The opinion of the court was delivered by: Karen E. Schreier Chief Judge
ORDER DENYING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT AND ) DEFENDANT'S REQUEST ) FOR SUMMARY JUDGMENT
Plaintiffs Bonnie Haggar and Sandra Havard, as personal representatives of the Estate of William Haggar, move for summary judgment. The government resists plaintiffs' motion and asks that summary judgment be granted in its favor.
The undisputed facts are as follows: William Haggar was the husband of Bonnie Haggar and the father of Sandra Havard.*fn1 He was familiar with tax law and was a controlling individual who handled all of the financial aspects in his marriage with Mrs. Haggar. Docket 15 at 12, 26; Docket 21 at 4, 8. In 1998, Mr. Haggar gave Havard $200,000 along with a total of $60,000 to her two children and her grandchild. Docket 20-2 at 5. Other than the gifts given to her, her children, and hergrandchild, Havard did not know about Mr. Haggar's finances. Docket 16-2 at 10. Mr. Haggar told Havard that she did not have to do anything with regard to the gift and that he would take care of the tax return. Docket 16-2 at 10.
Mr. Haggar also gave a total of $40,000 to Mrs. Haggar's two children. Docket 20-2 at 6.
Mrs. Haggar was aware of the gifts to Havard and signed a gift tax return that stated that she "consent[ed] to have the gifts (and generation-skipping transfers) made by me and my spouse to third parties during the calendar year considered as made one-half by each of us." Docket 20-6 at 6; Docket 20-2 at
1. Mr. Haggar had Mrs. Haggar sign the gift tax return without explanation. Docket 16-1 at 6. Certified public accountant Douglas Uthe prepared and filed the gift tax return for the Haggars. Mrs. Haggar was not given a copy of the gift tax return. Docket 16-1 at 6; Docket 1, Ex. A at 18.
Mr. Haggar died approximately six years later in January 2004. Plaintiffs were identified as the estate representatives in Mr. Haggar's will. They hired attorney Michael Billion and certified public accountant Uthe to assist them with preparing the estate's tax return. Mrs. Haggar went to the place where she knew Mr. Haggar had kept all of his tax records and produced all of the documents that she found to Billion. Docket 16-1 at 8. The 1998 gift tax return was not with the other tax records because Mr. Haggar's accountant did not give him a copy of the return. Docket 16-3 at 10-11.
Although somewhat educated and experienced in the business world, plaintiffs are not familiar with tax law. Docket 16-1 at 1-2, 9; Docket 16-2 at 2,
15. During one meeting, Billion asked plaintiffs whether Mr. Haggar had ever made any gifts. Docket 20-6 at 34-35. Plaintiffs answered no. Docket 20-6 at
35. As a result, the response to question 7a in Part 4 of the estate tax return, "Have federal gift tax returns ever been filed," was marked "no." Docket 20-4 at
4. Uthe told Billion that Mr. Haggar did not file any gift tax returns. Docket 16-3 at 8. Plaintiffs later signed and filed the estate tax return. Docket 20-4 at 1. Plaintiffs admitted that they did "nothing" to verify the accuracy of the answer to question 7a. Docket 20-6 at 32-33; Docket 20-7 at 11.
In August 2006, after examining the estate tax return and determining that plaintiffs failed to disclose the prior gifts, the IRS assessed a penalty under
26 U.S.C. § 6662(b)(1). Plaintiffs paid the additional federal estate tax and interest that was found by the IRS to have been owed by Mr. Haggar's estate. Docket 1 at 2. They do not allege that the additional federal estate tax and ...