Estate Tax Settlement – Abuse of Discretion

Listen to this article

Tax

7^th Circuit Court of Appeals

Officials: FLAUM, KANNE, and SYKES, Circuit Judges.

Estate Tax Settlement – Abuse of Discretion

No. 14-1216 Maria Billhartz. V. CIR

Where courts failure to adhere to appellants request to vacate settlement agreement with Tax Commissioner did not amount to abuse of courts discretion. The settlement conclusively “established the amount that the Estate could deduct. It was not the province of the Tax Court to determine whether this amount was correct.”

“Second, as we alluded to above, the Estate’s argument is contrary to the very nature of settlements. Consider a lawsuit arising out of a car accident, in which the plaintiff, after consulting with an auto mechanic, initially claims $1000 in damages. The defendant does not think he is actually liable, but fears a large jury verdict and offers to settle for 40% of the plaintiff’s claim ($400). The plaintiff accepts the settlement, but a couple of weeks later her car breaks down, and she discovers that the damage from the accident was more extensive than she initially thought—closer to $2000. Under the Estate’s theory, the plaintiff could then try to vacate the settlement because the parties were “mistaken” as to a “fact”—i.e., that the amount of damage to the plaintiff’s car had been finally determined at the time of the settlement. But, of course, that’s not right: by agreeing to a settlement, the plaintiff waived any right to later argue that she actually deserved more than she previously asked for. It makes no difference that the settlement was calculated as a percentage of the amount claimed by the plaintiff—all monetary settlement amounts can be expressed as a percentage of the amount claimed by the plaintiff.”

Affirmed.

Full Text

Attorney Derek A. Hawkins is the managing attorney at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.