- 12 -
Respondent relies on the principles of cases such as
Badaracco v. Commissioner, 464 U.S. 386, 401 (1984), and
Helvering v. Mitchell, 303 U.S. 391, 401 (1938), to the effect
that fraud is established upon the filing of a fraudulent return
and that the fraud penalty reimburses the Government for
detecting, investigating, and prosecuting fraud. Although we
have no qualms about respondent's recitation of this well-settled
law, whether the estate is liable for fraud is not at issue here.
We decided that issue in Estate of Trompeter v. Commissioner,
T.C. Memo. 1998-35, where we found that the estate had committed
fraud when it filed its estate tax return. We disagree with any
implication, however, that this body of law supports an
interpretation of the phrase "tax required to be shown on a
return" contrary to that which we espouse. The relevant phrase
does not apply just to cases of fraud. The same phrase appears
in section 6662(a), which, among other things, imposes a
20-percent accuracy-related penalty on underpayments attributable
to negligence and substantial understatement.
We hold that an estate's underpayment is determined by
taking into account all amounts which it is allowed to deduct in
computing its Federal estate tax liability. Respondent is
concerned that our holding will lead to bad tax policy in that
the "government's reimbursement [through the fraud penalty] could
be consumed by the * * * [estate's] counsels' fees and fees being
paid to the trustees, who happen to be the beneficiaries of the
Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 NextLast modified: May 25, 2011