In United States v. Robert Shriner, et al., Civil Action No. MJG-11-2929 (March 12, 2014), the U.S. District Court for the District of Maryland granted summary judgment in favor of the government to recover unpaid taxes from the estate of Carol Shriner. 

On June 3, 2004, Carol died and defendants Robert Shriner and Scott Shriner were appointed co-administrators of her estate.  While Carol was alive, she failed to file federal income tax returns for years 1997 and 2000 through 2003.  In 2004, the defendants engaged a law firm to represent the estate and prepare its outstanding tax returns.  The estate filed the tax returns and in 2005, the Internal Revenue Service assessed tax liabilities in the amount of $276,908.

 

Unpaid Taxes

The estate filed a power of attorney form, authorizing a law firm to represent it and directing the IRS to send all notices relating to tax liabilities to the law firm.  On multiple occasions, the IRS sent notices to the law firm regarding the estate’s unpaid tax liabilities relating to years 1997 and 2000 through 2003. 

As of Feb. 15, 2006, the estate owed taxes in the amount of $231,373.  Rather than paying the unpaid taxes due, the estate made distributions to the defendants totaling $470,963.  Distributions to the defendants left the estate without enough assets to pay the income tax liabilities.  As of March 18, 2013, the estate owed $333,292 in unpaid federal income taxes. 

 

The Law

Under 31 U.S.C. Section 3713, a representative of an estate is personally liable for an estate’s unpaid taxes, if: 1) the representative distributed assets of the estate; 2) the distribution rendered the estate unable to fully pay the outstanding taxes; and 3) the distribution occurred after the representative knew, or should have known, of the government’s claim for unpaid taxes.

 

Knowledge of Tax Liability

The defendants didn’t deny that they distributed assets of the estate, which rendered the estate unable to pay the outstanding tax liability.  The defendants, however, denied that they had actual or constructive knowledge of the estate’s tax liability.  The district court rejected their claims.

First, the court found that it was undisputed that the law firm represented the estate and the defendants before the IRS through a Power of Attorney and Declaration of Representative Form 2848 filed with the IRS.  The IRS sent multiple notices to the law firm regarding the estate’s unpaid taxes prior to the distribution of the estate assets.  “The Law Firm’s knowledge of the unpaid taxes is imputed to their clients,” ruled the court (citations omitted). 

Second, the court found no merit in the defendants’ claims of reliance on any erroneous advice from the law firm.  And, finally, the court found no evidence that there was any type of settlement of claims against the defendants. 

Accordingly, the court granted summary judgment for the United States and against the defendants.