In United States v. Lax, No. 18-CV-4061(ILG)(PK), 2022 WL 980096 (E.D.N.Y. March 31, 2022), a New York District Court held that a signed Form 890 consenting to an estate tax assessment didn’t preclude an executor of the estate from later challenging the assessment, but also noted that in other cases, the executor may be equitably estopped from doing so.
The government had issued several income tax assessments against Chaim Lax, individually and against his estate. The U.S. Tax Court had entered judgments on the assessments relating to Chaim’s federal individual income tax returns for tax years 2002, 2003, 2004 and 2007. An individual who had power of attorney for the estate signed a Form 870 consenting to the assessment on Chaim’s 2006 federal individual income tax return; the executors of Chaim’s estate also signed a Form 890 consenting to an assessment on the federal estate tax return. As of Sept. 23, 2020, the total balance due on these assessments (with penalties and interest) was $63,244,515.25.
The assessments remained unpaid, and the federal government sued in U.S. District Court to enforce them, moving for partial summary judgment. However, the estate disputed the assessments, claiming that the signed Form 890 didn’t preclude the executor from challenging them.
Because the Form 890 is only an informal settlement, the court agreed with the estate that the executor could still challenge the assessments for estate tax. Further, as the Form 890 agreement applies only to the estate tax assessment, it didn’t prevent the executor from challenging the individual income tax assessments. However, the court warned that the Form 890 wasn’t merely an administrative settlement carrying no consequences; in some cases, a signed Form 890 may give rise to equitable estoppel, and the taxpayer might not be able to challenge the tax assessment.