The U.S. government is suing the estate and donees of J. Howard Marshall for a combined $85 million of unpaid gift and GST taxes. The Complaint alleges that between 1993 and 1995 Marshall made more than $109 million in gifts to his ex-wife, son, and various other individuals and trusts. The IRS had previously issued deficiency notices to Marshall’s estate for gift and GST taxes, then later entered into stipulations about the amounts owed. Marshall’s estate failed or refused to fully pay the debts claimed. Since the estate did not pay, the government claims that the donees of the gifts were automatically personally liable.
In addition to seeking personal liability from all donee trusts and individuals, the government is suing the executors of Marshall’s estate, his ex-wife’s estate and the trustees of Marshall’s and his ex-wife’s trusts for personal liability. The government argues that under federal law a personal representative that pays a debt of the decedent prior to paying a government claim is personally liable to the government. Moreover, the government avers that under the relevant state law – Texas – a personal representative must preserve sufficient assets to pay tax liabilities of the decedent in accordance with the priorities established under Texas law and if he or she fails to do so, it subjects the representative to personal liability. The government alleges that the executors and trustees distributed the estates and trusts without paying the government and therefore breached their duties to the government and are personally liable.
The government is also seeking a 10% litigation surcharge under the federal Debt Collection Procedures Act.