CCA 200923045: Estate representative should receive written notice of the federal tax claim

Plain-English summary

Chief Counsel addressed notice of a federal tax claim to the personal representative of an estate. Under 31 U.S.C. § 3713, a representative may be liable for paying another estate debt ahead of the United States and making the estate insolvent if the representative knew of the federal debt or had facts that should have prompted an inquiry. An IRS employee had already told the representative's attorney about substantial claims by telephone. The advice agreed that the conversation should be confirmed by letter and noted Internal Revenue Manual procedures for serving a proof of claim or notice of federal taxes due. It also said an estimated claim could be completed after receipt of the revenue agent's report.

Ruling snapshot

• Question: How should the IRS document notice of its tax claim to an estate's personal representative?
• Outcome: Advice given
• Key authorities: 31 U.S.C. § 3713; IRM 5.5.1.6; U.S. v. Coppola, 85 F.3d 1015 (2d Cir. 1996)

Full text (IRS public release)

ID: CCA_2009050515332442 Number: 200923045
Release Date: 6/5/2009
Office: --------------
UILC: 63.01.00-00

From: ----------------
Sent: Tuesday, May 05, 2009 3:33:27 PM
To: --------------------
Cc:
Subject: Proof of claim in estate and USC 3713

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Under 31 U.S.C. § 3713, liability is imposed on a representative of a debtor, including the personal representative of an estate, who pays a debt of the estate to another in derogation of the priority of debts owed to the United States, thereby rendering the estate insolvent. In order for liability to attach, the representative must have knowledge of the debt owed by the estate to the United States or notice of facts that would lead a reasonably prudent person to inquire as to the existence of the debt owed before making the challenged distribution or payment. U.S. v. Coppola, 85 F.3d 1015, 1019 (2d Cir. 1996). As we understand, you had a telephone conversation with the attorney for the personal representative of the estate informing him of the Service's substantial claims. While this conversation may in itself be sufficient to put the personal representative on notice, we concur with your suggestion of confirming the conversation by letter. We note that IRM 5.5.1.6 contemplates that notice include service of Form 4490, Proof of Claim for Internal Revenue Taxes, or Form 10492, Notice of Federal Taxes Due. Further, as we understand, the -------- ------------ Unit will be able to complete an estimated claim upon receipt of the revenue agent's report. ------------------------------------------------------------------------------------------------------------
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