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Friday, September 07, 2012

Ind. Decisions - Tax Court issues opinion today, re inheritance tax

In Indiana Dept. of State Revenue, Inheritance Tax Division v. The Supervised Estate of John A. Schoenenberger, Deceased, a 9-page opinion, Judge Wentworth writes:

The Indiana Department of State Revenue, Inheritance Tax Division appeals the Lake Circuit Court’s (probate court) determination that the Estate of John A. Schoenenberger was entitled to interest on its refund claim computed according to the 1980 version of IC 6-4.1-10-1 and judgment interest. In challenging the probate court’s ruling, the Department claims that interest is to be calculated according to the 2007 version of IC 6-4.1-10-1. Accordingly, the resolution of this appeal depends on whether the 1980 or the 2007 version of IC 6-4.1-10-1 applies for purposes of computing interest on the Estate’s claim for refund of inheritance tax. The Court reverses and remands.

On February 23, 2003, John A. Schoenenberger died testate. On November 21, 2003, his Estate remitted an estimated inheritance tax payment, in the amount of $1.8 million, to the Lake County Treasurer.1 The Estate and the Department subsequently agreed that the Estate would file its Indiana inheritance tax return when the Internal Revenue Service completed its audit of the Estate. * * *

IC 6-4.1-10-1 governs all claims for the refund of Indiana inheritance tax. Prior to 1980, this statute did not provide for the payment of interest on refund claims whatsoever. In 1980, however, the General Assembly amended the statute to expressly authorize, among other things, the payment of interest * * *

The 1980 version of the statute was in effect when Schoenenberger died, when the Estate remitted its estimated payment of inheritance tax on November 21, 2003, and when it sent its return and letter to the Department on April 6, 2007.

Effective July 1, 2007, the General Assembly amended Indiana Code § 6-4.1-10-1 * * *

The 2007 version of the statute was in effect when the probate court determined the Estate’s inheritance tax liability on April 8, 2008, and when the Estate filed its Form IH-5 refund claim with the Department on April 14, 2008. * * *

The parties disagree about whether the 1980 version or the 2007 version of the inheritance tax refund statute applies. The Department maintains that the probate court should have applied the 2007 version of the statute because that version was in effect on April 14, 2008 when the Estate filed its Form IH-5 refund claim. The Estate, on the other hand, maintains that the probate court properly applied the 1980 version for the two alternative reasons discussed below. * * *

Both the 1980 and 2007 versions of the refund statute contain the same statute of limitations with respect to the filing of a refund claim: “the person must file the claim within three (3) years after the tax is paid or within one (1) year after the tax is finally determined, whichever is later.” * * * In this case, the Estate’s inheritance tax liability was finally determined on April 8, 2008, the day the probate court determined the amount of inheritance tax due. * * * Consequently, the Estate’s April 6, 2007 filing of its return and letter with the Department was not a valid refund claim because the probate court had not yet determined the amount of inheritance tax due as of that date.

The Estate, however, did file a valid refund claim on April 14, 2008, six days after the probate court determined its inheritance tax liability and more than nine months after the 2007 version took effect. Thus, the 2007 version of Indiana Code § 6-4.1-10-1 governed any right the Estate had to interest on its refund claim. * * *

For the above-stated reasons, the Court REVERSES the probate court’s determination. Accordingly, the Court REMANDS this matter to the probate court for action consistent with this opinion.

Posted by Marcia Oddi on September 7, 2012 10:32 AM
Posted to Ind. Tax Ct. Decisions