IRS $2.9M Hudson Valley estate tax case survives legal challenge

A federal judge has rejected a motion by Carmel lawyer Carla L. Marin to dismiss a $2.9 million estate tax lawsuit against her mother”™s estate.

For 11 years the IRS has been trying to collect the tax on the $7.4 million estate of Ana Beatriz Marin, who died in 2007. In 2018, the government sued to liquidate the estate to pay off the debt and to hold Carla, Philip and Carl Marin personally responsible.

U.S. District Judge Vincent L. Briccetti ruled Jan. 22 that Carla Marin, the executor, had failed to establish reasons to dismiss the government”™s allegations.

Ana Beatriz Marin was 77 when she died in an auto accident. She left a two-page, handwritten will that bequeathed property to her daughters, Debra and Andrea, and the remainder of her assets to her daughter Carla and sons Philip and Carl.

The estate included 29 parcels of property valued at nearly $6.3 million and financial assets worth more than $1.1 million. The real estate is in Putnam and Dutchess counties in New York and in Fairfield County, Connecticut.

The Internal Revenue Service calculated a $2.1 million estate tax.

The estate elected to pay interest only for five years and then 10 annual installments. The deal required the estate to either post a bond as collateral or consent to a special lien.

Interest-only payments were made from 2008 to 2012, and then stopped. The estate was in default, the government contended, for failure to make the annual payments or to secure the debt with a bond or lien.

The IRS demanded immediate payment of the full amount, in 2013. Carla Marin became sole executor in 2014, and the IRS cancelled the payment plan and filed tax liens.

By 2015, $2.5 million was owed. Carla Marin allegedly told the IRS that the estate”™s financial condition was “very poor,” Briccetti noted in his opinion, and there were not enough assets to fully pay the tax.

U.S. Attorney Geoffrey Berman filed a foreclosure complaint in 2018. The estate had earned more than $2 million in rental and other income, according to the complaint, yet the estate had not filed an income tax return since 2010.

Carla Marin had allegedly received more than $642,000 in cash from the estate and her brothers had received more than $28,000.

The estate also had paid more than $2.2 million in administrative expenses, from 2010 to 2016, for advertising, bank fees, property maintenance, taxes and insurance.

Carla Marin lives in one of the estate properties in Carmel and her law office is in another.

The government argues that U.S. tax liabilities take priority over other estate debts.

Carla Marin contends that the government failed to adequately establish its claims.

She argues, for example, that the government cannot hold her personally liable for estate taxes because the estate is not insolvent.

“The government has failed to make any objective factual allegations concerning the solvency of the estate,” she states in her motion to dismiss, “because the estate is, and always has been, solvent.”

Briccetti cited Marin”™s statements to the IRS that the financial condition was poor and there were not enough assets.

An executor may be liable for the tax when the estate pays other debts, Briccetti said, and the government has a priority claim.

As executor, he noted, she owed a fiduciary duty of undivided loyalty and impartiality to the estate and its creditors.

The government sufficiently alleged that Carla Marin “engaged in self-dealing of estate assets for her own personal benefit,” Briccetti found, “thereby depriving the estate of significant rental income.”

The tax liability now totals $2.9 million.

Assistant U.S. Attorney Samuel Dolinger is handling the government”™s case. Marin was represented by Manhattan attorneys Megan L. Brackney and Stephen A. Josey.