Beneficiaries on Hook for Tax Bill

The U.S. Tax Court has ruled that Illinois state law leaves beneficiaries liable for the tax bill of their benefactor to the extent of the bequest.  Beyond a zero-sum game, the Tax Court held that the amount of the bequest included the amount paid to attorneys to enforce the beneficiaries' claims against the estate.  The beneficiaries were also found liable for interest accrued since the filing deadline for the estate's return.  As a minor consolation, the Tax Court did not allow penalties because the IRS failed to give proper notice.

See Beneficiaries Liable as Transferees to Extent of Property Received From Estate, 2010 TNT 148-9 (August 2, 2010).

Posted by James G. Haskell, Associate Editor, Wealth Strategies Journal.