Estate loses on appeal but will get refund

September 30, 2015

The Indiana Tax Court reversed a probate court’s entry of summary judgment in favor of an estate on a claim seeking a refund of nearly $645,000 paid in inheritance tax, but the judge did find the estate is entitled to approximately $58,000 as a refund.

The estate of Judd Leighton reported to the probate court an Indiana inheritance tax liability of $1.3 million and claimed a refund of $57,199. The probate court accepted the return as filed March 19, 2007. But in 2011, the estate filed a claim with the Department of State Revenue seeking a refund of $644,998, which incorporated the refund of $57,199 as initially claimed on its inheritance tax return as well as $587,799 of Indiana inheritance tax it paid relating to a QTIP issue. When Leighton’s wife died and her estate filed its inheritance tax return, it did not elect QTIP status for the marital trust transfer even though it elected such status for federal estate tax purposes, so the Indiana inheritance tax had been paid twice on the transfer of marital property: once by her estate and once by Leighton’s estate.

The department denied the refund claim on the basis it was not timely filed. The Tax Court agreed, noting that a claim must be filed within three years after the tax is paid or within one year after the tax is finally determined, whichever is later. Leighton’s estate had until March 19, 2008, (one year from the date of the probate order) or Sept. 15, 2009, (three years from the date of its payment of inheritance tax) to file its refund claim.

“Because Judd’s Estate did not file its claim for refund with the Department until August 9, 2011, the Probate Court lacked subject matter jurisdiction and should therefore have dismissed the case,” Senior Judge Thomas Fisher wrote in Indiana Department of State Revenue, Inheritance Tax Division v. James F. Keenan and Wells Fargo Bank, N.A., as Co-Personal Representatives of the Estate of Judd Leighton, 71T10-1211-TA-74.

But the estate is entitled to initial refund of $57,199 it previously claimed, so Fisher remanded the matter for the department to issue the refund, plus all applicable statutory interest.


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