h). Section 6901 does

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[*17] not independently impose tax liability but provides the procedure

through which the IRS may collect from a transferee if a basis exists

under applicable state law or equity principles for holding the transferee

liable for the transferor’s debts. Commissioner v. Stern, 357 U.S. 39, 42–

45 (1958) (analyzing the predecessor statute); Frank Sawyer Tr. of May

1992 v. Commissioner, 712 F.3d 597, 602–03 (1st Cir. 2013), rev’g T.C.

Memo. 2011-298. Thus, the IRS is placed in “precisely the same position

as that of ordinary creditors under state law.” Starnes v. Commissioner,

680 F.3d 417, 429 (4th Cir. 2012), aff’g T.C. Memo. 2011-63. As indicated

supra p. 9, respondent bears the burden of proof to show that petitioner

is liable as a transferee of the transferor’s property. See § 6902(a);

Schussel v. Werfel, 758 F.3d 82, 87 (1st Cir. 2014), aff’g in part, rev’g in

part T.C. Memo. 2013-32.

The applicable state law is the law of the state in which the

transfer occurred. Commissioner v. Stern, 357 U.S. at 45. Here, because

the transfers occurred in Massachusetts, its law applies. Under the

Massachusetts Uniform Fraudulent Transfer Act (MUFTA), creditors

may seek to recover a debt from a transferee of a debtor in cases where

there is actual or constructive fraud. Mass. Gen. Laws ch. 109A, § 8

(1996). Section 6(a) of MUFTA provides:

A transfer made . . . by a debtor is fraudulent as to a

creditor whose claim arose before the transfer was made

. . . if the debtor made the transfer . . . without receiving a

reasonably equivalent value in exchange for the transfer

. . . and the debtor was insolvent at that time or the debtor

became insolvent as a result of the transfer . . . .

A claim is “a right to payment, whether or not the right is reduced to

judgment, liquidated, unliquidated, fixed, contingent, matured,

unmatured, disputed, undisputed, legal, equitable, secured, or

unsecured.” Id. § 2. A tax deficiency “exists from the date a return is to

be filed and . . . arises by operation of law when the return is not filed.”

United States v. Hogan, 861 F.2d 312, 316 (1st Cir. 1988). Thus, whether

the exact amount of the estate tax deficiency was known at the time of

the transfer does not affect whether the IRS had a claim against the

estate.

Respondent contends that petitioner is liable as a transferee

because petitioner transferred decedent’s residuary estate to himself,

rendering the estate insolvent. We agree.

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[*18] After distributing specific bequests and paying expenses,

petitioner, acting as executor for the estate, transferred the remaining

assets to himself in accordance with decedent’s will. The estate made

the transfer without receiving equivalent value and held no assets after

the transfer. A debtor is insolvent if the sum of its debts is greater than

the fair market value of all of its assets. MUFTA § 3(a). The transfer of

the estate’s remaining assets rendered the estate insolvent. The

transfer is therefore fraudulent pursuant to MUFTA. Accordingly, the

IRS may seek to recover the estate’s tax liability from petitioner.

Respondent acknowledges that petitioner’s personal liability is

limited to the amount actually transferred to him. See Schussel v.

Werfel, 758 F.3d at 92–93. The estate transferred to petitioner the

Hingham Property, decedent’s jewelry and personal effects, cash from

decedent’s personal bank account, decedent’s life insurance policy, and

the conversion of decedent’s 1% interest in Spencer Press. Respondent

did not present any evidence that the Parsonsfield Note was transferred

to petitioner, and therefore the value of the note may not increase this

limitation.

We have considered all of the arguments made by the parties and,

to the extent they are not addressed herein, we find them to be moot,

irrelevant, or without merit.

To reflect the foregoing,

Decisions will be entered under Rule 155.