Estate of Edward Thomas Coaxum, Deceased; Ronald Coaxum, Executor, Petitioners

T.C. Memo. 2011-135 UNITED STATES TAX COURT ESTA'IE OF EDWARD THOM S COAXUM, DECEASED, RONALD COAXUM EXECUTOR, Petitioner v. COMMISSIONER ØF »INTERN»L REVENUE Respondent Dcicket o 2 783-08. I ile à e 16, 2011.

Ronald Colaxtm, for petitioner.

Randall L. Eager,' for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

ORRISON, Judge:

The respondent issued a notice of deficiency deterrnihing an estate- ax deficiency of $337,193 and a sectiàn 665ï(a) ) ailure t"ó-fil addition to tax of $84;298 IUnless othei-wise indicated, all citations of sections refer toi the Internal evenue Code of 1986, as amendedrand in effect for the date of decedent's death, and all scitations of Rules refer to the Tax Court Rules of Practice and Procedure.

$8NED JUN 16 20H Ronald Coaxum filed a petit on for redetermination of the deficiency. After concessions by the parties, several issues remain.

They are resolved by the Court as follows:

(1) the decedent, Edward Coaxum, retained incidents of ownership in six life insurance policies, re dering their values includable in the value of the gross estate, (2) the value of the annuities owned by the decedent is included in the value of the gross estate, and (3) the estate is liable fo the section 6651(a) (1) addition to tax.

FINDINGS OF FACT

Ronald Coaxum- was a resident of South Carolina at the time he filed the petition. Thetlife of the decedent, Edward Coaxum, was insured by seven insurance policies that provided death benefits.

One of the polic es, the respondent concedes, had no value when the decedent die These policies were in force when he died.

The decedent possessed the power to change the beneficiaries on all six relevant insurance policies until he died.

At his death, the dece ent owned annuitiés with a value of $472, 956 .

The decedent died on O tober 15, 2003. His brother, Ronald Coaxum, is the executor-of he estate. Ronald Coaxum was required to file an estate- ax return within nine months after The seventh policy was reported on the estate' s tax return, but the respondent concedes that it had no value.

the death The estate-tax retur was not-filed until February -3 27, 2006.

The estate ax return report d that the val0es sof the six insu ance policies should be included in' the value, of the gross estate.

The policies and the values reported on..the return were:

Life Insurance Co.» of North America Metropolitan Life Insurance Co Life Insurance Co. of North America State =Farm Life Insurance Cò Monumental fe Insurance Co Metropolitah Life Insurance Co.

$500,000 56, 000 116, 000 51, 077 227,500 336, 000 The eturn reported that the valu of annuities includable in the gross estate was zero."Sn the notice of deficiency the - V respcndent:determined thatethe six insurancerpolicies should be incl ided in the value of the gross estate using the values reported, except that (1) the valve of thetState Farm Life Insugance Co. policy should be re uced $2,893 to $485184 and (2) the ¿aluenof the Monumentah Life Insuranbe Co. policy should be reduc:eds$500 to $227,000.

The no i'ce of deficiency thussstated that the value of' insurance on th decedent'solife was a $1,283,184.

Th notice'of deficiency also dete minedethat the The- executor is- required to file the return Sec.

6018 a) (1). The return must be filed within nine months after the date of déath, unless the IRS grants an, exténsiori. Secs.² 6075la), 6081. its transactions with the estate show , the IRS did not grant an extension.

As the IRS transcript of ännuities owned by the decedent at his death shoüld be included in his gross estate at a value of $472,956.

In the petition, .as amended; the petitioner claimed, among othei- things, that the value of the gross estate should not include the value of, the insurance policies The parties make the f llowing concessions .

•The petitioner conced s that, the value of th decedent' s rea property was underrepo ted by $50,402.

•The petitionar concedes that cash on hand was underreported by •The pètitioner concedes - that the ,actual funeral and administrative expensessinc rred by the estate are $$,780, rather than the $288 923 reported on the estate-tax return.

•The respondent concedes that $73, 583,of workers compensation benefits is no an asset sofathe estate.

These benefit"s dere determ nedt in the nötice of deficiency to be assets of the estatie.

9 •The respondent acknow edges sthat estate-tax deductions should be increased by $18, 226 the amount of an auto loan that was not deducted ön the est te-tax return-but that was allowed as a deduction in theanotice of defiàiency.

•The respondent acknowledges that the value of i surance policies includabler in the alue of the gross estate does not exceed $1,283r,184 (that is $ 00,000 + $56,000 $116 000 + $48,184 + $227,000 + $336,000).

OPIN10N

I.

The Decedent Retained an Incident of Ownership in Each of the Six Life Insurance Policies.

' Section 2042 provides that-the value of the- gross estate shal lude the value of all property (1) to the extent of the amount receivablŠ by the executor as insu'rance under policies on the life of the dece'dènt' and (2)' to the extent of the amount receivable by all other beneficiaries as insurance' under policies on the life' of the decedent with respect to wliitáh the- decedent, possessed at death any of thei incidents of ownership.

One incident Iof ownership is the- power to change the beneficiary of the insurance policy.

Sec. 20.2042 1(c).(2), Estate Tax Regs.

The respondent determined that the values of the six polidies should be included in th value of the gross estate.

Under Rule 142 (a) (1) , the taxpayer has the burden of proving that determinations in the notice of deficiency arerincorrect.

Section '/491(a) provides that the burden of proof rests with the IRS if the taxpayer introduces credible evidence, the taxpayer has c omplied with' substantiation requirements, the taxpayer has maint ained all required records, a.nd the taxpayer has cooperated with reasonable requests for information.

The preponderance of the vidence demonstrates that th decedent retained the right to change the beneficiaries on the policies until his death.

Therèfore the allocation of the burden of persuasion is immaterial.

See Martin Ice Cream Co. v. Commissioner, 110 T.C.

| 189, 210-216 (1998) .

The values of the policies are included in the value of the gross esta e.

II.

The Value of in the Value of the Gröss Estate.

the Annuities Owned by the Decedent Is Included At his death, the decedent owned annuities with a value of $472,956.

,Section 2039(a) rovides that the value of annuities owned by the decedent - is ineluded in the value of the gross estate. Therefore, the value of the annuities owned by the decedent is included in thenvalue of the gross estate.

Before trial, the parties stipulated that the the date of decedent' s death should Petitioner maintains that the fair market value of annuities owned at be excluded from the gross estate for the sole reason that these amounts were reported as taxable income on Lonnie Coaxum' s 2004 -AñÍended Federal and on Lonnie Coaxum's 2005 Federal income tax return income tax return.

Lonnie Coaxum is the 'brothe of the decedent .

The petitioner' s brief does not press the arcjument referred to in the stipulation that is quoted above.

The argument is therefore waived.

Instead, the petitiòner arg s tilat "decedent's beneficiaries will be allowed a deduction in the amount of Federal estate tax paid on the items of IRD [income in respect of a decedent] . " This is a reference to the deduction potentially allowed by section 691(c) to Lonnie CoExum in calculating his income-tax liability.

We do not have jurisdiction to determine the income- tax liability of Lonnie Coaxum. Therefore, we do not have ju isdiction to etermine that ornie Coaxum is~ entitled to as sectibn 691(c) deduction III. The Estate Is Liable for the Section 6651(a)T¹) Addition to T Section 665 (a) (1) , imposes an addition to tax for failing to file a required eturn bysthe pre cribed filing date.

The respondent has made a prima facie case that the addition to tax is appropriate.

See sec. 7491(c) (IRS has burden of producing evidence, also known as presentinc a prima facie case, that the addition to tax s appropriate) .

The petitioner has not overcome the prima facie <pase. Nor has the petitioner satisfied the burden of persuading the Court that the failure to timely. file the return was "due to reasonable cause and not due to willful neglect" .

See sec . 6651 (a) (1) ; H gbee v. Commissioner, 116 T . C.

438, 447 (2001) taxpayer has burden of persuasion to show reasonable cause .

The addition to tax is equal to - five percent of the amount required to be shown on the return for each month the return is late, up to a maximum of 25 percent .

Sec .

6651(a) (1), (b) ( ) .

The return w s filed more than five months late. Therefore the addition is equal to 25 percent of the net estate tax due .

Because the respondent conceded some of the p positions taken in tihe noti e of deficiency, the net estate tax -8-- due must be recomputed under Rule 155.

To réflect theaforegoinc DecisioÊ will be entered under Rule 155 .