ATTORNEY FOR APPELLANT: ATTORNEYS FOR APPELLEE:
JAMES C. TUCKER STEVE CARTER
TUCKER and TUCKER, PC ATTORNEY GENERAL OF INDIANA
Paoli, IN Indianapolis, IN
DEPUTY ATTORNEY GENERAL
INDIANA TAX COURT
IN THE MATTER OF THE ESTATE OF )
PEARL WILSON, DECEASED, )
ALICE W. THOMAS, )
v. ) Cause No. 49T10-0404-TA-19
INDIANA DEPARTMENT OF )
STATE REVENUE, INHERITANCE TAX )
ON APPEAL FROM ORANGE COUNTY CIRCUIT COURT
The Honorable Larry R. Blanton, Judge
Cause No. 59C01-0203-ES-23
February 2, 2005
Alice W. Thomas (Thomas) appeals the Orange County Circuit Courts (probate court) March
2004 judgment redetermining the Indiana inheritance tax liability of her mothers Estate.
The issue before this Court is whether the probate court erred in so
FACTS AND PROCEDURAL HISTORY
On September 17, 2001, Pearl Wilson (Wilson) conveyed approximately 397 acres
of land to Thomas, her only surviving child. Wilson died twenty days
later, on October 7, 2001, at the age of 87. On January
28, 2002, an independent appraiser valued the property conveyed by Wilson to Thomas
(as of the date of Wilsons death) at $637,000.
On March 28, 2002, Thomas filed an Indiana Inheritance Tax Return Form IH-6
for the Estate, reporting that no taxes were due.
The county inheritance
tax appraiser reviewed the return, pursuant to Indiana Code § 6-4.1-5-2, and then
forwarded it to the probate court. On June 6, 2002, the probate
court entered its Order Determining Inheritance Tax Due in the amount of $0.00.
The Department received notice of the probate courts order on October 16, 2002.
On November 12, 2002, the Department filed both a motion to set
aside the probate courts order, pursuant to Indiana Trial Rule 60(B), and a
Petition for Rehearing, Reappraisement and Redetermination of Inheritance and Transfer Tax (Petition).
In the Petition, the Department alleged that the value of the property transfer
from Wilson to Thomas, in the amount of $637,000, should have been included
in the taxable Estate because the presumption that the transfer was made in
contemplation of death had not been rebutted.
Consequently, the Department claimed that
the Estate owed at least $22,692.28 in inheritance taxes. On March 24,
2003, following a hearing, the probate court issued an order in which it
determined that the Estate owed inheritance tax in the amount of $22,692.28, plus
On April 19, 2004, the Estate filed its notice of appeal. This
Court heard the parties oral arguments on December 13, 2004. Additional facts
will be supplied as necessary.
STANDARD OF REVIEW
The Indiana Tax Court acts as a true appellate tribunal when it reviews
a probate court's final determination concerning the amount of Indiana inheritance tax due.
Ind. Code Ann. § 6-4.1-7-7 (West 2005); Indiana Dep't of State Revenue
v. Estate of Puschel, 582 N.E.2d 923, 924 (Ind. Tax Ct. 1991).
Consequently, on appeal, this Court will not reweigh the evidence nor judge the
credibility of witnesses, but will affirm the probate court's judgment upon any legal
theory supported by evidence introduced at trial. Estate of Hibbs v. Indiana
Dep't of State Revenue, 636 N.E.2d 204, 206 (Ind. Tax Ct. 1994).
The sole issue in this case is whether the probate court erred in
redetermining the Estates inheritance tax liability. Thomas argues that, pursuant to Indiana
Code § 6-4.1-7-1, the Departments Petition was untimely filed. She claims that
the probate court therefore lacked subject matter jurisdiction to redetermine the Estates inheritance
tax liability and, as a result, the probate courts original order of June
6, 2002 - which held that the Estates inheritance tax liability was zero
- must be reinstated. The Department, on the other hand, argues that
its Petition was timely filed. In the alternative, the Department argues that
given the circumstances of the case, it was excused from timely filing its
1. Was the Departments Petition Timely Filed?
The determination and collection of Indiana inheritance tax are governed entirely by statute.
The rights and obligations of the [D]epartment . . . and the
taxpayer, and the jurisdiction and powers of the probate court are defined therein.
Indiana Dept of State Revenue v. Estate of Binhack, 426 N.E.2d 714,
716 (Ind. Ct. App. 1981) (quoting Matter of Estate of Compton, 406 N.E.2d
365, 368 (Ind. Ct. App. 1980)). The rights and obligations of a
party seeking a redetermination of inheritance tax liability are set forth in Indiana
Code § 6-4.1-7-1, which provides:
A person who is dissatisfied with an inheritance tax determination made by a
probate court with respect to a resident decedents estate may obtain a rehearing
on the determination. To obtain the rehearing, the person must file a
petition for rehearing with the probate court within one hundred twenty (120) days
after the determination is made. In the petition, the person must state
the grounds for the rehearing. The probate court shall base the rehearing
on evidence presented at the original hearing plus any additional evidence which the
court elects to hear.
Ind. Code Ann. § 6-4.1-7-1 (West 2005) (emphasis added). 2. Was the Department excused from timely filing its Petition?
Given the language of this statute, Thomas argues that it is unambiguously clear
that the Department had 120 days from June 6, 2002 (i.e., the date
of the probate courts order determining the Estates inheritance tax liability) to file
its petition. Accordingly, she explains that the Department had until October 4,
2002, to file its petition; nevertheless, 159 days passed between the inheritance tax
determination by the probate court and the filing of the [Departments] Petition[.]
(Appellants Br. at 6.)
The Department argues, however, that the 120-day period did not begin to run
until the Department actually received notice of the probate courts determination. Thus,
the 120 day period did not begin until the Department received the IH-
on October 16, 2002. Therefore, the Departments Petition , filed on November
2, 2002, was timely. (Appellees Br. at 5-6.) The Department, however,
When the language of a statute is plain and unambiguous, the court has
no power to construe the statute for the purpose of limiting or extending
its operation. F.A. Wilhelm Constr. Co. v. Indiana Dept of State Revenue,
586 N.E.2d 953, 955 (Ind. Tax Ct. 1992) (citation omitted). The Department
wants the Court to read Indiana Code § 6-4.1-7-1 as saying [t]o obtain
the rehearing, the person must file a petition for rehearing with the probate
court within one hundred twenty (120) days after it receives notice from the
probate court that a determination has been made. Those words, however, are
not in the statute and this Court will not put them there.
Consequently, the Departments Petition, pursuant to Indiana Code § 6-4.1-7-1, was not timely
As Thomas properly states, the rule of law provides that if the Departments
Petition was untimely, the probate court was deprived of its jurisdiction to redetermine
the Estates inheritance tax liability. See Estate of Binhack, 426 N.E.2d at
717. Nevertheless, the Department argues that given the circumstances of this particular
case, it was excused from timely filing its Petition.
More specifically, the Department asserts that despite the fact that both the county
inheritance tax appraiser and the probate court were required by statute to notify
the Department of their respective actions, the Department did not receive notice until
October 16, 2002, well after the 120-day period had lapsed. Given that
it was precluded at that time, through no fault of its own, from
timely appealing the probate courts determination, the Department explains that it immediately filed
its motion to set aside the probate courts determination on the basis of
surprise, pursuant to Indiana Trial Rule 60(B).
Indiana Trial Rule 60 (B) provides that a party may move to have
a judgment set aside for the reasons of mistake, surprise, or excusable neglect.
Ind. Trial Rule 60(B)(1). As to this rule, there are no
fixed standards to determine the parameters of mistake, surprise or excusable neglect.
Stemm v. Estate of Dunlap, 717 N.E.2d 971, 974 (Ind. Ct. App. 1999)
(internal citation omitted). Rather, a courts decision to set aside a judgment
on any of these grounds turns upon the unique factual background of the
particular case. See id. Courts must balance the need for
efficient administration of justice with the preference for deciding cases on their merits
and giving a party its day in court. Flying J, Inc. v.
Jeter, 720 N.E.2d 1247, 1249 (Ind. Ct. App. 1999) (internal citation omitted).
In turn, because the decision to grant or deny a motion to set
aside a judgment under Trial Rule 60(B) is within a courts equitable discretion,
this Court will only reverse that decision if the lower court abused its
discretion. See Stemm, 717 N.E.2d at 974. An abuse of discretion
will not have occurred so long as there exists even the slightest evidence
of mistake, surprise, or excusable neglect. See id.
Pursuant to Indiana Code § 6-4.1-5-6, once the county inheritance tax appraiser reviewed
the Estates inheritance tax return and prepared an appraisal report thereon, a copy
of that report was to be served upon the Department. Ind. Code
Ann. § 6-4.1-5-6 (West 2005). This was not done. (See Appellants
App. at 25.) Similarly, under Indiana Code § 6-4.1-5-11, the probate court
was to immediately mail a copy of its June 6, 2002 determination to
the Department. Ind. Code Ann. § 6-4.1-5-11 (West Supp. 2004-2005). It
did not. (See Appellants App. at 27 (probate courts June 6th order,
with no distribution list); cf. with Appellants App. at 3 (probate courts March
24th redetermination, with distribution list).
The Department supervises the enforcement and collection of Indianas inheritance taxes. Ind.
Code Ann. § 6-4.1-12-6 (West 2005). To that end, a probate courts
determination regarding inheritance tax liability is merely a provisional estimate. Ind. Code
Ann. § 6-4.1-7-6(a) (West 2005). Indeed, the determination does not become final
until the Department has either accepted the estimate or been given the opportunity
to challenge the estimate. See id.; A.I.C. § 6-4.1-7-1
In this case, the Department was never put on notice that the Estate
was being processed, let alone that it could anticipate a determination thereon which
it could subsequently challenge. Thus, there is enough evidence to find that
the Department was no doubt surprised in the first instance when it received
notice that the Estate had been processed, and again in realizing that the
period in which it could challenge the probate courts determination had already lapsed.
Generally, with a Trial Rule 60(B) motion, the claimant must not only show
mistake, surprise, or excusable neglect, but must also make a prima facie showing
that a different result would be reached if the case were tried on
the merits. T.R. 60(B). See also Moore v. Terre Haute First
Natl Bank, 582 N.E.2d 474, 476-77 (Ind. Ct. App. 1991). Nevertheless, if
the judgment is void ab initio, a Trial Rule 60(B) claimant need not
show a meritorious claim or defense. Moore, 582 N.E.2d at 477.
The Indiana Court of Appeals has held that a default judgment against a
party is void ab initio if that party was entitled to notice but
never received it due to faulty process. See id. at 478.
An analogous situation exists here: in order for the Department to either
accept or challenge the probate courts provisional estimate of inheritance tax liability, the
Department was entitled to receive timely notice thereof. See A.I.C. § 6-4.1-5-6;
§ 6-4.1-5-11. Through no fault of its own, the Department did not
receive any notice until after the 120-day period had already expired. Consequently,
the probate courts June 6th order, not having been properly served upon the
Department, was void ab initio. Accordingly, the probate court did not abuse
its discretion when it redetermined the Estates inheritance tax liability on the basis
of the Departments allegation of surprise.
For the foregoing reasons, this Court finds that the probate court did not
err in redetermining the inheritance tax liability of the Estate. Accordingly, the
judgment of the probate court is AFFIRMED.
In computing the zero liability, Thomas reported that, at the time
of Wilsons death, her total taxable estate was worth $20,371.36. (Appellants App.
at 4.) Because the entire Estate was transferred to Thomas (a Class
A transferee), the first $100,000 of the transferred property interest was exempt.
See Ind. Code Ann. § 6-4.1-3-10 (West 2005). See also Ind. Code
Ann. § 6-4.1-1-3 (West Supp. 2004-2005) (defining classes of transferees).
Indiana Code § 6-4.1-2-4 provides that Indianas inheritance tax applies to,
inter alia, transfers which are made in contemplation of the transferors death.
Ind. Code Ann. § 6-4.1-2-4(a)(2) (West 2005). A transfer is presumed to
have made in contemplation of the transferors death if it is made within
one (1) year before the transferors date of death. However, the presumption
is rebuttable. A.I.C. § 6-4.1-2-4(b). The purpose of this provision is
to catch, and subject to taxation, those transfers of property which were made
with a testamentary motive (i.e., distribution in anticipation of death and/or for the
purpose of avoiding death taxes). See Indiana Dept of State Revenue v.
Estate of Baldwin, 652 N.E.2d 124, 126 (Ind. Tax Ct. 1995).
That is a function proper for the legislature only.
In any event, the Department demonstrated that it had a meritorious
claim when it prevailed on rehearing. (
See Appellants App. at 3, 104-18.)