United States v. Marshall, et al.

This case stemmed from an indirect gift made by J. Howard Marshall to various family members. After J. Howard's Estate failed to pay gift taxes pursuant to I.R.C. 6324(b), the IRS tried to collect the unpaid gift tax from the donees. The Government subsequently filed suit against the donees, seeking to recover the unpaid gift taxes and to collect interest from the beneficiaries. The Government also sought to recover from two individuals (E. Pierce Jr. and Hilliard), who, as representatives of various estates and trusts, allegedly paid other debts before paying those owed to the Government. The court rejected appellants' argument that the district court erred in finding that the donees incurred an independent interest liability as a result of the donor's unpaid gift tax and held that interest accrues on donee's liability for the unpaid gift taxes and that interest is not limited to the extent of the value of the gift. The court concluded that res judicata barred Eleanor Pierce (Marshall) Stevens from arguing that J. Howard did not make a gift to her because the court determined that Stevens was a donee. Finally, the court held that Hilliard and E. Pierce Jr. knew of the potential liability to the Government and the Federal Priority Statute applies; Hilliard and E. Pierce Jr. are liable under the Federal Priority Statue for the amount of the charitable set-aside; E. Pierce Jr. is individually liable for the value of the personal property he distributed from Stevens's Estate; Hilliard is personally liable for the amount he caused the Living Trust to pay for accounting and legal services on behalf of other charitable organizations; and E. Pierce Jr. did not breach his state law fiduciary duties because E. Pierce Jr. did not owe Stevens's Estate's creditors a fiduciary duty under Texas law. Accordingly, the court affirmed in part and reversed in part. View "United States v. Marshall, et al." on Justia Law