The Court of Federal Claims held that an estate was not entitled to a refund of a late-filing penalty because the estate lacked reasonable cause for waiting to file the estate tax return. In this case, the decedent was survived by a spouse who was a United States resident and a citizen of Bolivia at the time of the decedent's death. The executor's attorney advised that the estate should wait to file the estate tax return until the surviving spouse became a United States citizen so that the estate would be entitled to a marital deduction for the bequests passing to the decedent's spouse. The surviving spouse also filed claims against the estate arising out of her rights under a prenuptial agreement. Based on the attorney's advice, the executor requested a six-month extension of the time to file the estate tax return and made an estimated tax payment which the executor believed to be sufficient to satisfy the taxes due even if the estate were unable to claim the marital deduction.
At the time the extension period ended and the estate tax return was due, the surviving spouse was in the process of applying for citizenship. The attorney again advised the executor to file the return late to claim the marital deduction, indicating that the late filing would not trigger a penalty as long as the return was filed within a reasonable time after the spouse became a citizen and the ancillary matters (i.e., the spouse's claims against the estate) were settled. Approximately fourteen months after the extended due date for the estate tax return, the spouse became a United States citizen, and nine months after that date the surviving spouse and the estate entered into an agreement settling the ancillary matters. The court determined that the attorney's advice to the estate constituted reasonable cause for the estate to delay its filing until after the surviving spouse became a United States citizen. Nonetheless, the court found that the attorney's advice did not constitute reasonable cause to delay filing until all of the ancillary matters were concluded because such advice was not an interpretation of substantive tax law. As a result, the estate's additional nine-month delay subjected it to the maximum late-filing penalty.