Request for Replacement Estate Tax Check Denied
The U.S. Court of Federal Claims held it did not have jurisdiction to issue a replacement check to a U.S. executor after a foreign executor named to the same estate cashed a refund check from the IRS.
The issue arose after a U.S. citizen died in 2006 while living in France, resulting in individuals’ in the U.S. and France being named as executors of her estate. In August 2007, the U.S. executors requested an extension of time to file the decedent’s estate tax return. The request was accompanied by a payment of $17.5 million in estate taxes. In February 2008 the French executor, who is the decedent’s son, filed an estate tax return showing an overpayment of approximately $10.4 million. The filing was apparently unknown to the U.S. executors, who later the same month filed an estate tax return on behalf of the decedent showing an overpayment of approximately $5.1 million. Based on the first return filed, the IRS issued a $10.4 million refund to the decedent’s son, as executor of her estate. The check was cashed. Upon learning of the refund, the U.S. executors filed a complaint in the Court of Federal Claims, seeking a replacement check for the $10.4 million paid to the foreign executor as well as a refund of $5.1 million.
The U.S. executors made three arguments to support their position that the Court of Federal Claims had jurisdiction. First, the executors claimed jurisdiction under 31 USC § 3702, the general claim submission statute. The court noted, however, that section 3702 does not provide an independent basis for jurisdiction but merely provides rules and procedures for settling claims. For the court to have jurisdiction, a plaintiff must identify a money-mandating statute—that is, a contract, federal statute, regulation or provision of the U.S. Constitution that can fairly be interpreted to show the plaintiff’s right to compensation from the federal government.
The U.S. executors next argued jurisdiction under 31 USC § 3343, the Check Insurance Forgery Fund. To prevail under section 3343, a plaintiff must show that a check was lost or stolen through no fault of the payee, the check was paid by the U.S. Treasury based on a forged endorsement, or the payee did not participate in the negotiation or payment. Although the court found section 3343 to be a money-mandating statute, it was not applicable to the case at hand because none of the requisite facts were present.
Finally, the U.S. executors claimed the IRS had breached an implied-in-fact contract that it has with all taxpayers to properly account for the tax revenues it collects. The court dismissed this argument, noting that such jurisdiction can be claimed only by nontaxpayers who without a tax assessment could not otherwise recover improperly seized property. Taxpayers, however, may file a claim for refund and therefore cannot invoke implied-in-fact contract jurisdiction.
Finding no basis for jurisdiction, the court dismissed the U.S. executors’ claim for a replacement check. At the time the opinion was issued, the U.S. executors were still seeking from the court the refund of $5.1 million.
By Laura Lee Mannino, CPA, LL.M., associate professor of accounting and taxation, St. John’s University, Jamaica, N.Y.
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