Carter v. United States

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ALABAMA

NORTHEASTERN DIVISION

ELIZABETH R. CARTER, as )

Personal Representative of the Estate )

of Frances E. P. Roper, )

)

Plaintiff )

)

vs. ) Case No. 5:18-cv-01380-HNJ

)

UNITED STATES OF AMERICA, )

)

Defendant )

MEMORANDUM OPINION

This action proceeds before the court on Defendant’s Amended Motion to

Dismiss or Alternatively for Summary Judgment. (Doc. 17). At the outset, the court

does not possess subject matter jurisdiction over this action due to Plaintiff Elizabeth R.

Carter’s failure to file a timely administrative claim seeking a refund of tax payments.

However, the court heeds recent Supreme Court jurisprudence establishing that most

limitations periods are claims-processing rules rather than jurisdictional requisites, yet

the same result ensues because Carter’s alleged financial disability does not equitably toll

the limitations period, whether deemed jurisdictional or not. Furthermore, the

Internal Revenue Service properly assessed the stock at issue pursuant to its fair market

exchange value rather than a reduced value engendered by a massive criminal fraud.

Therefore, on the merits Carter’s claim for a tax refund falters.

As a result, for the reasons set out herein, the court GRANTS Defendant’s

motion.

STANDARD OF REVIEW

Rule 12(b)(1) Motion

“Federal courts are courts of limited jurisdiction” and, as such, possess the power

to hear cases only as authorized by the Constitution or United States’ laws. Kokkonen v.

Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). “[B]ecause a federal court is

powerless to act beyond its statutory grant of subject matter jurisdiction, a court must

zealously insure that jurisdiction exists over a case.” Smith v. GTE Corp., 236 F.3d 1292,

1299 (11th Cir. 2001). “If the court determines at any time that it lacks subject-matter

jurisdiction, the court must dismiss the action.” Fed. R. Civ. P. 12(h)(3).

Federal Rule of Civil Procedure 12(b)(1) permits a district court to dismiss a case

for “lack of subject-matter jurisdiction.” Fed. R. Civ. P. 12(b)(1). Plaintiff bears the

burden of persuasion on establishing the court’s subject matter jurisdiction. OSI, Inc. v.

United States, 285 F.3d 947, 951 (11th Cir. 2002) (citing Thomson v. Gaskill, 315 U.S. 442,

446 (1942)).

The Eleventh Circuit establishes particular modes of review for Rule 12(b)(1)

challenges to subject matter jurisdiction:

[A] motion to dismiss for lack of subject matter jurisdiction pursuant to

Fed. R. Civ. P. 12(b)(1) can be based upon either a facial or factual

challenge to the complaint. If the challenge is facial, the plaintiff is left

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with safeguards similar to those retained when a Rule 12(b)(6) motion to

dismiss for failure to state a claim is raised . . . Accordingly, the court must

consider the allegations in the plaintiff’s complaint as true . . . A facial

attack on the complaint requires the court merely to look and see if the

plaintiff has sufficiently alleged a basis of subject matter jurisdiction, and

the allegations in his complaint are taken as true for the purposes of the

motion . . .

Factual attacks, on the other hand, challenge the existence of subject

matter jurisdiction in fact, irrespective of the pleadings, and matters

outside the pleadings, such as testimony and affidavits are considered.

Furthermore, . . . the district court has the power to dismiss for lack of

subject matter jurisdiction on any of three separate bases: (1) the

complaint alone; (2) the complaint supplemented by undisputed facts

evidenced in the record; or (3) the complaint supplemented by undisputed

facts plus the court’s resolution of disputed facts.

McElmurray v. Consol. Gov’t of Augusta-Richmond Cty., 501 F.3d 1244, 1251 (11th Cir. 2007)

(citing, inter alia, Williamson v. Tucker, 645 F.2d 404, 412 (5th Cir. 1981); Lawrence v. Dunbar,

919 F.2d 1525, 1529 (11th Cir. 1990)) (internal quotation marks and alterations omitted).

Therefore, a factual challenge to subject matter jurisdiction typically permits a

“trial court . . . to weigh the evidence and satisfy itself as to the existence of its power to

hear the case.” Williamson, 645 F.2d at 412-13. No presumptive truthfulness would

attach to a plaintiff’s claims, and “the existence of disputed material facts [would] not

preclude the trial court from evaluating for itself the merits of jurisdictional claims.”

Id; see also Lawrence, 919 F.2d at 1528-29.

When “a Rule 12(b)(1) motion is filed in conjunction with other Rule 12

motions, the court should consider the Rule 12(b)(1) jurisdictional attack before

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addressing any attack on the merits.” Ramming v. United States, 281 F.3d 158, 161 (5th

Cir. 2001) (citing Hitt v. City of Pasadena, 561 F.2d 606, 608 (5th Cir. 1977));1 Harris v.

Board of Trustees Univ. of Ala., 846 F. Supp. 2d 1223, 1230 (N.D. Ala. 2012) (court

considered Rule 12(b)(1) jurisdictional challenge before addressing Rule 12(b)(6)

arguments).

Rule 12(b)(6) Motion

Rule 12(b)(6), Federal Rules of Civil Procedure, permits a court to dismiss a

complaint if it fails to state a claim for which relief may be granted. In Ashcroft v.

Iqbal, 556 U.S. 662 (2009), the Court revisited the applicable standard governing Rule

12(b)(6) motions to dismiss. First, courts must take note of the elements a plaintiff

must plead to state the applicable claims at issue. Id. at 675.

After establishing the elements of the claim at issue, the court identifies all

well-pleaded, non-conclusory factual allegations in the complaint and assumes their

veracity. Id. at 679. Well-pleaded factual allegations do not encompass mere

“labels and conclusions,” legal conclusions, conclusory statements, or formulaic

recitations and threadbare recitals of the elements of a cause of action. Id. at 678

(citations omitted). In evaluating the sufficiency of a plaintiff’s pleadings, the court

1 All decisions of the former Fifth Circuit handed down prior to September 30, 1981, constitute

binding precedent on this Circuit. Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981).

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may draw reasonable inferences in plaintiff’s favor. Aldana v. Del Monte Fresh Produce,

N.A., Inc., 416 F.3d 1242, 1248 (11th Cir. 2005).

Third, a court assesses the complaint’s well-pleaded allegations to determine if

they state a plausible cause of action based upon the identified claim’s elements.

Iqbal, 556 U.S. at 678. Plausibility ensues “when the plaintiff pleads factual content

that allows the court to draw the reasonable inference that the defendant is liable for

the misconduct alleged,” and the analysis involves a context-specific task requiring a

court “to draw on its judicial experience and common sense.” Id. at 678, 679

(citations omitted). The plausibility standard does not equate to a “probability

requirement,” yet it requires more than a “mere possibility of misconduct” or factual

statements that are “merely consistent with a defendant’s liability.” Id. at 678, 679

(citations omitted).

As the Eleventh Circuit provides, “[o]rdinarily, we do not consider anything

beyond the face of the complaint and documents attached thereto when analyzing a

motion to dismiss.” Fin. Sec. Assur., Inc. v. Stephens, Inc., 500 F.3d 1276, 1284 (11th Cir.

2007) (citing Brooks v. Blue Cross & Blue Shield of Fla., Inc., 116 F.3d 1364, 1368 (11th Cir.

1997)). The Eleventh Circuit “recognizes an exception, however, in cases in which a

plaintiff refers to a document in its complaint, the document is central to its claim, its

contents are not in dispute, and the defendant attaches the document to its motion to

dismiss.” FSA, 500 F.3d at 1284 (citing Harris v. Ivax Corp., 182 F.3d 799, 802 n. 2 (11th

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Cir. 1999); Brooks, 116 F.3d at 1368–69). The exception applies in this case, as

Defendant submits the Certificate of Assessments and Payments regarding the federal

estate tax liability of the Estate of Frances E.P. Roper, the Estate’s September 17, 2013,

refund claim, and the IRS’s acknowledgement of receipt of the refund claim on

September 25, 2013. These documents are central to the Estate’s refund claim.

FACTS

Plaintiff Elizabeth R. Carter serves as the personal representative of the Estate of

Frances E. P. Roper. Ms. Roper died on September 21, 2007. At the time of her

death, Ms. Roper owned 567,092 shares of Colonial BancGroup stock, worth a market

value of $17,604,767. Ms. Roper bequeathed the majority of her estate, comprised

primarily of Colonial BancGroup stock, to her niece, Elizabeth R. Carter, and her

nephew, Randy Roper. Within six months after Ms. Roper’s death, the market value of

the stock had decreased to $8,548,947.

On June 19, 2008, Plaintiff filed a federal estate tax return, reporting an estate

valued at $6,261,530.00 and tendering payment of the computed tax. On April 26,

2009, the Estate filed an amended return reporting a slightly lower tax of $6,169,892.

The Colonial stock represented 46.8% of the gross estate. In valuing the Colonial

stock, the Estate used the alternative valuation date to calculate the fair market value, a

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method which relies upon the stock’s exchange price six months after a decedent’s

death. The IRS accepted the amended return and issued a refund.2

On September 13, 2013, the Estate filed a refund claim with the Internal

Revenue Service, alleging it overpaid its estate tax by $3,731,616, due to a criminal fraud

perpetrated against Colonial by one of its customers.3 The Estate asserted it did not

have to rely upon the stock’s exchange price for valuation due to the criminal fraud

involving the bank. The IRS denied the claim.

2 Ms. Carter and Mr. Roper allege Colonial Bank and its executives urged them not to sell their shares

as their value began to decrease. Instead, they obtained a loan from Colonial Bank to pay the estate

tax, for which Colonial Bank required personal guarantees from Ms. Carter and Mr. Roper. They

remain liable on these personal guarantees.

3 The United States prosecuted and obtained convictions against Lee Bentley Farkas for bank, wire and

securities fraud, and conspiracy to commit the same, arising from a multibillion dollar scheme to hide

the financial difficulties of Taylor, Bean, & Whitaker Mortgage Corp. (“TBW”) during his tenure as

chairman and principal owner of TBW. TBW received short-term, secured funding from Colonial

Bank via a master advance account, and it also maintained an investor funding account at Colonial

which housed proceeds from loan sales to investors in the secondary market. Between 2002 and

2003, Farkas and his co-conspirators disguised overdrafts of TBW’s master advance account by

“sweeping” funds from TBW’s investor funding account into and out of the master advance account.

As a result of this sweeping scheme, Colonial Bank’s daily reports did not depict the overdrafts. As

the deficit in TBW’s account grew to well over $100 million, Farkas and his co-conspirators initiated

more sophisticated schemes, including “Plan B.”

Under Plan B, TBW sold sham mortgage loans and loan pools to Colonial Bank. Colonial Bank held

approximately $250 million in Plan B individual loans on its books by mid–2005, and approximately

$500 million by August 2009. As a result, Colonial BancGroup significantly overstated the value of its

assets in its quarterly and annual reports to the United States Securities and Exchange Commission.

See United States v. Farkas, 474 F. App’x 349, 350–51 (4th Cir. 2012).

A grand jury returned an indictment against Farkas on June 15, 2010. See United States v. Farkas, No.

1:10CR200 LMB, 2010 WL 3835110 (E.D. Va. Sept. 24, 2010). A jury convicted Farkas on April 19,

2011. See United States v. Farkas, No. 1:10cr200 (LMB), 2011 WL 5101752 (E.D. Va. Oct. 26, 2011).

On August 14, 2009, the Alabama State Banking Department closed Colonial Bank, and the Federal

Deposit Insurance Corporation (FDIC) assumed receivership over the bank. By December 17, 2010,

Colonia’s stock closed at $0.07 per share and could no longer be publicly traded. (Doc. 17-4 at 4).

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The Estate commenced a federal court action seeking a refund of the

purportedly overpaid estate tax. Elizabeth R. Carter, Personal Representative of the Estate of

Frances E.P. Roper v. United States, Case No. 2:15-cv-02357-TMP (N.D. Ala.). The

government moved to dismiss the action on the basis of lack of subject matter

jurisdiction and lack of merit. The Estate then sought dismissal of the action without

prejudice, which the government did not oppose. The court dismissed the action

without prejudice on May 12, 2016.

The Estate filed another refund claim on August 26, 2016, on the same ground as

previously asserted. The medical opinion of Ms. Carter’s treating physician, Dr.

William Hahn, accompanied the claim, in which he declared Ms. Carter suffered from a

medical impairment for over five years which prevented her from managing the Estate’s

affairs. Ms. Carter also submitted a declaration in which she attested no other person

had authority to act on her behalf in conducting any financial matters.

When the IRS failed to dispose of the claim within the statutorily required time,

the Estate filed the instant action for recovery of excess federal tax erroneously or

illegally assessed and collected. It contends the Colonial stock was worthless on the

valuation date, based on non-public information which later became available.

Defendant asserts the court lacks subject matter jurisdiction to adjudicate Plaintiff’s

claim, yet if subject matter exists, Plaintiff’s claim lacks merit.

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I. The Court Does Not Possess Subject Matter Jurisdiction

As a threshold matter, the Defendant contends the court must dismiss this action

pursuant to Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter

jurisdiction because the Estate submitted an untimely refund claim, citing 26 U.S.C.

§ 6511(a). Although recent Supreme Court jurisprudence strongly suggests any

untimeliness does not deprive the court of subject matter jurisdiction, the court agrees

with Defendant’s contention.

Under settled principles of sovereign immunity, “the United States, as sovereign,

‘is immune from suit, save as it consents to be sued . . . and the terms of its consent to be

sued in any court define that court’s jurisdiction to entertain the suit.’” United States v.

Testan, 424 U.S. 392, 399 (1976) (quoting United States v. Sherwood, 312 U.S. 584, 586

(1941)). The United States has waived its sovereign immunity to allow taxpayers to

file actions seeking tax refunds: “The district courts shall have original jurisdiction . . .

of [a]ny civil action against the United States for the recovery of any internal-revenue

tax alleged to have been erroneously or illegally assessed or collected . . . .” 28 U.S.C.

§ 1346(a)(1).

However, a claimant may not maintain a refund suit in any court “until a claim

for refund or credit has been duly filed with the Secretary, according to the provisions

of law in that regard, and the regulations of the Secretary established in pursuance

thereof.” 26 U.S.C. § 7422(a); Wachovia Bank, N.A. v. United States, 455 F.3d 1261, 1264

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(11th Cir. 2006). The most pertinent law for this case involves the statute of limitations

contained in 26 U.S.C. § 6511(a). Section 6511(a) provides in pertinent part:

Claim for credit of refund of an overpayment of any tax imposed by this

title in respect of which tax the taxpayer is required to file a return shall be

filed by the taxpayer within 3 years from the time the return was filed or 2

years from the time the tax was paid, whichever of such periods expires

the later. . . .

26 U.S.C. § 6511(a). Subsection (b)(1) provides that “[n]o credit or refund shall be

allowed or made after the expiration of the period of limitation prescribed in subsection

(a) for the filing of a claim for credit or refund, unless a claim for credit or refund is filed

by the taxpayer within such period.” Id. § 6511(b)(1). Therefore, “unless a claim for

refund of a tax has been filed within the time limits imposed by [section] 6511(a), a suit

for refund . . . may not be maintained in any court.” United States v. Dalm, 494 U.S. 596,

602 (1990) (citing United States v. Kales, 314 U.S. 186, 193 (1941)); United States v. Clintwood

Elkhorn Min. Co., 553 U.S. 1, 5 (2008) (“unless a claim for refund of a tax has been filed

within the time limits imposed by § 6511(a), a suit for refund . . . may not be maintained

in any court.”); Wachovia Bank, 455 F.3d at 1269 (a claimant’s failure to comply with

§ 6511(a) deprives a district court of subject-matter jurisdiction over a refund claim).

Application of § 6511(a) proceeds straightforwardly, as Carter clearly violated the

provision in the circumstances at bar. When the Estate filed its 2013 and 2016

administrative claims, the limitations period for submitting such a claim had lapsed

because the Estate had filed its tax returns in 2008 and 2009. Therefore, the Estate

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clearly violated § 6511(a), which bars the court’s jurisdiction over a suit regarding such a

late-filed claim.

Nevertheless, Carter invokes the financial disability exception to § 6511(a) to toll

the filing of the Estate’s refund claim.

II. Carter’s Alleged Financial Disability Did Not Toll The Estate’s

Deadline to File a Refund Claim

Defendant contends Carter’s alleged financial disability does not excuse the

untimeliness of the Estate’s refund claim. The court finds the alleged financial

disability of an Estate’s personal representative does not extend the filing deadline for

the Estate to seek a refund.

To pursue a refund claim, a claimant must file an administrative claim with the

IRS before filing suit in federal court. See 26 U.S.C. § 7422(a) (“No suit or proceeding

shall be maintained in any court for the recovery of any internal revenue tax alleged to

have been erroneously or illegally assessed or collected . . . until a claim for refund or

credit has been duly filed with the Secretary . . . . “); Wachovia Bank, 455 F.3d at 1264 (a

refund claimant must adhere to applicable regulations, specifically § 6511(a), before

filing suit to obtain a refund). As established previously, a claimant must file the

administrative claim within three years from the time the tax return was filed or two

years from the time the tax was paid. 26 U.S.C. § 6511(a).

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There exists no dispute the Estate failed to file a claim for a refund within

§ 6511(a)’s prescribed deadlines, as it did not file a claim until 2013, well after 2009

when the Estate filed its amended return. Carter contends the deadline to file the

administrative claim should be tolled pursuant to 29 U.S.C. § 6511(h) due to her

financial disability.

Title 28 U.S.C. § 6511(h) permits suspension of the filing deadlines while a

taxpayer is unable to manage his or her financial affairs due to a disability:

(1) In general

In the case of an individual, the running of the periods specified in

subsections (a)[and] (b)[ ] . . . shall be suspended during any period of such

individual’s life that such individual is financially disabled.

(2) Financially disabled

(A) In general

For purposes of paragraph (1), an individual is financially disabled

if such individual is unable to manage his financial affairs by reason of a

medically determinable physical or mental impairment of the individual

which can be expected to result in death or which has lasted or can be

expected to last for a continuous period of not less than 12 months. An

individual shall not be considered to have such an impairment unless

proof of the existence thereof is furnished in such form and manner as the

Secretary may require.

(B) Exception where individual has guardian, etc.

An individual shall not be treated as financially disabled during any

period that such individual’s spouse or any other person is authorized to

act on behalf of such individual in financial matters.

26 U.S.C. § 6511(h)(1)–(2); see also Saltzman & Book, IRS Practice and Procedure,

¶ 11.03, Rules Applicable to Claims For Credit or Refund, 1999 WL 1050963, at *7

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(discussing The IRS Restructuring and Reform Act of 1998’s addition of § 6511(h)’s

financial disability provision).

Carter asserts that from Fall 2008 to the end of 2013, she suffered from moderate

to severe mental and emotional maladies which rendered her incapable of managing the

Estate’s financial affairs. She provides the declaration of her treating physician, Dr.

William Hahn, to support this contention. Both Carter and Dr. Hahn attest the trauma

from the Colonial stock’s complete devaluation caused Carter’s ailments. For these

reasons, Carter maintains her disabilities incited § 6511(h)’s equitable tolling provision

so as to excuse the untimely filing of the refund claim.

Unfortunately for Carter, estates do not constitute “individuals” subject to

§ 6511(h)’s provisions. Estates, while able to conduct their affairs only through

personal representatives, exist separately from their personal representatives.

First and foremost, the terms and structure of the Internal Revenue Code

commands the conclusion that the category “individual” does not include entities such

as estates. The Code defines the term “person” as “an individual, a trust, estate,

partnership, association, company or corporation.” 26 U.S.C. § 7701(a)(1).

Therefore, the Code delineates the term “individual” from the term “estate.”

To parry the distinction between “individuals” and “estates” for purposes of

§ 6511(h), Carter cites to examples in the Code treating an estate in the same manner as

an individual rather than a corporation. First, Carter cites 26 U.S.C. § 2002, which

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requires payment of the estate tax by the executor, and argues estates thus must act

through individuals. She also cites 26 U.S.C. § 641(b) (“[t]he taxable income of an

estate or trust shall be computed in the same manner as in the case of an individual,

except as otherwise provided in this part.”). The other statutory provisions cited by

Carter impose upon estates the same benefits or burdens as those heaped upon

individuals.4 Plaintiff generally asserts that the Code permits estates to take advantage

of tax provisions which by their own terms apply only to individuals.

As an initial rejoinder, many of the provisions cited by Carter implicate

computation of tax liabilities; § 6511(h) pertains to the deadline for seeking a refund.

Further, the Code contains a separate section addressing federal estate tax, 26 U.S.C.

§§ 2001-2210, and provides a separate form (Form 706) to report estate tax. The Code

regulates the estate and trust income in 26 U.S.C. §§ 641-685 and requires a report of

that income on a separate form (Form 1041). The Code also sets out differing tax rates

for estates as opposed to individuals. See 26 U.S.C. § 1(a)-(d) (individual income tax

rates); 26 U.S.C. § 1(e) (estate income tax rates). Thus, the Code does not treat

individuals and estates in the same manner in all respects. While Plaintiff asserts an

4 See 26 U.S.C. § 67 (imposing a 2 percent floor on miscellaneous itemized deductions); 26 U.S.C. § 212

(deduction of ordinary and necessary expenses paid or incurred for the collection of income; for

management, conservation, or maintenance of property held for the production of income; or in

connection with certain tax matters); 26 U.S.C. § 465 (at-risk rules); 26 U.S.C. § 469 (passive activity

loss rules); 26 U.S.C. § 163(d) (allowing estates to deduct investment interest expenses only to the

extent of the investment income); 26 U.S.C. § 166(d)(1) (requiring estates to characterize nonbusiness

bad debts as short-term capital losses); 26 U.S.C. §§ 1014(a), 1223(11) (an estate constitutes a “person”

in determining the basis and holding period of property acquired from a decedent).

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estate may only act through an individual (or, at times, through a corporate

representative, see Smith v. Wachovia Bank, N.A., 33 So. 3d 1191 (Ala. 2009)), the same

holds true of corporations. 5

5 Carter cites B.W. Jones Tr. v. Comm’r of Internal Revenue, 132 F.2d 914 (4th Cir. 1943), for the proposition

that “American courts have historically held that provisions of the Code using the term ‘individual,’

but not pertaining directly to the computation of taxable income, are generally construed to apply to

trusts and estates.” (Doc. 25 at 6). Presumably, Plaintiff relies on the following language from the

case:

Sec. 211(a) of the Revenue Act of 1936, 49 Stat. 1714, as amended by sec. 501 of the

Revenue Act of 1937, 26 U.S.C.A.Int.Rev.Acts, page 904, and sec. 211(a) of the

Revenue Act of 1938, 52 Stat. 527, 26 U.S.C.A.Int.Rev.Acts, page 1093, contain the

following provision: ‘There shall be levied, collected, and paid for each taxable year, in

lieu of the tax imposed by sections 11 and 12, upon the amount received, by every

nonresident alien individual not engaged in trade or business within the United States

and not having an office or place of business therein, from sources within the United

States * * * a tax of 10 per centum of such amount * * * .’

And sec. 211(b) of these Revenue Acts provides: ‘A nonresident alien individual

engaged in trade or business in the United States or having an office or place of

business therein shall be taxable without regard to the provisions of subsection (a).’

Sec. 161 of the Act, 52 Stat. 517, 26 U.S.C.A.Int.Rev.Acts, page 1080, provides that the

taxes imposed ‘upon individuals’, under the title relating to the income tax, ‘shall apply

to the income of estates or of any kind of property held in trust’. This means, of

course, that the tax is imposed upon the income of the trust and that the trust is taxable

under secs. 11 and 12 of the Revenue Act, 26 U.S.C.A.Int.Rev.Acts, page 1002, as

contended by the Commissioner, unless it can bring itself within the provisions of sec.

211, i.e. unless it can show (1) that it is nonresident as well as alien, (2) that it is not

engaged in trade or business within the United States, and (3) that it does not have an

office or place of business in the United States.

* * * *

It is the manifest intention of Congress that alien trusts be subjected to the same rule as

alien individuals, and such trust is subject to sec. 211 only under circumstances that

would subject an individual to it.

B.W. Jones Tr. v. Comm’r of Internal Revenue, 132 F.2d at 915–16. No other court has cited B.W. Jones for

Carter’s proposition.

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More importantly, extending Code provisions applicable to individuals to

matters regarding estates does not convert the “estates” into “individuals.” As

reviewed previously, § 6511(h) applies to “individuals” and does not extend its

provisions to “estates.” Other courts have adjudicated this issue and reached the same

conclusion.6

6 See Murdock v. United States, 103 Fed. Cl. 389 (2012) (trustee of deceased taxpayer’s inter vivos trust

cannot claim tolling under § 6511(h); “the physical or mental impairment must be that of the taxpayer,

not of some third person”); Alternative Entm’t Enters., Inc. v. United States, 458 F. Supp. 2d 424 (E.D.

Mich. 2006), aff’d, 277 F. App’x 590 (6th Cir. 2008) (corporation could not claim “individual” status

under § 6511(h)’s tolling provision when corporation’s sole employee, officer, and shareholder alleged

inability to file tax returns due to cancer diagnosis); Brosi v. Comm’r, 120 T.C. 5, 10, 2003 WL 118259

(2003) (for a taxpayer to qualify as financially disabled pursuant to § 6511(h), the physical or mental

impairment must be that of the taxpayer, not of some third person); Lawrence S. Deutsch, M.D. & Assocs.

v. United States, No. CV 16-5257, 2017 WL 1079996, at *2 (E.D. Pa. Mar. 21, 2017), appeal dismissed sub

nom. Lawrence S. Deutsch, M.D. & Assocs., P.C. v. USA, No. 17-1720, 2017 WL 4863250 (3d Cir. Aug. 2,

2017) (because tolling under § 6511(h) only applies to an “individual” taxpayer, financial disability of

sole member of professional corporation did not extend time for corporation to seek refund); Pleconis

v. I.R.S., No. CIV.A. 09-5970 SDWES, 2011 WL 3502057, at *7 (D.N.J. Aug. 10, 2011) (spouse who

argued she did not file taxes, in part, because she was caring for her husband, could not claim financial

disability because the physical or mental impairment has to be the taxpayer’s, not a third person’s); see

also IRS Rev. Proc. 99-21, 1999-1 C.B. 960 (1999) (“Section 6511(h), as added by § 3202 of the Internal

Revenue Service Restructuring and Reform Act of 1998, Pub. L. No. 105-206, 112 Stat. 685 (July 22,

1998), suspends the statute of limitations period for filing a claim for credit or refund under § 6511(a)

for any period of an individual taxpayer’s life during which the taxpayer is unable to manage the taxpayer’s

financial affairs because of a medically determinable mental or physical impairment that can be

expected to result in death, or has lasted (or can be expected to last) for a continuous period of not less

than 12 months.”) (emphasis added); c.f., In re Cook, No. 14–20547, 2014 WL 5686272 (Bankr. S.D. Ga.

Nov. 4, 2014) (decedent’s estate not an “individual” as term used in 11 U.S.C. § 1301(a)). In addition,

bankruptcy law does not equate an estate with an individual. See, e.g., In re Cook, No. 14-20547, 2014

WL 5686272, at *1 (Bankr. S.D. Ga. Nov. 4, 2014) (“A decedent estate is not an individual under the

Bankruptcy Code.”); In re Estate of Patterson, 64 B.R. 807, 808 (Bankr. W.D. Tex.1986) (estates are not

“persons”); In re Brown’s Estate, 16 B .R. 128, 128 (Bankr. D.D.C. 1981) (a probate estate is not an

individual person within the meaning of the Bankruptcy Code); but see In re Case, 148 B.R. 901, 902

(Bankr. W.D. Mo. 1992) (decedent’s estate is an individual because it is the extension of an individual

natural person, the decedent).

Notably, In re Case equated an estate with the decedent, not the personal representative of the estate.

This comports with § 6511(h), which allows an estate to invoke financial disability to excuse a late

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Therefore, Carter may not invoke her financial disability to toll the time for the

Estate’s refund claim, and thus, § 6511(a) bars the Estate’s refund claim because it was

not timely filed administratively. Although the foregoing findings bar the court’s

exercise of jurisdiction over this matter, the prospect that § 6511(a) does not present a

jurisdictional bar incites review of Carter’s claim on the merits.7

refund claim when the decedent suffered from a financial disability, not the administrator of the estate.

See Estate of Rubinstein v. United States, 96 Fed. Cl. 640, 642 (2011) (considering whether decedent’s

alleged financial disability tolled the time for estate to seek a refund); Estate of Kirsch v. United States, 265

F. Supp. 3d 315, 322 (W.D.N.Y. 2017) (same).

7 Supreme Court jurisprudence no longer accords similar limitations periods jurisdictional status. In

United States v. Kwai Fun Wong, 135 S. Ct. 1625 (2015), the Supreme Court held the limitations period for

filing a Federal Tort Claims Act case is not jurisdictional. The Court determined “the Government

must clear a high bar to establish that a statute of limitations is jurisdictional.” Id. at 1632. “In recent

years, [the Court has] repeatedly held that procedural rules, including time bars, cabin a court’s power

only if Congress has ‘clearly state[d]’ as much.” Id.(citation omitted). “Time and again, [the Court

has] described filing deadlines as ‘quintessential claim-processing rules,’ which ‘seek to promote the

orderly progress of litigation,’ but do not deprive a court of authority to hear a case.” Id. (citing

Henderson v. Shinseki, 562 U.S. 428, 435 (2011)).

Therefore, to “ward off profligate use of the term ‘jurisdiction,’ [the Court has] adopted a ‘readily

administrable bright line’ for determining whether to classify a statutory limitation as jurisdictional. . . .

[Courts should] inquire whether Congress has ‘clearly state[d]’ that the rule is jurisdictional; absent

such a clear statement, . . . ‘courts should treat the restriction as nonjurisdictional in character.’”

Sebelius v. Auburn Reg’l Med. Ctr., 568 U.S. 145, 153 (2013) (citations omitted). As a result, the Court

has “repeatedly held that filing deadlines ordinarily are not jurisdictional . . . .” Id. at 154 (citations

omitted).

Even more recently, the Supreme Court reconfirmed that a statute’s limitations period primarily

pertains to claim-processing, not subject matter jurisdiction. See Fort Bend Cty., Texas v. Davis, 139 S.

Ct. 1843, 1849 (2019) (“The Court has therefore stressed the distinction between jurisdictional

prescriptions and nonjurisdictional claim-processing rules, which ‘seek to promote the orderly

progress of litigation by requiring that the parties take certain procedural steps at certain specified

times.’” (quoting Henderson v. Shinseki, 562 U.S. 428, 435 (2011))); Nutraceutical Corp. v. Lambert, 139 S.

Ct. 710 (2019) (contrasting nonjurisdictional claim-processing rules subject to waiver by an opposing

party with court procedural rules which clearly foreclose a flexible equitable tolling approach). “If a

time prescription governing the transfer of adjudicatory authority from one Article III court to

another appears in a statute, the limitation [will rank as] jurisdictional; otherwise, the time specification

17

III. The Stock’s Fair Market Value at the Time the Estate Filed Its Tax

Return Governs

Even if the court determined § 6511(h) tolled the time for the Estate to file its

refund claim, the valuation of the Colonial stock establishes no entitlement to refund.

fits within the claim-processing category.” Hamer v. Neighborhood Hous. Servs. of Chicago, 583 U.S. at

__,138 S. Ct. 13, 20 (2017) (citation omitted).

Section 6511(a)’s filing deadlines appear to fall within the ambit of a claim-processing rule rather than

a jurisdictional prerequisite. As similarly countenanced in Kwai Fun Wong, § 6511(a)’s “text speaks

only to a claim’s timeliness, not to a court’s power.” 135 S. Ct. at 1632; see § 6511 (describing the filing

deadlines for administrative claims for tax credits and refunds). Section 6511 “’does not speak in

jurisdictional terms or refer in any way to the jurisdiction of the district courts.’” Kwai Fun Wong, 135

S. Ct. at 1633 (citations omitted). Furthermore, § 6511’s limitations periods fall in a different section

of the Internal Revenue Code from the jurisdiction granting provisions. See 28 U.S.C. § 1346(a)(1); 26

U.S.C. § 7422.

The court cognizes the Supreme Court referred to § 6511’s time limits in jurisdictional terms in United

States v. Dalm, 494 U.S. 596 (1990). In Dalm, the Court held the district court did not have jurisdiction

over a suit seeking a refund of gift tax, interest, and penalties when the plaintiff did not file suit within

the limitations period. Id. at 601. The Eleventh Circuit followed Dalm’s reasoning in dismissing a

refund suit for lack of subject matter jurisdiction. Wachovia Bank, N.A. v. United States, 455 F.3d 1261,

1268-69 (11th Cir. 2006). However, the Supreme Court’s recent jurisprudence portrays that courts

“once used [the term “jurisdiction”] in a ‘less than meticulous’ manner.” Nutraceutical, 139 S. Ct. at

714 n. 3 (citing Hamer, 583 U.S. at __, 138 S. Ct. at 21; Kontrick v. Ryan, 540 U.S. 443, 454 (2004)).

“Those earlier statements did not necessarily signify that the rules at issue were formally ‘jurisdictional’

as [the Court uses] that term today.” Id.

Nevertheless, the structural interpretation of § 6511(a) as a claims-processing rule may not overcome

its prior construal as a jurisdictional provision. See Fort Bend, 139 S. Ct. at 1849 (The “Court has stated

it would treat a requirement as ‘jurisdictional’ when ‘a long line of Supreme Court decisions left

undisturbed by Congress’ attached a jurisdictional label to the prescription.”) (citations & internal

alterations omitted). Furthermore, notwithstanding the shadow cast on § 6511(a) as a jurisdictional

provision, its limitations period applies to this action as it prescribes mandatory filing deadlines subject

to a narrow tolling provision. See Nutraceutical, 139 S. Ct. at (“The mere fact that a time limit lacks

jurisdictional force, however, does not render it malleable in every respect. Though subject to waiver

and forfeiture, some claim-processing rules are “mandatory”—that is, they are “‘unalterable’” if

properly raised by an opposing party.” (citing Manrique v. United States, 137 S. Ct. 1266, 1272 (2017); see

also Kontrick, 540 U.S. at 456; Eberhart v. United States, 546 U.S. 12, 19 (2005) (per curiam) (A

claim-processing rule manifests as “mandatory” when a court must enforce the rule if a party

“properly raise[s]” it.). Therefore, Defendant properly raised the limitations period prescribed by 26

U.S.C. § 6511(a), and it applies whether it is designated as a jurisdictional or claim processing rule.

18

A “taxable estate” consists of a “gross estate” reduced by deductions allowed by

the Internal Revenue Code. See 26 U.S.C. §§ 2001, 2051. The “gross estate”

comprises the fair market value of a decedent’s property either on the date of death, or

an “alternative valuation date,” occurring six months from the decedent’s death. 26

U.S.C. §§ 2031(a), 2032(a). In this case, the two possible valuation dates represent the

date of Ms. Roper’s death, September 21, 2007, or six months thereafter, March 21,

2008. Carter contends the Colonial stock was worthless at that time of its valuation

due to fraud.

The fair market value of an asset constitutes the “price at which the property

would change hands between a willing buyer and a willing seller, neither being under any

compulsion to buy or sell and both having reasonable knowledge of relevant facts.” 26

C.F.R. § 20.2031-1(b). For securities traded on the stock exchange, “the general rule is

that the average exchange price quoted on the valuation date furnishes the most

accurate, as well as the most readily ascertainable, measure of fair market value.”

Amerada Hess Corp. v. Comm’r, 517 F.2d 75, 83 (3rd Cir. 1975); see also, United States v.

Cartwright, 411 U.S. 546, 551 (1973) (“[I]f the decedent had owned ordinary corporate

stock listed on an exchange, its ‘value’ for estate tax purposes would be the price the

estate could have obtained if it had sold the stock on the valuation date, that price being,

under Treas. Reg. s 20.2031—2(b), the mean between the highest and lowest quoted

selling prices on that day.”); Johnson v. Comm’r, 74 T.C. 89, 93 (1980), aff’d, 673 F.2d 262

19

(9th Cir. 1982) (“[t]he obvious reason for using the exchange price as the fair market

value of the stock is that such price is the best evidence of what a willing buyer will pay

a willing seller for the stock”).8

Unfortunately, the prevailing sentiment establishes that the fair market valuation

method does not include an exception for fraudulent or criminal actions not known to

the public, even if those actions lower or destroy the stock’s value. This sentiment

manifests initially in Estate of Wright v Commissioner, 43 B.T.A. 551 (1941). In Wright, the

taxpayer contended a stock’s exchange-traded price did not represent fair market value

because the “prices were the result of misrepresentations and concealments of which

purchasers and sellers on the Exchange were at that time unaware.” Id. at 555. The

Tax Court declined to disregard a “universally accepted market price, the result of

numerous transactions in which the general public freely participated.” Id. at 556.

The fraudulent conduct alleged by the taxpayer, assuming it occurred “did not prove

that the market did not exist or that the sales did not take place.” Id.

Several other cases mirror Wright’s holding. See Gourley v. United States, No. 08–

558 T, 2009 WL 2700206, at *5, 6 (Fed. Cl. Aug. 26, 2009) (“Even when the corporation

engages in a ‘deliberate, massive fraud’ that conceals the true circumstances of the

business, the price at which the stock could be bought and sold on a public exchange on

8 Johnson identified exceptions to this rule, principally when “the stock was not sold on any exchange,

or because the stock valued was part of a large block of stock, or because the stock price was artificially

controlled by a syndicate.” Johnson v. Comm’r, 74 T.C. 89, 96 (1980).

20

the valuation date remains the fair value of the stock….” The stockholders “possessed

the same information that was available to the public when they bought this publicly

traded stock and both they and the public knew what the stock sold for on that date.

When a stock has a market value, that is generally the ‘fair’ valuation for tax assessment

purposes.”); Polack v. Comm’r, 366 F.3d 608, 612 (8th Cir. 2004) (“[i]nformation the

hypothetical willing buyer could not have known is obviously irrelevant” to fair market

value) (quoting First Nat’l Bank of Kenosha v. United States, 763 F.2d 891, 894 (7th Cir.

1985)); Johnson, 74 T.C. at 95–96 (“it is immaterial whether the officers did in fact

misrepresent the earnings and profits of the corporation; in any event, the fair market

value of the Mattel stock is to be based on prices for which such stock was sold on the

NYSE.”); Gudmundsson v. United States, 665 F. Supp. 2d 227, 238 (W.D.N.Y. 2009), aff’d,

634 F.3d 212 (2d Cir. 2011) (court rejected argument that valuation of stock should take

into account fraud that caused stock’s inflated price on relevant valuation date).

Carter argues the government cannot assume a different posture than its position

during prosecution of the criminal fraud at issue. The government commenced its

prosecution of the fraud in 2010. In its June 23, 2011, sentencing memorandum, the

United States declared the fraud affected Colonial stocks’ fair market value as of its

disclosure to the public on August 3, 2009.9 Of course, the flaw in the contention

9 Specifically, the sentencing memorandum stated, “all individuals who held Colonial BancGroup

common stock as of August 3, 2009 are victims because once the fraud was disclosed, the stockholders

were unable to sell their stock for a price higher or equal to the price at which they purchased the

21

manifests upon initial review. The market for Colonial BancGroup did not collapse

until more than one year after the Estate’s valuation date. Until the fraud affected the

exchange price, it exhibited no effect upon the stock’s fair market value.

Carter also decries use of the average exchange price in these circumstances as

“unfair, unequitable, and unjust,” (Doc. 25 at 9), citing Shackleford v. United States, 262

F.3d 1028 (9th Cir. 2001). In Shackleford, the plaintiff estate argued use of annuity tables

to determine the fair market value of future lottery payments yielded an inaccurate

valuation. The court held the fair market valuation rule did not accurately reflect

“economic reality” and sanctioned use of the “more realistic and reasonable valuation

method” proposed by the estate. Id. at 1032.

The Shackleford decision rests upon distinguishable facts and regulations. In

Shackleford, the IRS regulations required asset valuation pursuant to annuity tables for

non-commercial annuities, such as future lottery payments, except when another

regulatory provision applies. State law forbade the owner from assigning future

payments, thereby reducing the actual value of the winnings. The court thus

determined the asset’s marketability was restricted and less valuable than an identical

marketable asset. Id. at 1032. In such circumstances, the court approved a valuation

method using a hypothetical buyer, seller, and market.

stock.” (Doc. 1-4 at 21-22).

22

Rather than using annuity tables, as in Shackleford, the IRS utilizes the exchange

rates set by the market for valuing stocks. The IRS determined, and courts agree, that

this method of valuing stocks and securities sufficiently reflects the actual value of the

stock. The Treasury regulations explicitly direct that “if there is a market for stocks or

bonds, on a stock exchange, in an over-the-counter market, or otherwise, the mean

between the highest and lowest quoted selling prices on the valuation date is the fair

market value per share or bond.” 26 C.F.R. § 20.2031-2(b). Had Plaintiff sold the

stock upon the decedent’s death or within six months thereafter, Plaintiff would have

received the market rate for the stock as of that date, and that remains the appropriate

valuation under IRS regulations. See Johnson, 673 F.2d at 265 (noting that the taxpayers

in that case “were always free to sell their stock at the exchange price”). As the Tax

Court stated in Wright,

What petitioner’s position would require us to hold, therefore, is that a

universally accepted market price, the result of numerous transactions in

which the general public freely participated, should be disregarded

because more than two years later concealed facts were disclosed which,

had they been known, might have created a different market from that

which the facts show actually existed.

43 B.T.A. at 555; accord Scher v. United States, No. 1788-72, 1976 WL 1191, at *2 (D. N.J.

Sept. 29, 1976) (“the requirement that the hypothetical willing but uncompelled buyer

and seller used in the market value test have knowledge of relevant facts, does not

23

contemplate knowledge of insider information. It encompasses only putative

knowledge of that data available in the marketplace.”).10

Although the court is sympathetic to Carter’s plight in these circumstances, it

cannot invoke its equitable powers to fashion relief against the ravages wreaked by the

criminal fraud. See United States v. Dalm, 494 U.S. 596, 608 (1990) (A “party litigating a

tax claim in a timely proceeding may, in that proceeding, seek recoupment of a related,

and inconsistent, but now time-barred tax claim relating to the same transaction. . . .

To date, we have not allowed equitable recoupment to be the sole basis for

jurisdiction.”). In these circumstances, providing an equitable remedy would invade

upon the province of Congress.11

10 Other examples exist where courts utilize an alternate valuation method. See Kuchman v. Comm’r, 18

T.C. 154, 163 (1952) (petitioner held stock with contractual restrictions and could not find a buyer;

thus, stock had no ascertainable fair market value and petitioner’s acquisition of the stock did not

justify charging petitioner with any income in the year of its receipt); Frizzelle Farms, Inc. v. Comm’r, 61

T.C. 737, 743 (1974), aff’d per curiam, 511 F.2d 1009 (4th Cir. 1975) (alternative valuation appropriate for

unusual circumstances, such as valuation of a large block of stock or when stock is not freely

transferable). However, the circumstances differ from the case at bar, which involves stock publicly

traded on the New York Stock Exchange and not otherwise non-transferable.

11 Congress has intervened in the past to correct supposed injustices resulting from extreme

fluctuations in market valuation. Congress added the alternative valuation date provision after the

stock market crash of 1929, in an apparent effort to provide relief for post-death decreases in the value

of estate property. See S. Rep. No. 1240, at 9 (1935); H.R. Rep. No. 74-1681, 74th Cong., 2d Sess.

page 9 (1935); S. Rep. No. 74-1240, part 1, 74th Cong., 2d Sess. pages 9-10 (1935); S. Rep. No.

74-1240, part 2, 74th Cong., 2d Sess. pages 8-9 (1935); 79 Cong. Rec. 14632 (1935) (statement of Mr.

Samuel B. Hill); see also Maass v. Higgins, 312 U.S. 443, 446 (1941) (purpose of predecessor to § 2032 was

to “mitigate the hardship consequent upon shrinkage in the value of estates during the year following

death”); Howard M. Zaritsky, Re-Proposed Regulations on Value Changes During Alternate Valuation Period,

39 Est. Plan. 44, 48, 2012 WL 1035953, at *1 (2012); Skye Christakos, Has the IRS Gone Too Far with Its

Alternate Valuation Date Proposed Regulations?, 15 Lewis & Clark L. Rev. 491, 495–98 (2011). Congress

initially provided for an alternative valuation date one year after the decedent’s death. See H.R. Rep.

24

CONCLUSION

Based on the foregoing analysis, the court will GRANT Defendant’s Motion and

DISMISS this action WITH PREJUDICE. The court will enter a separate order in

conformity with this Memorandum Opinion.

DONE and ORDERED this 9" day of August, 2019.

N. fet JR.

UNITED STATES MAGISTRATE JUDGE

83-1337, 4116 (1954) (“Present law allows an estate to be valued at either the date of a decedent’s death

or 1 year thereafter.”). In 1970, Congress amended the alternative valuation date to six months after

the decedent’s death, in light of its change to the deadline for filing estate tax returns from 15 months

to nine months. Excise, Estate, and Gift Tax Adjustment Act of 1970, Pub. L. No. 91-614,

§101(a)(1), 84 Stat. 1836, 1836 (1970). Congress amended § 2032 again in 1984, adding subsection (c)

to allow the election only if both the value of the gross estate and the estate tax were reduced. See

H.R. Rep. No. 98-432, at 1521 (1983) (stating that purpose of provision is to provide “relief for estate

tax purposes where the value of the property decreased after death so that estate taxes are not

inordinate.”’). Most recently, H.R. 25, introduced in 2019, proposes repeal of the estate tax. Based

upon this legislative activity, the court should not use its equitable authority to address a matter clearly

with Congress’s purview and awareness.

25