Knappe v. United States, No. 10-56904 (9th Cir. 2013)
Annotate this CaseActing on the bad advice of his accountant, plaintiff, the executor of an estate, filed the estate-tax return several months late. Consequently, the IRS assessed significant penalties against the estate. Plaintiff initiated this action seeking a refund of the penalty. The court concluded that it was plaintiff's duty to ascertain the correct extended filing deadline. By relying on his accountant's advice about that nonsubstantive matter, he failed to exercise ordinary business care and prudence, and he could not show reasonable cause to excuse the penalty. Therefore, the court affirmed the judgment of the district court.
Court Description: Tax. The panel affirmed the district court’s grant of summary judgment to the Government in a tax refund action seeking abatement under 26 U.S.C. § 6651(a)(1) of a penalty for filing a late estate tax return. Taxpayer claimed he was entitled to relief because he relied on his expert accountant, who incorrectly advised him about the deadline for filing the return after obtaining an extension. The panel held that it was taxpayer’s duty to ascertain the correct extended filing deadline, and that he failed to exercise ordinary business care and prudence by relying on his accountant’s advice about this nonsubstantive matter. Consequently, taxpayer failed to show “reasonable cause” under § 6651(a)(1) to excuse the penalty.
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