The opinion
United States Tax Court
T.C. Memo. 2022-103
SANDRA E. SANDER, DECEASED,
Petitioner
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent
—————
Docket No. 22472-16. Filed October 6, 2022.
—————
S died a resident of Florida. Upon S’s death, S’s
daughter became the sole trustee of a trust that S had
established during her life. R issued a notice of deficiency
to S. S’s daughter filed a Petition for redetermination of
the deficiencies. S’s daughter has not been appointed a
personal representative of S’s estate by a Florida probate
court.
Held: S’s daughter is not authorized to be
substituted for S as a party in the case.
—————
James A. Kutten, for petitioner.
Jamie M. Powers and Karen O. Myrick, for respondent.
MEMORANDUM OPINION
MORRISON, Judge: Before her death, Sandra Sander
established a trust. 1 She was a co-trustee of the trust with her daughter
1 The Sandra E. Sander Lifetime Trust.
Served 10/06/22
2
[*2] Leda. Leda was nominated as personal representative by Sandra’s
will. On July 4, 2016, Sandra died. Under the terms of the trust, at
Sandra’s death (1) Leda was to become the sole trustee and (2) the assets
of the trust were to be transferred to three new separate trusts for each
of Sandra’s three children (including Leda). On July 15, 2016, the
Internal Revenue Service (IRS) issued a notice of deficiency to Sandra
determining income tax deficiencies of $28,123 for 2013 and $25,544 for
2014 as well as a section 6662(a) penalty of 20% of the determined
amount of the deficiency for each year. 2 On October 17, 2016, Leda filed
a Petition for redetermination of the deficiencies in Sandra’s name.
Leda filed a Motion to Substitute Parties and Change Caption seeking
to substitute herself, as trustee of the original trust, for Sandra in this
litigation. No personal representative for Sandra’s estate has been
appointed by a Florida circuit court. We hold that Leda does not have
the authority to act for Sandra in this case. Therefore, we will deny
Leda’s Motion for Substitution. Respondent filed a Motion to Dismiss
for Lack of Jurisdiction on the ground that Leda does not have the
authority to act for Sandra. We reserve ruling on respondent’s Motion
to Dismiss for Lack of Jurisdiction to allow an opportunity for a probate
action to be commenced for Sandra’s estate and for a personal
representative to be appointed.
Background
On March 15, 1991, Sandra created the Sandra E. Sander
Revocable Trust. The record does not reveal the terms of the
corresponding trust instrument.
On April 15, 2014, Sandra’s 2013 income tax return was due. Her
liability for income tax for that year arose then.
On October 25, 2014, Sandra executed a “bill of sale” by which she
transferred all her tangible personal property, other than that held as
an investment or used in connection with a business, to the trustee of
the Sandra E. Sander Revocable Trust.
On October 25, 2014, Sandra executed a trust instrument that we
refer to as the Sandra E. Sander Lifetime Trust. The Sandra E. Sander
Lifetime Trust revoked the provisions of the “SANDRA E. SANDER
LIFETIME TRUST . . . dated June 17, 1997 amended March 16, 1998
2 Unless otherwise indicated, all statutory references are to the Internal
Revenue Code, Title 26 U.S.C., in effect at all relevant times, and all Rule references
are to the Tax Court Rules of Practice and Procedure.
3
[*3] and May 29, 1998, made and entered into by SANDRA E. SANDER,
as the grantor and SANDRA E. SANDER as the trustee.” The record
does not reveal the substance of the revoked provisions. 3
The Sandra E. Sander Lifetime Trust provides that the co-
trustees of the trust are Sandra and her daughter Leda. It further
provides that if Sandra “shall cease to serve for any reason, [Leda] shall
serve as sole trustee.”
Article II includes provisions related to the administration of the
trust during Sandra’s lifetime. Article II allowed Sandra to amend or
revoke the trust provisions and to have the trust make distributions of
its assets to her.
Articles III and IV of the Sandra E. Sander Lifetime Trust contain
provisions related to the payment and distribution of certain assets of
the trust after Sandra’s death. We describe these provisions below.
Article III, section 1 provides:
After the death of the grantor [i.e., Sandra], the trustee
may, in the trustee’s sole discretion, pay out of the
remaining principal of the trust estate any or all legal
debts, any or all expenses of administration of the grantor’s
probate estate and any or all of the expenses of the
grantor’s last illness and funeral or memorial service. It is
the grantor’s desire that the trustee will make the
payments authorized under the provisions of this
ARTICLE only if, in the opinion of the trustee, it is
impossible, inadvisable or impracticable for such payments
to be made by the personal representative of the grantor’s
probate estate.
Article III, section 2 provides that upon the death of Sandra, the
“trustee” of the Sandra E. Sander Lifetime Trust will distribute the
“items of tangible personal property which are part of the trust estate”
3 Leda contends that the “Sandra E. Sander Lifetime Trust,” by its terms,
revoked “all of Sandra’s prior living trusts.” The Sandra E. Sander Lifetime Trust on
its face revoked “all of the provisions of the Trust Agreement,” where the term “Trust
Agreement” was defined as the “SANDRA E. SANDER LIFETIME TRUST . . . dated
June 17, 1997 amended March 16, 1998 and May 29, 1998, made and entered into by
SANDRA E. SANDER, as the grantor and SANDRA E. SANDER, as the trustee.” By
its terms, the Sandra E. Sander Lifetime Trust revoked only a June 17, 1997, trust.
4
[*4] to Sandra’s “surviving children.” However, the same section
provides that any items identified in a written list signed by Sandra
were to be distributed by the trustee to the persons named on the list.
The record does not reveal whether such a list existed.
Article III, section 3 provides that the
trustee shall pay, without contribution or reimbursement,
out of the remaining trust assets all estate, inheritance,
succession, transfer and other death taxes of any kind,
including any interest and penalties thereon, payable with
respect to all property taxable by reason of the grantor’s
[Sandra’s] death, whether or not passing under this
instrument, including, but not limited to, life insurance,
jointly-held assets and assets passing pursuant to a
beneficiary designation.
Article IV defines the term “Remaining Trust Property” as “all of
the assets of the trust estate which are not required for the
disbursements described in ARTICLE III, above, including any assets
received from the grantor’s probate estate, or from any other source.”
Article IV provides the remaining trust property must be “divided, per
stirpes, for the benefit of the grantor’s [Sandra’s] descendants who
survive the grantor and shall be held in separate trusts for the benefit
of such descendent with income and principal administered and
distributed pursuant to the provisions of ARTICLE V hereof.”
Article V sets forth provisions to be followed by the trustees of
each of the separate trusts for the benefit of Sandra’s descendants. 4
Article VIII, section 1 grants various powers to the trustee of the
Sandra E. Sander Lifetime Trust (and the trustees of the trusts for
Sandra’s descendants):
The trustee, in the administration of each trust estate
hereunder, in addition to those powers, duties and
immunities provided under the laws of the governing
jurisdiction, shall have, subject to the limitations
4 The trustees of these separate trusts for the benefit of Sandra’s descendants
are, pursuant to article VII(1)(b) of the Sandra E. Sander Lifetime Trust, each
respective descendant of Sandra.
5
[*5] hereinafter set forth, the following specific powers, duties
and immunities, to-wit:
....
1.12 Compromise Debts. To pay, compromise, compound,
adjust, submit to arbitration, settle, or release any claims
or demands of the trust estate as the trustee may deem
advisable, including the acceptance of deeds of real
property in satisfaction of bonds and mortgages, and to
make any payments in connection therewith which the
trustee may deem advisable.
....
1.15 Pay Expenses. To pay any and all expenses, costs, fees,
taxes, penalties or other charges, including any
expenditures authorized by this ARTICLE, and to charge
the same against principal or income, or partly against the
principal and partly against the income, of the whole or any
part of the trust estate, and including taxes on net gift
transfers to the trust estate or any separate trust created
hereunder.
Thus, under article VIII, section 1 the trustee of that trust has the power
to pay or compromise claims of the trust (as provided in section 1.12 of
the trust instrument) and the power to pay expenses (as provided in
section 1.15 of the trust instrument).
Article VIII provides that each of the “trust estates provided for
herein shall be governed by the laws of Florida.”
On April 15, 2015, Sandra’s 2014 income tax return was due. Her
liability for income tax for that year arose then.
On July 4, 2016, Sandra died a resident of Florida. She is
survived by her three daughters: Leda Sander, Stephanie Curtis, and
Cassie Sander.
At the time of her death, Sandra had a will. Leda was nominated
as personal representative in the will. The other terms of the will, such
as the identities of the beneficiaries, are not revealed by the record.
6
[*6] Under the terms of the Sandra E. Sander Lifetime Trust, Leda
became the sole trustee when Sandra died. When Sandra died, a new
trust was created for each of Sandra’s three daughters pursuant to the
terms of the Sandra E. Sander Lifetime Trust.
Leda retained an attorney who advised her that “there are no
assets to probate.”
Sandra’s will was never probated, nor was a personal
representative ever appointed for her estate.
On July 15, 2016, the IRS issued a notice of deficiency to Sandra
for tax years 2013 and 2014 determining deficiencies and penalties for
those years.
On October 17, 2016, Leda filed a Petition for redetermination of
the deficiencies in Sandra’s name. It advised the Court that Sandra had
died. The Petition was signed by Leda, a resident of Missouri when the
Petition was filed.
On April 27, 2017, Leda moved to substitute parties and change
the caption such that, as trustee of the Sandra E. Sander Lifetime Trust,
Leda would be substituted as the petitioner in the case.
On May 2, 2017, respondent filed a Motion to Dismiss for Lack of
Jurisdiction arguing that the case should be dismissed because the
Petition was not filed by a personal representative of Sandra’s estate or
by some other fiduciary.
On November 17, 2017, we held a hearing on both motions. Leda
introduced two documents: (1) the Sandra E. Sander Lifetime Trust, i.e.,
the trust instrument dated October 25, 2014; and (2) the October 25,
2014, bill of sale. She also testified.
Discussion
I. Does Leda have the authority under Florida law to litigate this
case?
Rule 60 provides in pertinent part:
(a) Petitioner: (1) Deficiency or Liability Action: A
case shall be brought by and in the name of the person
against whom the Commissioner [i.e., the IRS] determined
7
[*7] the deficiency (in the case of a notice of deficiency) or
liability (in the case of a notice of liability), or by and with
the full descriptive name of the fiduciary entitled to
institute a case on behalf of such person. See Rule 23(a)(1).
A case timely brought shall not be dismissed on the ground
that it is not properly brought on behalf of a party until a
reasonable time has been allowed after objection for
ratification by such party of the bringing of the case; and
such ratification shall have the same effect as if the case
had been properly brought by such party. . . .
....
(c) Capacity: The capacity of an individual, other
than one acting in a fiduciary or other representative
capacity, to engage in litigation in the Court shall be
determined by the law of the individual’s domicile. The
capacity of a corporation to engage in such litigation shall
be determined by the law under which it was organized.
The capacity of a fiduciary or other representative to
litigate in the Court shall be determined in accordance with
the law of the jurisdiction from which such person’s
authority is derived.
Leda seeks recognition from the Court, through her Motion, that
she is authorized to act in this case. She claims that she is so authorized
as the trustee for the Sandra E. Sander Lifetime Trust. The question of
whether Leda was authorized to file a Petition on behalf of Sandra
depends on whether state law authorizes her to file a Petition for
Sandra. See Rule 60(c); Fehrs v. Commissioner, 65 T.C. 346, 349 (1975);
Estate of Peterson v. Commissioner, 45 T.C. 497, 500 (1966). Leda has
the burden of proving that she was so authorized. See Fehrs, 65 T.C.
at 348.
No personal representative has been appointed for Sandra’s
estate. We will first explain the appointment process. In Florida a
personal representative is appointed by a Florida circuit court under the
Florida Probate Code. 5
5 The Florida Probate Code is Florida Statutes chapters 731 to 735. Fla. Stat.
§ 731.005 (2021). We refer to provisions of the Florida Probate Code as “Florida
Probate Code § ___.” All provisions of the Florida Statutes (including provisions of the
8
[*8] The powers granted to a personal representative are specified by
Florida Probate Code § 733.612(20), which provides that a “personal
representative . . . may properly: . . . [p]rosecute or defend claims or
proceedings in any jurisdiction for the protection of the estate, of the
decedent’s property, and of the personal representative.”
The “[e]state” is “the property of the decedent that is the subject
of administration.” Id. § 731.201(14).
Florida Probate Code § 731.201(28) defines a “[p]ersonal
representative” as “the fiduciary appointed by the court to administer
the estate.”
In the Florida Probate Code the word “[c]ourt” is defined as the
“circuit court.” Id. § 731.201(7). Thus, for purposes of Florida Probate
Code § 731.201(28), the word “court” means the circuit court. Circuit
courts are given subject matter jurisdiction over probate matters by
Florida Statutes § 26.012(2) (2021), which provides:
Circuit courts shall have exclusive original jurisdiction . . .
(b) [o]f proceedings relating to the settlement of the estates
of decedents and minors, the granting of letters
testamentary, guardianship, involuntary hospitalization,
the determination of incompetency, and other jurisdiction
usually pertaining to courts of probate . . . .
A related venue provision provides: “The venue for probate of wills and
granting letters shall be: (a) [i]n the county in this state where the
decedent was domiciled.” Florida Probate Code § 733.101(1)(a). This
venue provision includes two terms of art that require explanation:
“probate of wills” and “granting letters.” The term “[p]robate of wills” is
defined as “all steps necessary to establish the validity of a will and to
admit a will to probate.” Id. § 731.201(31). The term “[l]etters” refers
to the “authority granted by the court [i.e., the circuit court] to the
personal representative to act on behalf of the estate of the decedent.”
Id. § 731.201(24). The Florida Probate Code also provides that the terms
“letters of administration” and “letters” have the same meaning. Id.
Although the word “administration” is not expressly defined in
the Florida Probate Code, it is understood to mean “the process by which
the personal representative collects the assets, pays the debts, and
Florida Probate Code) discussed in this opinion are found on the website
www.leg.state.fl.us, using the year 2021 in the drop-down menu.
9
[*9] makes distribution to the beneficiaries.” David T. Smith, The
Potential Personal Representative: Ready, Willing, But Perhaps Unable
to Act in Florida, 48 Fla. L. Rev. 675, 691 (1996). In the provisions we
have discussed, some form of the word “administration” has been used
thrice. First, a form of the word was used to define a personal
representative as “the fiduciary appointed by the court to administer the
estate.” Florida Probate Code § 731.201(28). Second, an “[e]state” is
defined as the property of a decedent that is the “subject of
administration.” Id. § 731.201(14). Third, the word “administration” is
in the term “letters of administration.” Id. § 731.201(24).
In “granting letters of administration,” the circuit court is to
prefer the person nominated in the will to be the personal
representative. Id. § 733.301; Schleider v. Estate of Schleider, 770 So.
2d 1252, 1253 (Fla. Dist. Ct. App. 2000).
The important point is that a person becomes the personal
representative by being appointed by the circuit court acting in its
probate capacity. See Shane Kelley & Jenna Rubin, Practice under
Florida Probate Code, § 4.1 (2020) (explaining that the personal
representative is the “court-appointed overseer of a decedent’s probate
estate”).
Rule 60(c) provides that state law determines the capacity of a
fiduciary to litigate in the Tax Court. The relevant state law, for the
purpose of determining whether Sandra’s personal representative could
litigate this case, is Florida Probate Code § 733.612. That provision
gives the personal representative the power to litigate for the “estate.”
Id. § 733.612(20). It follows that state law would give a personal
representative of Sandra’s estate the authority to proceed in Tax Court. 6
6 There is no precedent directly supporting the proposition that the personal
representative under Florida law has the authority to litigate a Tax Court deficiency
case. In Estate of Arnett v. Commissioner, 31 T.C. 320, 330 (1958), we held that an
administrator cum testamento annexo (a type of office that is now included in the
definition of a personal representative, Florida Probate Code § 731.201(28)) was
authorized to litigate on behalf of a deceased taxpayer. And in Davison v.
Commissioner, 13 T.C. 554, 556–57 (1949), we held that a wife who was not a “properly
appointed and duly qualified administrator or executor” for the estate of her late
husband was not authorized to litigate a deficiency proceeding on behalf of her late
husband’s estate. Both Estate of Arnett and Davison hinged on older provisions of
Florida law.
10
[*10] As noted above, Leda does not contend that she is a “personal
representative” appointed by a Florida circuit court. 7
7 Leda does not argue that the effect of the statutory provisions for small
estates under the Florida Probate Code (which we have not yet discussed) means that
she has authority to act for her mother. These provisions are found in chapter 735 of
the Florida Probate Code, entitled “Small Estates,” which is split into two parts.
Part I of chapter 735 is titled “Summary Administration.” It provides that
“[s]ummary administration may be had in the administration of . . . [an] estate, when
it appears” among other conditions, that “the value of the entire estate subject to
administration in this state, less the value of property exempt from the claims of
creditors, does not exceed $75,000 or that the decedent has been dead for more than 2
years.” Florida Probate Code § 735.201. Part I further provides that the “estate may
be administered in the same manner as the administration of any other estate, or it
may be administered as provided in this part.” Id. § 735.202. A petition for summary
administration “may be filed by any beneficiary or person nominated as personal
representative in the decedent’s will offered for probate.” Id. § 735.203(1). If a petition
for summary administration is filed, then “the will, if any, shall be proved in
accordance with chapter 733 [entitled “Probate Code: Administration of Estates”] and
be admitted to probate.” Id. § 735.206(1). Florida Probate Code § 735.206(3), which is
in part I, provides that the circuit court “may enter an order of summary
administration allowing immediate distribution of the assets to the persons entitled to
them.” Florida Probate Code § 735.206(2), which is in part I, provides that before an
order of summary administration is entered, “the petitioner shall make a diligent
search and reasonable inquiry for any known or reasonably ascertainable creditors,
serve a copy of the petition on those creditors, and make provision for payment for
those creditors to the extent that assets are available.”
Part I does not give Leda the authority to litigate this action. Although part I
allows a person to file a petition for summary administration, id. § 735.203, and
although such a filer may pay creditors of the estate, id. § 735.206(2), that is not the
same as the power to litigate estate matters outside the circuit court acting in its
probate capacity. Leda has not petitioned for summary administration, so she does
not have the powers held by someone who has petitioned for summary administration.
Part I of chapter 735 of the Florida Probate Code authorizes the circuit court
handling a summary administration to order the immediate distribution of assets
through an “order of summary administration.” Id. § 735.206(3). But that does not
confer powers on someone to litigate outside of that court.
Part II of chapter 735 is titled “Disposition of Personal Property Without
Administration.” Florida Probate Code § 735.301(1), which is in part II, provides:
No administration shall be required or formal proceedings instituted
upon the estate of a decedent leaving only personal property exempt
under the provisions of s. 732.402, personal property exempt from the
claims of creditors under the Constitution of Florida, and nonexempt
11
[*11] Leda relies upon this Court’s precedent in Estate of
Galloway v. Commissioner, 103 T.C. 700 (1994), for the proposition that
she has authority to act for her mother in this proceeding. In Estate of
Galloway, the taxpayer died before the mailing of the notice of
deficiency. Id. at 701. The taxpayer’s daughter filed a Tax Court
petition in the taxpayer’s name. Id. The daughter had been named
executor of the taxpayer’s will. Id. However, she had not been appointed
as a personal representative of the taxpayer by a California court. Id.
Under California law, a personal representative of the decedent may
commence legal actions for the benefit of the estate. Cal. Prob. Code
§ 9820(a) (West 2022). A personal representative also has the power to
administer the estate. Id. § 8400(a). A person named as executor in a
will has the right to be appointed a personal representative, id. § 8420,
but does not have power to administer the estate until such appointment
is made, id. § 8400(a).
California Civil Procedure Code § 377.30 (West 2022) provides
that a “cause of action that survives the death of the person entitled to
commence an action . . . may be commenced by the decedent’s personal
representative or, if none, by the decedent’s successor in interest.”
California Civil Procedure Code § 377.32(a) (West 2022) provides that
the person
personal property the value of which does not exceed the sum of the
amount of preferred funeral expenses and reasonable and necessary
medical and hospital expenses of the last 60 days of the last illness.
Florida Probate Code § 735.301(2), which is in part II, provides:
Upon informal application by affidavit, letter, or otherwise by any
interested party, and if the court is satisfied that subsection (1) is
applicable, the court, by letter or other writing under the seal of the
court, may authorize the payment, transfer, or disposition of the
personal property, tangible or intangible, belonging to the decedent to
those persons entitled.
Although part II provides that “[n]o administration shall be required” if the
assets of the decedent are low enough in value, id. § 735.301(1), it does not authorize
anyone to litigate on behalf of the decedent outside the circuit court (acting in its
probate capacity). Although part II allows an “interested party” to ask the circuit court
(in its probate capacity) for an authorization to transfer the assets of the decedent, id.
§ 735.301(2), this is not the same as authorization to litigate outside such a court.
In summary, none of the provisions in part I or part II of chapter 735 regarding
small estates authorizes Leda to litigate this case.
12
[*12] who seeks to . . . continue a pending action . . . as the
decedent’s successor in interest under [article 3 of title 3 of
the Cal. Civ. Proc. Code (Cal. Civ. Proc. Code §§ 377.30
to .35 (West 2022))], shall . . . file an affidavit or a
declaration under penalty of perjury under the laws of
[California] stating [that] . . . “[n]o proceeding is now
pending in California for administration of the decedent’s
estate . . .” [and that the person is the] “. . . decedent’s
successor in interest . . . .”
California Civil Procedure Code § 377.33 (West 2022) provides that the
“court in which an action is commenced or continued under this article
[article 3 of title 3] may make any order concerning parties that is
appropriate to ensure proper administration of justice in the case,
including appointment of the decedent’s successor in interest as a
special administrator or guardian ad litem.”
Estate of Galloway, 103 T.C. at 701, acknowledged that the
taxpayer’s daughter had not been appointed as a personal
representative. Estate of Galloway also held that no affidavit or
declaration had been prepared under California Civil Procedure Code
§ 377.32 sufficient to qualify the daughter (and certain other persons
including the surviving spouse) as successors in interest. Estate of
Galloway, 103 T.C. at 703. However, Estate of Galloway, 103 T.C. at
703–05, held that California Civil Procedure Code § 377.33, “[t]he
controlling provision in these circumstances,” authorized the Tax Court
to order that the daughter could represent the decedent’s estate in the
Tax Court deficiency action. Estate of Galloway explained that it
interpreted California Civil Procedure Code § 377.33 “in very broad
terms” to give the Tax Court “the authority to make an appropriate
order in the interest of justice.” Estate of Galloway, 103 T.C. at 703.
Estate of Galloway concluded: “Given the authority by Cal. Civ. Proc.
Code sec. 377.33, . . . we will make an order appointing [the taxpayer’s
daughter] as a special administrator of decedent’s estate solely for
purposes of this action.” Id. at 704–05.
Leda contends we should enter a similar order as to her. She
argues:
This Court has prior precedent [i.e., Estate of Galloway],
appointing a special administrator to pursue the Tax Court
case where the facts support such action. Under the facts
of this case, the Tax Court should exercise its discretion
13
[*13] and appoint Leda, the trustee of Sandra’s Living Trust [i.e.,
the Sandra E. Sander Lifetime Trust], a special
administrator for Sandra.
But in Estate of Galloway, 103 T.C. at 703–04, the “controlling
provision” was California Civil Procedure Code § 377.33. As to our case,
the nearest counterpart is Florida Probate Code § 733.308 (2021), which
we have not yet discussed. Florida Probate Code § 733.308 provides in
part: “When an estate must be represented and the personal
representative is unable to do so, the court shall appoint an
administrator ad litem without bond to represent the estate in that
proceeding.” The word “court” in Florida Probate Code § 733.308 is
defined in Florida Probate Code § 731.201(7) as “the circuit court.” The
“circuit court” refers to the Florida county court acting in its probate
capacity. See id. § 733.101(1)(a). Thus, only the circuit court in its
probate capacity can appoint an administrator ad litem to represent the
estate under that provision.
This conclusion is supported by caselaw interpreting Florida
Probate Code § 733.308. Gomez v. Fradin, 199 So. 3d 554 (Fla. Dist. Ct.
App. 2016) (per curiam); Middleton v. Cruce, No. 4:13cv132-WS, 2014
WL 2117177 (N.D. Fla. May 21, 2014).
Gomez was an appeal of a nonprobate circuit court decision.
Gomez, 199 So. 3d at 555. One of the defendants in the nonprobate
circuit court suit died. Id. The plaintiffs sought to have the circuit court
appoint a representative of the deceased defendant because no estate
had been opened for him. Id. The circuit court held that it had no
authority to appoint such a representative in the litigation, and it
observed that the plaintiffs could petition for administration in the
“probate court.” Id. The plaintiffs appealed the order. Id. On appeal,
the state court of appeals issued a per curiam opinion holding that it had
no appellate jurisdiction over the circuit court’s order refusing to appoint
a representative of the deceased defendant because the order was not
final and because the order, even if erroneous, did not irreparably harm
the plaintiffs because they could petition for administration. Id. Thus,
the appellate opinion did not evaluate the merits of the circuit court’s
conclusion. However, Judge Warner, concurring specially, explained
that Florida Probate Code § 733.308 authorizes only the “probate court”
to appoint an administrator ad litem and that therefore the circuit court
was correct to rule that it could not appoint a representative for the
deceased defendant. Id. (Warner, J., concurring).
14
[*14] In Middleton, a plaintiff died after commencing litigation in the
U.S. District Court for the Northern District of Florida. Middleton,
2014 WL 2117177, at *1. The plaintiff’s husband asked the district court
to substitute him as the plaintiff. Id. at *4. Later he submitted a motion
with a different request: He asked the district court to stay the case until
a Florida court could appoint one Joyce McCarthy as administrator ad
litem under Florida Probate Code § 733.308 to litigate the case.
Middleton, 2014 WL 2117177, at *4. The district court rejected both
requests. Id. First, the district court addressed the husband’s
contention that he should be substituted for his wife. Id. at *5. It
explained that under Florida law, the husband, as a convicted felon, was
barred from being appointed as a personal representative. Id.
Therefore, the district court held that the husband could not be
substituted for his wife in the litigation. Id. Second, it rejected the
husband’s request that the litigation be stayed until McCarthy was
appointed by a Florida court as administrator ad litem. Id. at *4. The
district court held that it was inappropriate for it to wait for the
appointment of an administrator ad litem because the appointment of
an administrator ad litem was authorized under Florida law only when
there was a personal representative appointed who was unable to
represent the estate. Id. at n.7. In the district court’s view, there would
be no occasion to appoint an administrator ad litem until a personal
representative was appointed and was shown unable to fulfill the duties.
Id. The district court held that although the case should not be delayed
to await the appointment of an administrator ad litem, it should be
continued “if Joyce McCarthy or some other individual is legally
appointed personal representative for Plaintiff.” Id. at *5. Significantly,
Middleton never suggested that the district court had the power to
appoint an administrator ad litem. It assumed that this power could be
exercised only by a Florida circuit court acting in its probate capacity. 8
Leda contends that Gomez and Middleton are not instructive
because those cases did not involve the trustee of a trust. Leda is the
trustee of the Sandra E. Sander Lifetime Trust, and she contends that
Fla. Stat. § 736.0816(23) (2021) gives her the authority to act for her
mother’s estate in this litigation. The provision authorizes a trustee to
“[p]rosecute or defend, including appeals, an action, claim, or judicial
8 Middleton raises another issue that would prevent us from appointing Leda
an administrator ad litem under Florida Probate Court §733.308. Even if we were the
appropriate court to make the appointment (we are not), Middleton suggests such an
appointment can be made only if a personal representative has been appointed (and is
unable to fulfill the duties). No such personal representative has been appointed.
15
[*15] proceeding in any jurisdiction to protect trust property or the
trustee in the performance of the trustee’s duties.” However, “trust
property” is not directly involved in this case. This case involves the
redetermination of the income tax deficiencies of Sandra for the 2013
and 2014 tax years. See § 6214(a). As part of the decision about the
deficiencies, the Court would necessarily redetermine Sandra’s tax
liabilities for those years. See § 6211. To then collect these liabilities
from the Sandra E. Sander Lifetime Trust, the IRS would need to invoke
transferee liability concepts and show that the Sandra E. Sander
Lifetime Trust is a liable transferee of Sandra. But such liability is a
“secondary liability.” Steve R. Johnson, Unfinished Business on the
Taxpayer Rights Agenda: Achieving Fairness in Transferee Liability
Cases, 19 Va. Tax. Rev. 403, 409 n.28 (2000). To allow the Sandra E.
Sander Lifetime Trust to litigate this case merely because of its
secondary liability would elevate that entity over all other persons who
might be held secondarily liable for the income tax liabilities. 9
9 Leda makes the following contention: “Except for the assets of Sandra’s
Living Trust [i.e., the Sandra E. Sander Lifetime Trust] there are no assets to pay
Sandra’s potential 2013 and 2014 income tax liabilities.” The record does not prove
this statement. Leda testified that, by the time of our hearing, there were no assets in
her mother’s name. But even if that were so, the income tax liabilities can be collected
from any person to whom Sandra’s assets were transferred after the income tax
liabilities arose.
The assets from which the IRS can collect the 2013 and 2014 income tax
liabilities are not limited to the assets held by Sandra at the time of our motions
hearing. The IRS can assert theories of transferee liability to collect the 2013 and 2014
income tax liabilities from persons to whom Sandra transferred her assets after the
liabilities arose. See Michael I. Saltzman & Leslie Book, IRS Practice and Procedure
⁋ 17.01 (rev. 2d ed. 2018) (describing theories of transferee liability, including liabilities
enforced under the procedures of section 6901); id. ⁋ 17.02[2] (explaining that a
requirement for transferee liability under section 6901 is that “the taxpayer/transferor
is liable for a tax both at the time of the transfer and at the time the transferee liability
is asserted”). Sandra’s 2013 and 2014 income tax liabilities arose on April 15, 2014
and 2015, respectively, the dates that the returns were due. See §§ 6151(a), 6072(a).
If she transferred property after these respective dates, the recipients of the property
are potentially liable for income tax for the respective tax years under the principles
of transferee liability. The record is unclear as to what assets Sandra owned when the
2013 and 2014 income tax liabilities arose and to whom she transferred them. It is
therefore speculative to conclude that there is no transferee other than the Sandra E.
Sander Lifetime Trust from whom the IRS can collect the 2013 and 2014 income tax
liabilities. We do not imply that such a conclusion would be relevant.
Leda also contends that any payment of the income tax liabilities for 2013 and
2014 will be made from the Sandra E. Sander Lifetime Trust. This contention is based
16
[*16] We will deny the Motion to Substitute Parties and Change
Caption.
II. Does the Court have jurisdiction?
Under Rule 60(a) and (c), when a petition has been filed after the
taxpayer is deceased, the petition must have been filed by a fiduciary
entitled to bring the case on behalf of the deceased taxpayer. Fehrs v.
Commissioner, 65 T.C. 346, 349 (1975). Otherwise, we are without
jurisdiction. Id. at 348. In Fehrs, a taxpayer’s spouse filed a petition for
redetermination on behalf of the deceased taxpayer. We dismissed the
petition for lack of jurisdiction, but only after giving the spouse a chance
to have a representative appointed for the taxpayer’s estate for the
purpose of representing the taxpayer. Leda urges the Court to similarly
defer ruling on respondent’s Motion to Dismiss for Lack of Jurisdiction:
“If the Court denies petitioners’ Motion to Substitute parties, petitioner
requests that the Court allow petitioner time to open a probate
proceeding . . . .” We agree that it is appropriate to do so.
We will defer ruling on respondent’s Motion to Dismiss for Lack
of Jurisdiction for six months in order to allow an opportunity for a
probate action to be commenced for Sandra’s estate and a personal
representative appointed.
To reflect the foregoing,
An order will be issued denying petitioner’s Motion to Substitute
Parties and Change Caption and ordering Leda J. Sander to file a status
report in six months explaining whether a personal representative has
been appointed for the Estate of Sandra E. Sander.
on Leda’s testimony that, as trustee of the Sandra E. Sander Lifetime Trust, she will
direct the trust to pay any income tax liabilities. Leda may well intend to direct the
Sandra E. Sander Lifetime Trust to pay the income tax liabilities. But this
unenforceable intention is insufficient to protect the legal rights of other parties. If we
were to grant Leda’s Motion for Substitution and therefore allow her to litigate the
amounts of the income tax liabilities, our decision about the amounts of the income tax
liabilities would be binding on any persons against whom the IRS might assert
transferee liability. See Krueger v. Commissioner, 48 T.C. 824, 829–30 (1967).