Wilson v. United States, No. 20-603 (2d Cir. 2021)Annotate this Case
Joseph Wilson, the sole owner and beneficiary of a foreign trust, filed his returns for tax year 2007 late, the IRS assessed a 35% penalty that applies to beneficiaries of foreign trusts, and Wilson paid the penalty. After his death, plaintiffs filed suit on behalf of Wilson's estate for a refund, arguing that the IRS should have imposed only a 5% penalty that applies to owners of foreign trusts. The district court granted partial summary judgment in favor of plaintiffs.
The Second Circuit vacated the district court's judgment, holding that when an individual is both the sole owner and beneficiary of a foreign trust and fails to timely report distributions she received from the trust, the government has the authority under the Internal Revenue Code to impose a 35% penalty. Accordingly, the court remanded for further proceedings. The court denied motions for leave to file a supplemental appendix that includes documents outside the record on appeal and for leave to file a sur-reply brief as moot.