*9 Decision will be entered under Rule 50.
1. Petitioners, having reason to know that an estate tax return was required, relied upon an attorney to prepare and file this return. Held, this reliance upon the attorney did not constitute reasonable cause under sec. 6651, I.R.C. 1954, for petitioners' failure to file a timely estate tax return.
2. Held, also, the fact that litigation was still pending at the time the estate tax return was due, did not constitute reasonable cause, even though the outcome of that litigation might affect the tax liability.
*200 Respondent mailed the executors of the Estate of Frank Duttenhofer notification, dated May 12, 1966, stating:
the determination of the estate tax liability for the * * * estate discloses a deficiency in tax in the amount of $ 3,469.75 and an addition to the tax in the amount of $ 39,942.27 [under sec. 6651(a), I.R.C. 1954].
*201 Both parties have made concessions which will be given effect under Rule 50. The only issue remaining is whether the failure timely to file the estate tax return was due to reasonable cause so as to make the addition to tax provided for in section 66511 inapplicable.
*11 FINDINGS OF FACT
Some of the facts have been stipulated. The stipulation of facts and exhibits attached thereto are incorporated herein by this reference.
Decedent Frank Duttenhofer (hereinafter sometimes referred to as Frank) died on February 22, 1963. Frank was survived by a son, Frank Duttenhofer, Jr., two daughters, Helen Sapp and Ada Foley, and a brother, William Duttenhofer (hereinafter sometimes referred to as William).
On March 11, 1963, the last will and testament of Frank Duttenhofer, deceased, was duly approved by the Probate Court of Hamilton County, Ohio, and petitioners Albert J. Uhlenbrock (hereinafter sometimes referred to as Albert) and William were appointed coexecutors of the estate. The last will and testament provided, in part, as follows:
8. I hereby nominate, constitute and appoint Albert J. Uhlenbrock and my brother, William Duttenhofer, as co-executors of this my Last Will and Testament.
* * * *
I hereby expressly direct that no bond or other security shall be required of said co-executors, in any jurisdiction, to serve the faithful performance of their duty as such. I request my co-executors to employ my attorney, Thomas H. Mongan, in the administration*12 of my estate.
William was 77 years of age in 1963 and had completed only 4 years of formal education. For about 20 years just preceding 1963 he had worked as a factory employee of Cincinnati Gasket & Packing Co. (hereinafter referred to as Cincinnati Gasket), a corporation controlled by Frank. William had only a limited experience with Federal taxes, but he had prepared his own income tax return on several occasions. Prior to being appointed coexecutor of his brother's estate, William had no experience with estate tax returns.
In 1963, Albert was 38 years of age and president of Cincinnati Gasket. He graduated from high school in 1942 and shortly thereafter began his employment with Cincinnati Gasket as a part-time office and factory worker. Albert had been an employee of Cincinnati Gasket since 1942 except for the time he spent in military service. Albert worked in various capacities for Cincinnati Gasket until 1957 when he was elected president of the company. Although Albert had never previously been an executor or administrator of an estate, he *202 knew an estate tax return was required to be filed but did not know its due date.
Pursuant to the request made in the*13 will, the coexecutors employed Thomas H. Mongan (hereinafter referred to as Mongan) as the attorney for the estate. Mongan was a graduate of the University of Cincinnati with a bachelor of arts degree, a bachelor of business administration degree, and a bachelor of laws degree. He was an attorney duly admitted to practice in Ohio, and he had practiced in Federal and State courts for 20 years and had also worked for a public accounting firm. In either 1953 or 1954, Mongan became Frank's legal consultant and shortly thereafter met the petitioners. Mongan's relation with petitioners was minimal. His only significant contact with them in a legal capacity was in 1954 when the bylaws of Cincinnati Gasket were amended. Except for this, petitioners rarely, if ever, saw or dealt with Mongan prior to Frank's death.
On April 23, 1963, William and Albert, as coexecutors of the estate, signed an "Estate Tax Preliminary Notice" (Form 704) which had been drafted by Mongan. The petitioners' signatures were subscribed to the preliminary notice and in bold face type within 1 1/2 inches of their signatures the following statement appeared:
NOTICE. -- Failure to file a required return on Form*14 706 within 15 months from the date of death may render executors, administrators, and persons in actual or constructive possession of the decedent's property liable for penalties.
On July 18, 1963, a petition was filed on behalf of Lena Klicke (hereinafter referred to as Lena) in the Court of Common Pleas, Hamilton County, Ohio. This petition alleged that Lena was the surviving spouse of Frank and that the will admitted in the Probate Court of Hamilton County, Ohio, on March 11, 1963, was not Frank's last will and testament. The petition prayed that this document be set aside and for such other relief as necessary. Lena's petition postponed proceedings in the Probate Court of Hamilton County and shortly thereafter all the papers pertaining to the probate of the will were transferred to the Court of Common Pleas in order to dispose of the issues raised.
On August 22, 1963, the coexecutors of the estate filed a demurrer to Lena's petition and on October 22, 1963, filed a memorandum in support of the demurrer. On April 29, 1964, the Court of Common Pleas filed an opinion sustaining the demurrer, but allowed 15 days for Lena to file an amended petition. Neither an amended petition*15 nor the Ohio statutory election of a surviving spouse to take against the will were ever filed by Lena. Under Ohio law, the period in which she could make this election terminated on July 14, 1967.
During the whole period of administration, Albert and William mainly signed the various papers and documents prepared by Mongan, who would send the papers to petitioners or have petitioners come to *203 his office. William did not assist in any other aspect of the administration of the estate, but Albert did maintain some accounting records on rental property and handled the receipts and disbursements for some mortgages owned by the estate. Except for the records Albert maintained, all other papers and records of the estate were kept by Mongan.
Mongan made the policy decisions and performed all other work for the estate including handling the matters pertaining to estate taxes and income taxes. He also represented the estate in litigation, which included disposition of the proceeds from a life insurance policy, State of Ohio taxes on certain mortgages, and Lena's petition. In short, Mongan not only represented the estate but also controlled its total administration.
Due to Mongan's*16 lack of diligence, it was not until September 16, 1964, that he wrote the district director of internal revenue, Cincinnati, Ohio, requesting an extension until December 22, 1964, for filing the Federal estate tax return. This was the only instance when an extension for filing the Federal estate tax return was requested. Shortly thereafter Mongan advised Albert that he had applied for an extension of time in which to file the estate tax return, and that in Mongan's opinion, this request would be granted. This was the first occasion that Albert became aware of the date when the return was due, and of Mongan's failure to prepare and timely file a Federal estate tax return for the estate. Subsequently, the district director advised Mongan that the estate tax return (Form 706) had been due on May 22, 1964, and that the request for an extension of time for filing had been rejected. The respondent's letter sent to Mongan dated September 28, 1964, denied the extension request and stated the following reasons:
1. Request for the extension is not signed by the taxpayer or his duly authorized agent. 2
2. The request was not in this office or mailed on or before the date prescribed by*17 law for filing the return. Your return should be filed as soon as possible, attaching a statement explaining in detail your reason for the late filing.
On October 27, 1964, a properly executed estate tax return (Form 706) for the Estate of Frank Duttenhofer, deceased, was filed with the district director of internal revenue, Cincinnati, Ohio.
OPINION
The decedent died on February 22, 1963. Section 6075 of the Code requires an estate tax return to be filed within 15 months after decedent's death. Accordingly, the date on which the estate tax return was due was May 22, 1964; however, no estate tax return was filed until October 27, 1964. The sole issue is whether the failure to timely file *204 the Federal estate tax return was due to reasonable cause under section 6651. 3
*18 Petitioners' basic contention is that they relied upon competent counsel to prepare and file the estate tax return and that this reliance constituted reasonable cause for failure to file on time. We do not agree.
Reasonable cause as applied in section 6651 has been defined as the "exercise of ordinary business care and prudence." Southeastern Finance Co. v. Commissioner, 153 F. 2d 205 (C.A. 5, 1946), affirming 4 T.C. 1069">4 T.C. 1069 (1945). Sec. 301.6651-1(a)(3), Proced. and Admin. Regs.
Whether the failure to file on time was due to reasonable cause is primarily a question of fact to be decided from all the circumstances in a particular case. See Coates v. Commissioner, 234 F. 2d 459 (C.A. 8, 1956), affirming a Memorandum Opinion of this Court. The record shows that petitioners, at the time of their appointment as executors, knew little about handling the administration of an estate and so employed Mongan, the attorney suggested in the will. The facts disclose further that petitioners practically abdicated their responsibilities with respect to the estate in favor of Mongan. They made no attempt*19 to determine their duties as executors or to inquire into any of Mongan's activities with respect to the estate, but relegated themselves to the position simply of signing the documents prepared by Mongan. We do not find that the petitioners failed to exercise proper care in complying with the request of the decedent to employ Mongan in the administration of the estate. However, petitioners did fail to act as ordinarily intelligent and prudent businessmen by blindly acquiescing in all of Mongan's decisions and thus giving him effective control of administering the estate, whereas this responsibility was basically their own. We think more was required of the executors. See below.
Moreover, within 2 months of the death of the decedent, petitioners signed Form 704, a form which clearly stated a Federal estate tax return must be filed within 15 months of date of death. Thus, petitioners can reasonably be considered to have known that the filing of an estate tax return was required. We have found as a fact that Albert knew such a return had to be filed, but did not know its due date. In Estate of William T. Mayer, 43 T.C. 403">43 T.C. 403 (1964), affirmed per curiam*20 351 F. 2d 617 (C.A. 2, 1965), certiorari denied 383 U.S. 935">383 U.S. 935 (1966), we agreed with the District Court for the Northern District *205 of California in Ferrando v. United States, 52 A.F.T.R. (P-H) 1924">52 A.F.T.R. 1924, 56-2U.S.T.C. par. 11, 615 (1956), affd. 245 F. 2d 582 (C.A. 9, 1957), when it said:
persons who undertake to act as executors do not meet the required standard of care merely by employing an attorney to represent them. They must assume at least the minimum responsibility of seeing to it that the attorney acts with diligence.
* * * *
it is not asking too much of an executor, who is aware that an estate tax must be paid, that he ascertain the time when the return and the tax are due. Ordinary prudence demands that he do so * * *
The facts show that petitioners' actions fall clearly within this language. Petitioner Albert knew that a return was required. Nevertheless he made no attempt to determine its due date or whether Mongan was acting "with diligence." Applying this standard, it is clear that Albert did not "exercise ordinary business care and *21 prudence."
Petitioners rely on a number of cases for the proposition that as a matter of law, reliance upon a tax adviser to prepare and file tax returns constitutes reasonable cause under section 6651. Orient Investment & Finance Co. v. Commissioner, 166 F. 2d 601 (C.A.D.C. 1948), reversing a Memorandum Opinion of this Court; Haywood Lumber & Min. Co. v. Commissioner, 178 F. 2d 769 (C.A. 2, 1950), modifying 12 T.C. 735">12 T.C. 735 (1949); Brooklyn & Richmond Ferry Co., 9 T.C. 865">9 T.C. 865 (1947), affd. 171 F. 2d 616 (C.A. 2, 1948), certiorari denied 336 U.S. 968">336 U.S. 968 (1949); Hatfried, Inc. v. Commissioner, 162 F. 2d 628 (C.A. 3, 1947), reversing a Memorandum Opinion of this Court; and Safety Tube Corporation, 8 T.C. 757">8 T.C. 757 (1947), affd. 168 F. 2d 787 (C.A. 6, 1948). We think reliance upon these cases is misplaced. In the situations involved in those cases the taxpayers, without knowledge that certain tax returns were required, were *22 found to have reasonably relied upon their tax advisers to determine whether a return should be filed and if so to prepare the necessary returns for filing. Under those circumstances, the Court held the taxpayers had "reasonable cause" for failure to file the proper tax return and therefore the addition to tax was excused. The situations in those cases are distinguishable from the instant facts. Here, there could be no question but that a return should be filed and the executors and counsel should have known an estate tax return was required. The only question here involved was "when" the return was due, and not "whether" one was due. It is our opinion that where a taxpayer should know a tax return is required (and here Albert did know that a return was required), but delegates the responsibility of preparing and filing the return to a third person, the delegate's subsequent failure in this appointed task does not alone constitute reasonable cause for failure to file on time under section 6651. See Logan Lumber Co. v. Commissioner, 365 F. 2d 846, 854*206 (C.A. 5, 1966); Estate of William T. Mayer, supra; *23 and Southeastern Finance Co. v. Commissioner, supra.
Petitioners rely heavily upon In re Fisk's Estate, 203 F. 2d 358 (C.A. 6, 1953), reversing a Memorandum Opinion of this Court. In that case, similar to the instant case, the executrix of the decedent's estate employed an attorney prominent in the local community. The estate tax return was prepared by the attorney, but was filed 1 day late. The respondent determined that the estate was liable for the addition to tax for failure to timely file, and we agreed. On appeal, the Court of Appeals reversed this Court and found that there was "reasonable cause" for failure to timely file due to the executrix's reliance upon the attorney. We feel that case is distinguishable from this one. The facts in Fisk do not show that the petitioner-executrix failed to act prudently or that she ever knew or had reason to know that an estate tax return was required. As in the prior cases mentioned above, where the taxpayers, without knowledge that a return was required, relied upon a competent tax adviser to prepare the proper papers, this good-faith reliance constituted reasonable*24 cause under section 6651. However, it is our opinion that the reasoning of those cases does not apply where a third person is relied upon to prepare and timely file a tax return for a taxpayer who knows that a return must be filed.
This is not a case concerned with a complex question of whether any return at all need be filed and where competent advice that none is required is relied on to excuse failure to file on time. This case only involves a question of calendar dates and we do not think that because the petitioners, knowing a return had to be filed, relied on an attorney, competent or not, to file the return, excuses late filing. Under these facts, we hold that petitioners cannot avoid the penalty for delinquent filing simply because they hired a lawyer, and turned everything over to him.
Petitioners' second contention is that the failure of the attorney to prepare and file the estate tax return within the proper period was due to reasonable cause since the estate was involved in litigation which might ultimately affect the estate tax. Even assuming that the results of the litigation might affect the determination of an estate tax, we do not feel that this alone constitutes*25 reasonable cause for failure to file on time. Mongan was aware that a reasonable extension of time for filing the return could have been obtained under section 6081, which would have avoided the penalty. In fact, Mongan eventually requested this extension but due to his lack of diligence the request was not filed until 3 months after the due date of the Federal estate tax return.
Furthermore, we cannot find that this litigation prevented Mongan from filing an estate tax return. Even without receiving an extension, *207 Mongan could have prepared and filed the return based on the information then available. When and if the matters there in issue were decided in such a manner as to affect the estate tax liability, Mongan could then have filed an amended tax return. We cannot agree that the uncertainty of the outcome of litigation, even together with the other factors herein, constituted reasonable cause for Mongan's failure to file.
Decision will be entered under Rule 50.
Footnotes
1. All statutory references are to the Internal Revenue Code of 1954.↩
2. At this time, Mongan did not have written authorization to represent the Estate of Frank Duttenhofer before the Internal Revenue Service.↩
3. SEC. 6651. FAILURE TO FILE TAX RETURN.
(a) Addition to the Tax. -- In case of failure to file any return required under authority of subchapter A of chapter 61 * * * on the date prescribed therefor (determined with regard to any extension of time for filing), unless it is shown that such failure is due to reasonable cause and not due to willful neglect, there shall be added to the amount required to be shown as tax on such return 5 percent of the amount of such tax if the failure is for not more than 1 month, with an additional 5 percent for each additional month or fraction thereof during which such failure continues, not exceeding 25 percent in the aggregate.↩