Colorado Probate Blog - Wade Ash Woods Hill & Farley, P.C.

Estate of Petteys v. Farmers State Bank of Brush, 2016 COA 34, No. 14CA1581

On March 10, 2016, the Colorado Court of Appeals issued an opinion that reversed the trial court and held that an irrevocable trust, a part of which was included in the gross estate of the decedent, was required to contribute its pro rata share of estate taxes under Colorado's estate tax apportionment statute. Our firm had prepared the Will for the decedent, in which estate taxes attributable to the irrevocable trust's inclusion in his gross estate were specifically apportioned to that trust. The trust had been created in 1958. The decedent died in 2009; a U.S. Estate Tax Return was filed in 2010, the estate paid the entire tax due, and the personal representative requested that the trust contribute its share of the tax. When the trustee refused, the personal representative brought suit. Initially, the trial court held that because federal law was silent as to apportionment to such interests prior to the 1986 effective date for IRC 2207B, the Colorado statute at 15-12-916 applied, but the court did not decide certain other issues. After the IRS completed its audit in October 2012, final request for contribution was made. A hearing was held before the trial court in 2015 on the remaining issues, and the court ordered, among other things, that the effective date statute at 15-17-101 permitted the court to refuse to apply the Colorado Probate Code if it found it to be "inequitable." The trial court found that it would be inequitable to force the trustee to pay its pro rata share of the tax and entered judgment for the trustee. The personal representative appealed.

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Highway Bill Contains Some Tax Provisions

On July 31, 2015, the President signed H.R. 3236, the "Surface Transportation and Veterans Health Care Choice Improvement Act of 2015" which primarily continues the highway trust fund for another three months. Included in the bill is a requirement for consistency for large estates (those required to file an estate tax return): the estate must report the value of property included in the gross estate (date of death or alternate value), and the same value must be used for income tax basis reporting. Any underpayment of tax due to understatement of basis would be subject to a 20% accuracy-related penalty, and the bill also clarifies that the 6-year statute of limitations applies where an overstatement of basis results in a substantial (25% or more) omission of income.

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