Personal Liability of a Fiduciary under the Federal Priority Statute for Unpaid Federal Taxes of an Estate and Recent U.S. District Court Decisions

By Diane L. Mutolo J.D. LL.M.

An estate fiduciary may be held personally liable for the estate's unpaid taxes. IRC § 6901 provides that the government may collect a fiduciary's liability under the Federal Priority Statute (31 U.S.C. § 3713) for an unpaid claim of the Government. In three recent U.S. district court cases, the courts considered the personal liability of estate representatives. This EIA discusses a fiduciary's personal liability and the decision in those cases.

Excerpt:

Recent Cases

     In three recent United States district court cases, the courts considered the personal liability of representatives of estates under 31 U.S.C. Section 3713.

     United States v. Tyler. In United States v. Tyler [enhanced version available to lexis.com subscribers], the United States District Court for the Eastern District of Pennsylvania found two co-executors, Mr. Tyler and Mr. Ruch (together "the defendants"), liable for the unpaid taxes of an estate under 31 U.S.C. Section 3713. 


     In the case, the federal government filed an action against the defendants, co-executors of the respective estates of Mr. Tyler's late father ("the taxpayer") and Mr. Tyler's late mother (together "the decedents"), to enforce a federal tax lien on real property owned by the decedents. In 2002, the Internal Revenue Service had assessed the taxpayer with income tax liabilities for the years 1992 to 1998, and at the time of the assessments, the decedents owned certain real property. In 2006, the taxpayer died, and his wife followed in death in 2007.

     The defendants became co-executors of the wife's estate, and in 2007, the Service sent letters to the defendants notifying them of the federal tax lien encumbering the real property. Mr. Ruch challenged the federal tax lien through an administrative appeal, which was rejected by the Service. Subsequently, in 2008, the defendants conveyed the real property to Mr. Tyler, who later sold the property to a third party in 2009. In 2010, the government brought the action against the defendants individually and as co-executors of the respective estates of the decedents to enforce the federal tax lien.

(footnotes omitted) 

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