Do the accountants plant more confusion and conflict in the family when they need more cover? Please judge for yourself.
1992.04.21 Lynch payment of $545,820 payment to the estate is not mentioned or reported in the accounting.
1992.04.22 (Edward White to Jean Nader)
"Enclosed is an agreement which should satisfy Tony as to the car. It cannot be any clearer.
Also enclosed is a preliminary analysis of the estate tax, which should be close to being accurate. I do need to check with Jo Ann Barnes as to a technical question as to whether or not any of your father's trust comes into this. I do not think it does, but there have been many changes in the law since that trust was established. I will have to ask her to bill us for that advice and any other technical tax matters I am not comfortable with. I can do most of the rest of the tax work and save the estate some money.
The executors' commission shown on the analysis is not figured on the value of the realty; however it does not include the 5% commission on the receipts of the estate in addition to the inventory.
In order to file that return and the subsequent Fiduciary Income tax return we will need an accounting from Tony from the date of his last accounting to the date of death. If he does not want to prepare it, I will not agree to any preliminary disbursal to him at all, and will seek your approval to file suit against him to compel the accounting, plus damages to the estate for his delay. Since that trust terminated on your mother's death, his final accounting is due now and not in October.
There will be no further explanations or written entreaties to him as far as I am concerned. He has the duty and he will perform it under a court order if necessary. Of course he will furnish that receipt.
The preliminary analysis contains three alternatives on Accotink at the bottom for your consideration.
In the event that we do seek a reduction in the assessment Tony will be given written notice that his prompt cooperation is necessary and that if he fails to cooperate that he is aware of the adverse consequences to the estate and is responsible for them.
As far as further steps are concerned, we have a lot to do. No gift tax returns were filed for 1989 and 1991 which will have to be done. The results of those gifts are factored in under "Unified Credit used for gifts 9,784".
The paper trail in the court and IRS is as follows:
File Estate tax by June 15, 1992
File First Accounting (16 months after qualification but can be sooner)
Ask for posting of Debts and Demands against the estate.
File Fiduciary Income tax returns for period 9/15/91-9/15/92, due January 1, 1993.
File Motion for a Show Cause why distribution should not be made. Submit Show Cause Order.
Request Executor's exoneration letter from IRS and Virginia.
Obtain closing letter from IRS and Virginia as to estate tax returns.
File 1993 Fiduciary tax returns (Sept. 1992-distribution)
File for Order allowing distribution.
File Final Accounting.
Normally distribution is withheld until the Order of Distribution is entered. As I indicated the creditors have one year to press claims against the estate. No prudent executor will distribute before that period, the entry of the Order of Distribution and the receipt of the tax closing letters.
Sincerely, Edward J. White
1992.06.11 Two versions of a payment made to the IRS on the extension request. One version is for $175,000 and one version is for $119,000. There should only be one version.
1992.06.11 (Edward White to Anthony O'Connell, copies to Jean Nader and E.A. Prichard)
'Thank you very much for your letter of June 9 and the appraisal.
I am helping Jean with the county matter and would appreciate your assistance since you certainly have much more expertise in the Accotink affair than anyone else. I agree that we must amplify the material previously sent to the county, and that the letter you enclosed is most pertinent. I had copies you sent me several years ago of the 1987 letters you wrote and received, but did not have the October letter.
Enclosed is a proposed addendum for the county which I wish you would look over, edit and add any comments that you think we should make. I am sure there are many factors that I have missed that you can add and welcome your input.
With regard to the income tax matter and the capital gain from the receipt of principal on the Lynch note in April 1991, I was following the 1990 return and simply did not pick up the fact that there was a principal payment in 1991. I will most certainly pay any interest and penalty which might accrue in this regard, and sincerely appreciate your calling it to my attention.
Again, I appreciate your help.
Sincerely, Edward J. White"
1992.12.10 (James McCauley [bar] to Edward White)
"Enclosed is a copy of a complaint which was received by the Virginia State Bar. Pursuant to the Rules of the Virginia Supreme Court and the Virginia State Bar Council Rules for Disciplinary Procedure, Virginia State Bar staff attorneys investigate and, in the appropriate cases, prosecute Charges of Misconduct received by the State Bar.
The State Bar has docketed this complaint, and the office of Bar Counsel is conducting the initial investigation to determine if the case should be filed with a district committee. I have been assigned as the staff attorney who will investigate and prosecute any Charges of Misconduct which may be filed with a district committee as a result of this complaint.
As part of the initial investigation, please review the complaint and provide a written answer within twenty-one (21) days of the date of this letter. Your answer will be reviewed by me as the assigned staff attorney to determine whether or not the complaint should be referred to a district committee for further investigation. Also, your answer may be sent to the complainant for review and may be used by the State Bar in the State Bars investigation and prosecution of' this case.
The Rules of the Virginia Supreme Court state in Part Six: Section IV, Paragraph 13(B)(S)(a) that
. . . Any such Charges of Misconduct shall be filed with a District Committee unless such preliminary investigation clearly reveals that the Charges of Misconduct have no basis in fact or that even if proved they would not constitute Misconduct.
If you do not file an answer within twenty-one (21) days, the above-referenced case will be filed with a district committee for further action.
The Supreme Court Rules and the Council Rules of Disciplinary Procedure, as amended, can be found in the August 1992 Virginia Lawyer Register, "Professional Guidelines for the Virginia Lawyer", The Rules of the Virginia Supreme Court for Disciplining, Suspending and Disbarring Attorneys and the Virginia Code of Professional Responsibility are in Volume 11, Code of Virginia (1950), as amended.
If you have any questions about the disciplinary procedure, either you or your attorney may contact me at the Virginia State Bar.
1992.12.11 (Edward White to Anthony O'Connell, Jean Nader, and Sheila O'Connell) (No copy to another)
"As a result of information gleaned at an estate law seminar yesterday, I think there may be a way of reducing the estate tax.
The law has long allowed percentage discount for "minority" interests in land which pass from a decedent. This means that if the decedent owned a partial interest (less than 50%) of a piece of property, that the IRS would allow a discount of its true value since minority interests are extremely difficult to sell.
A very recent case has upheld this discount even where two family trusts with the same trustees and same beneficiaries wound up owning the property. A 15% discount was allowed. In our case, prior to your mother's death, she owned a 53.9006% interest in Accotink and the Harold O'Connell Trust owned the rest.
I have discussed this idea with Jo Ann Barnes who feels that even though 53.9006% is not a minority interest, that we might, nevertheless, get the discount. She suggests amending the return, asking for 30% and settling for 15%.
The IRS will counter with several arguments. One, is that it is not a minority interest. She feels we might prevail since it is only just over 50%. Second, since the land is held as tenants in common, it could be partitioned into smaller facts (zoning problems notwithstanding) and either the trust or any of you could sell your interest if a buyer could be found. The IRS will also argue that aspect. The normal course, however, would be for some discount to be allowed.
The bottom line on this is shown on the enclosed tax computation. A fifteen percent discount would result in a tax savings to each of you of $3151.31.
The disadvantages are:
1. This will, in Jo Ann's opinion, absolutely trigger an audit and negotiation.
2. The final disbursement will be delayed.
3. The basis to each of you in the property will be reduced and will result in an increased capital gains tax later on when the property is sold.
As to the last item, Jo Ann pointed out that while there might be a higher tax in the future, you would have the use of the tax savings money now, and that the capital gains rate is 28% whereas the estate is in a 39% federal bracket. As to the first and second items, there may well be an audit anyway on the Accotink valuation question.
I will leave this decision to you, and would ask that Jean coordinate the response. I will be going out of town on December 19 and will be back on January 11. I do not see how it can be done before then.
As to other items - We heard from Virginia concerning the amended income tax return. There was a penalty of $106.00 which I paid. The fiduciary income tax will be $56,000.00 mainly due to the capital gain on the note payoff. The estate is charged with this. Since the estate and the heirs are in the same bracket, there is no difference whether it is paid by the estate or you. There may even be a savings on state taxes depending on rates.
Sincerely, Edward J. White"
(See the enclosure in the pdf reference)