United States v. Blake

942 F.Supp.2d 285

UNITED STATES of America, Plaintiff,

v.Nancy BLAKE, as personal representative for the Estate of Ada Talbot, deceased, Defendant.

No. 12–CV–2577 (ADS)(ARL).

United States District Court, E.D. New York.

April 20, 2013.

U.S. Department of Justice, Tax Division, by: Bartholomew Cirenza, Trial Attorney, Washington, DC, for the Plaintiff.

Gleich Siegel & Farkas, by: Lara Pouratian Emouna, Esq., of Counsel, Great Neck, NY, for the Defendant.

MEMORANDUM OF DECISION AND ORDER

SPATT, District Judge.

On May 22, 2012, the Plaintiff United States of America (“the Plaintiff”) commenced this action seeking to collect an assessed federal estate tax from the Estate of Ada Talbot, now deceased. In this regard, the United States of America seeks judgment against the defendant Nancy Blake (“the Defendant”), as personal representative for the Estate of Ada Talbot, deceased, in the amount of $456,775.68, plus accrued statutory additions computed from the date of assessment until fully satisfied.

Presently pending before the Court is the Defendant's motion to dismiss the Amended Complaint pursuant to Federal Rules of Civil Procedure (“Fed. R. Civ.P.”) 12(b)(1) and/or 12(b)(6). In the alternative, the Defendant requests that this Court abstain from hearing this action or stay this action pending final judgment in a related action pending in New York State Supreme Court, Nassau County, entitled Nancy Blake v. United States of America, Index No.: 2010/003268 (“the Quiet Title Action”). For the reasons that follow, the Court abstains from exercising jurisdiction and dismisses the Plaintiff's action.

I. BACKGROUND

A. The Tax Assessments

On July 3, 1989, Ada Talbot (“Talbot”) died testate. (Cirenza Decl., Exh. A.) In her last will and testament, in relevant part, Talbot appointed her daughter, Betty Blake (“Blake”) as executrix of the last will and testament. (Cirenza Decl., Exh. B.) However, in the event Blake died, failed to qualify, resigned or became incapable of acting, Talbot appointed her granddaughter, the Defendant, as successor executrix. (Cirenza Decl., Exh. B.)

On June 4, 1991, a “United States Estate (and Generation Skipping Transfer) Tax Return” form (“Form 706”) was filed with the United States Internal Revenue Service (“IRS”) on behalf of Talbot's Estate (“the Estate”). (Cirenza Decl., Exh. C.) Line 21 of Form 706 indicated a net estate tax liability of $253,590. (Cirenza Decl., Exh. C.) Line 28 of Form 706 indicated that this same amount, $253,590, was the balance due with the return. (Cirenza Decl., Exh. C.)

On July 29, 1991, the IRS made a tax assessment against the Estate for an estate tax in the amount of $253,590.40. (Cirenza Decl., Exh. E.) On March 11, 1992, a “Revenue Officer Report for the Special Procedures function of Proof of Claim Proceeding” form (“Form 4488”) was executed by IRS Revenue Officer Patricia Amari. (Cirenza Decl., Exh. E.) Form 4488 listed Blake as the executor and Stephen Gleich, whose firm now represents the Defendant, as her attorney. (Cirenza Decl., Exh. E.) Form 4488 indicated that the unpaid balance on the July 29, 1991 tax assessment, including penalties and interest, was $374,123.79. (Cirenza Decl., Exh. E.) According to Form 4488, the Estate had no liquid assets to provide for immediate payment of the liability, and although the Estate was seeking a mortgage on property to provide partial payment of the tax, full payment was not anticipated for a year. (Cirenza Decl., Exh. E.)

Starting on June 18, 1992 and continuing to March 10, 1993, the Estate through its attorneys corresponded with the IRS concerning the outstanding estate tax liability of the Estate. (Cirenza Decl., Exh. F.) In order to satisfy this outstanding estate tax liability, the Estate represented that it was trying to obtain a mortgage loan for property owned by the Estate and located in Kings County at the address 2235 Emmons Avenue, Brooklyn (“Premise One”). (Cirenza Decl., Exh. F.) However, the Estate was encountering difficulties in securing the financing. (Cirenza Decl., Exh. F.) The Estate also requested abatement of certain penalties and transmitted minor payments to the IRS. (Cirenza Decl., Exh. F.)

On April 27, 1993, the IRS served Blake, in her capacity as executrix of the Estate, with a “Proof of Claim for Internal Revenue Taxes” form (“Form 4490”). (Cirenza Decl., Exh. G.) Form 4490 stated that the Estate was “justly and truly indebted to the United States in the amount of $456,775.68 with interest.” (Cirenza Decl., Exh. G.) In this regard, Form 4490 provided that the amount of the estate tax was $231,481.46, the amount of the statutory penalties, calculated to May 15, 1993, was $118,961.39 and the amount of the interest, also calculated to May 15, 1993, was $106,332.83. (Cirenza Decl., Exh. G.) Form 4490 further provided that the tax lien arose on July 29, 1991.

Form 4490 was accompanied by a letter, also dated April 27, 1993. (Cirenza Decl., Exh. G.) The letter instructed Blake to acknowledge receipt by stamping or endorsing a duplicate copy of Form 4490, which the IRS provided her, and returning the copy to the IRS in the enclosed addressed and postpaid envelope. (Cirenza Decl., Exh. G.)

According to the Plaintiff's opposition papers, the April 27, 1993 Form 4490 did not result in immediate payment and on November 30, 1994, the IRS mailed Notices of Intent to Levy to (1) Blake; (2) the Estate and Blake's attorneys; and (3) the Estate and Blake's CPA. (Pl. Opp., pg. 4.) However, the Plaintiff provides no evidence to support these statements, nor makes these factual allegations in its Amended Complaint.

On June 21, 1994, the IRS made another tax assessment against the Estate. (Cirenza Decl., Exh. D.) In its opposition papers, the Plaintiff suggests that the June 21, 1994 tax assessment against the Estate was for unpaid estate tax amounting to $54,838.00. (Pl. Opp., pg. 3.) Nevertheless, the Amended Complaint fails to even mention the estate tax liability that was assessed by the IRS in connection with the June 21, 1994 tax assessment. In addition, the Plaintiff and the Defendant have not offered any evidence regarding the amount of estate tax liability assessed by the IRS on June 21, 1994.

On August 11, 1995, an “Installment Agreement” form (“Form 433–D”) was executed by Wayne Foreman, CPA, on behalf of the Estate. (Cirenza Decl., Exh. H.) Under the Installment Agreement, the Estate agreed to pay the estate tax liability—by then $560,214.98 plus accruals—by making monthly payments in the amount of $2,500 by the 11th of every month. (Cirenza Decl., Exh. H.) However, for the November 11, 1995 payment, the Estate agreed to pay $12,500 instead of $2,500. (Cirenza Decl., Exh. H.)

B. The Estate's Default on the Installment Agreement and the Notices of Federal Tax Liens

On June 19, 2005, Blake died. (Cirenza Decl., Exh. I.) According to the Plaintiff, the IRS was never informed of Blake's death and, thereafter, the Estate defaulted on the Installment Agreement and its estate tax liability remained unsatisfied. (Pl. Opp., pg.4.) Prior to her death, on June 17, 2005, IRS Technical Service Advisor Michael J. Seidita (“Seidita”) had sent a letter to Blake advising her that the outstanding balance due to the IRS was $1,110,586.40 and demanding full payment within 30 days of the date of the letter. (Cirenza Decl., Exh. J.) Seidita also informed Blake that he had filed appropriate Notices of Federal Tax Liens to protect the Plaintiff's interest. (Cirenza Decl., Exh. J.) A copy of the June 17, 2005 letter was sent to the Defendant. (Cirenza Decl., Exh. J.) The letter did not clarify whether it was being sent to the Defendant in her individual capacity or in her capacity as a personal representative of the Estate. (Cirenza Decl., Exh. J.)

The two properties that were subject to the abovementioned Notices of Federal Tax Liens are presently owned by the Defendant in fee simple. (Emouna Aff., Exh. A.) The first of these premises is Premise One. (Cirenza Decl., Exh. J.; Emouna Aff. Exh. A.) The Defendant acquired her fee interest in Premise One by virtue of three deeds. (Emouna Aff., Exh. A.) The first deed was made and delivered on or about November 17, 2004 and was recorded in the Office of the Kings County City Register on January 28, 2005. (Emouna Aff., Exh. A.) The second deed was made and delivered on or about January 6, 2010 and was recorded in the Office of the Kings County City Register on January 12, 2010. (Emouna Aff., Exh. A.) Finally, the third deed was made and delivered on or about January 6, 2010 and was recorded in the Office of the Kings County Register on January 19, 2010. (Emouna Aff., Exh. A.)

The second premise is located in Nassau County at the address 74 Laurel Avenue, Sea Cliff (“Premise Two”). (Cirenza Decl., Exh. J.; Emouna Aff., Exh. A.) The Defendant acquired her fee interest in Premise Two by virtue of three deeds. (Emouna Aff., Exh. A.) The first deed was made and delivered on or about November 17, 2004 and was recorded in the Office of the Nassau County Clerk on January 5, 2005. (Emouna Aff., Exh. A.) The second and third deeds were made and delivered on or about January 6, 2010 and were recorded in the Office of the Nassau County Clerk on January 13, 2010. (Emouna Aff., Exh. A.)

By virtue of the Notices of Federal Tax Lien, which were filed in the Office of the Nassau County Clerk and the Office of the Kings County City Register, the Plaintiff claimed an interest in Premise One and Premise Two adverse to that of the Defendant. (Emouna Aff., Exh. A.) These Noticeswere filed against the Estate, as well as Blake and the Defendant, each in their capacity as executrix of the Estate. (Emouna Aff., Exh. A.) With respect to Premise One, a Notice of Federal Tax Lien was filed on or about April 6, 2004. (Emouna Aff., Exh. A.) As for Premise Two, a Notice of Federal Tax Lien was filed on or about April 22, 2004. (Emouna Aff., Exh. A.) Both these Notices included the...