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Michael W. Miglio, Executor of the Estate of Jennie Miglio v. Department of the Treasury

August 2, 2011

MICHAEL W. MIGLIO, EXECUTOR OF THE ESTATE OF JENNIE MIGLIO, DECEASED, AND AS REPRESENTATIVE OF THE ESTATE OF DECEDENTS ANTOINETTE MIGLIO AND FRANCES MIGLIO, PLAINTIFF,
v.
DEPARTMENT OF THE TREASURY,
INTERNAL REVENUE SERVICE, UNITED STATES OF AMERICA, DEFENDANT.



The opinion of the court was delivered by: Marvin E. Aspen, District Court Judge:

MEMORANDUM OPINION AND ORDER

Plaintiff Michael Miglio, as executor of the Estate of Jennie Miglio, and as representative of the estates of Antoinette Miglio and Frances Miglio, claims that Defendant, the Internal Revenue Service ("IRS"), owes a refund to the estate of Jennie Miglio pursuant to 26 U.S.C. § 2013. (Comal. ¶¶ 16--18.) Presently before us is Defendant's motion to dismiss. Defendant moves to dismiss for lack of subject matter jurisdiction and for failure to state a claim upon which relief may be granted. For the following reasons, we grant Defendant's motion.

I. BACKGROUND

Plaintiff Michael Miglio is the executor of the estate of Jennie Miglio, who died on March 25, 2007. (Comal. ¶ 5.) Jennie Miglio had seven sisters, including Antoinette and Frances Miglio. (Id. ¶¶ 5, 10.) Antoinette died on May 2, 1998 and Frances died on January 7, 2000. (Id. ¶ 11.) According to the complaint, when each sister died, the surviving sisters received the remainder of the deceased sister's estate, with all of the assets at issue channeled finally to the last surviving sister, Jennie. (Id. ¶ 10.) Both Antoinette's and Frances' estates paid federal estate taxes. (Id. ¶ 11.) Jennie's estate paid no federal estate tax in part because of deductions stemming from charitable contributions. 26 U.S.C. § 170 (c)(2)(B). (Comal. ¶ 12, Ex. 10.)

On November 27, 2009, Plaintiff first sought a refund from Defendant pursuant to 26 U.S.C. § 2013, which allows a recent decedent's estate to claim an estate tax credit for property in the estate that was recently subject to the estate tax. (Resp. at 8.) Defendant denied Plaintiff's request for a refund based on this credit on May 11, 2010. (Id.) Plaintiff filed this suit on July 8, 2010. (Dkt. No. 1.) Pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure, Defendant moves to dismiss for lack of subject matter jurisdiction and for failure to state a claim upon which relief may be granted. (Mot. & Mem.)

II. STANDARD OF REVIEW

The purpose of a motion to dismiss under Rule 12(b)(6) is to test the sufficiency of the complaint, not decide the merits of the case. Fed. R. Civ. P. 12(b)(6); Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990) (quoting Triad Assocs., Inc. v. Chicago Hous. Auth., 892 F.2d 583, 586 (7th Cir.1989)). In considering a motion to dismiss under Rule 12(b)(6), we must accept all well-pled allegations in the complaint as true and draw all reasonable inferences in the plaintiff's favor. Cody v. Harris, 409 F.3d 853, 857 (7th Cir.2005); Thompson v. Illinois Dep't of Prof'l Regul., 300 F.3d 750, 753 (7th Cir. 2002).

Rule 12(b)(1) requires dismissal of claims over which the federal court lacks subject matter jurisdiction. Fed. R. Civ. P. 12(b)(1). Jurisdiction is the "power to decide" and must be conferred upon the federal court. In re Chicago, Rock Island & Pacific R.R. Co., 794 F.2d 1182, 1188 (7th Cir. 1986). In reviewing a Rule 12(b)(1) motion, we may look beyond the complaint to other evidence submitted by the parties to determine whether subject matter jurisdiction exists. See United Transp. Union v. Gateway W. Ry. Co., 78 F.3d 1208, 1210 (7th Cir. 1996). A plaintiff faced with a 12(b)(1) motion to dismiss bears the burden of establishing that the jurisdictional requirements have been met. See Kontos v. U.S. Dep't Labor, 826 F.2d 573, 576 (7th Cir. 1987).

III. ANALYSIS

Defendant argues that we lack subject matter jurisdiction over any claim for refund on behalf of Frances' estate, because the administrative claim for refund was not filed within the time allotted for doing so by statute. (Mem. at 4--6.) As such, Defendant contends that Frances' estate did not properly exhaust the administrative remedies that are a prerequisite to Defendant's waiver of sovereign immunity, and we lack subject matter jurisdiction. With respect to Jennie's estate, Defendant asserts that Jennie's estate is not eligible for a refund based on the credit provided for by 26 U.S.C. § 2013, because the estate paid no federal estate tax. (Id. at 6--9.) Defendant is correct in both respects, and the motion to dismiss is granted.

A. FAILURE TO TIMELY EXHAUST ADMINISTRATIVE CLAIMS PROCESS

A federal district court does not have jurisdiction over a taxpayer's claim for a federal tax refund "until a claim for refund or credit has been duly filed with the Secretary [of the Treasury] according to the provisions of law in that regard, and the regulations of the Secretary established in pursuance thereof." 26 U.S.C. § 7422(a). Section 6511(a) of the Internal Revenue Code further provides that a taxpayer must file any administrative claim for a refund within three years from the time that the applicable tax return was filed or two years from the time that the tax was paid, whichever is later. 26 U.S.C. § 6511(a); C.I.R. v. Lundy, 516 U.S. 235, 240, 116 S. Ct. 647, 651 (1996).

The claim for refund in this case is based on 26 U.S.C. § 2013. This statutory provision allows a decedent's estate to claim an estate tax credit for "all or a part of the amount of the Federal estate tax paid with respect to the transfer of property . . . to the decedent by or from a person (herein designated as a 'transferor') who died within 10 years before, or within 2 years after, the decedent's death." Id. The amount of the credit varies based on percentage multipliers that decline across the ten-year period within which successive deaths would give rise to the credit. Id. § (a)(1)--(4). Thus, the closer the successive deaths are together, the higher the credit. The reason for allowing this credit is "to prevent the excessive dilution of testamentary transfers by the estate tax where successive deaths occur within a relatively short period." S. Rep. No. 83-1622, at 122 (1954).

Defendant argues that we lack jurisdiction over any claim for a refund under Section 2013 brought on behalf of Frances' estate, because that estate did not timely file its administrative claim. (Mem. at 4--6.) Because Frances' estate filed its tax return and paid its taxes in September 2000, it had until September 2003 to file a claim for a refund with Defendant. (Comal. Exs. 8 & 9.) 26 U.S.C. § 6511(a). Defendant contends that because no one filed an administrative claim on behalf of Frances' estate until Plaintiff did so in March of 2010, we lack subject matter jurisdiction on any claim relating to Frances' estate. 26 U.S.C. § 7422(a). In response, Plaintiff concedes that we would lack jurisdiction over any claim for a refund brought by ...


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