Circuit Court for Washington County Case No. 21-C-15-55059 AA
Wright, Leahy, Shaw Geter, JJ.
case arises from a judicial review of the assessment of
estate taxes owed by the Estate of Margaret Beale Taylor in
the Circuit Court for Washington County. Appellee Richard
Reeves Taylor, the estate's personal representative, in
determining the amount of tax due, subtracted the value of
Mrs. Taylor's interest in a marital trust created by her
husband from the total value of her Maryland estate tax
valuation. The Comptroller of the Treasury, appellant,
disallowed the exclusion, resulting in an increase in the
Estate's tax liability. The Comptroller also imposed
penalties for the interest accrued and late filing.
petitioned the Tax Court, seeking reversal and an abatement
of the assessments. The Tax Court affirmed the
Comptroller's inclusion of the value of the interest in
the marital trust and the assessments of interest, but waived
and abated the late payment penalty. Appellee filed a timely
petition for judicial review in the circuit court, and
appellant filed a cross-petition. After a hearing, the
circuit court reversed the Tax Court's assessment of
taxes and interest against the estate.
consolidated appellant's questions
presented as follows:
1. Does Maryland have the statutory or constitutional
authority to include the value of Margaret Beale Taylor's
interest in the trust transferred to her under her
predeceased husband's will - the "QTIP" trust -
in her Maryland estate, and therefore subject the trust to
Maryland estate tax?
2. Did the Tax Court improperly waive a late-filing penalty
based upon the conclusion that the taxpayer
"demonstrated with affirmative evidence that reasonable
cause exists" for waiver of the penalty?
reasons set forth below, we shall affirm the judgment of the
trust in question was created by the will of John Wilson
Taylor, Margaret Beale Taylor's husband, who predeceased
her on December 1, 1989. At the time of Mr. Taylor's
death, the Taylors were residents of Wayne County, Michigan.
Mr. Taylor died with a valid will, which directed the
creation of a "residuary marital trust," valued on
his date of death at $2, 299, 893.20. His will further
directed that all of the net income from the residuary
marital trust be paid to Mrs. Taylor at least annually for
and during her lifetime.
his death, Mr. Taylor's Estate filed a timely federal tax
return with the Internal Revenue Service, in which his estate
claimed a deduction for the marital trust, known as a
qualified terminable interest property ("QTIP")
election. Election of the QTIP deduction enables a married
couple to defer payment of any estate tax on the QTIP until
the death of the surviving spouse. The marital deduction is
allowed for the entire value of the QTIP.
Mr. Taylor's death, Mrs. Taylor continued to reside in
Michigan until 1993, when she moved to Washington County,
Maryland. She died testate on January 15, 2013.
the personal representative of Mrs. Taylor's Estate (the
"Estate" or "appellee"), Richard Reeves
Taylor, filed a federal Estate (and Generation-Skipping
Transfer) Tax Return with the Internal Revenue Service, which
included Mrs. Taylor's terminable life interest in the
marital trust. On the federal estate tax return, appellee
reported an estate value of $5, 582, 245. Appellee also filed
a Maryland estate tax return, in which the personal
representative excluded the value of the marital trust,
decreasing the reported value of Mrs. Taylor's federal
gross estate by $4, 108, 048.02.
explained his deduction of Mrs. Taylor's interest in the
marital trust in a statement attached to the Maryland return.
In reliance on Section 7-309(b)(6)(i) of the Maryland
Tax-General Code Annotated, the marital trust created under
the Last Will and Testament of decedent's deceased
spouse, John Wilson Taylor, in which decedent had an income
interest for life and which is reported on Schedule F of
decedent's Federal Estate Tax Return, Form 706, has been
excluded from the federal gross estate (line 1, federal Form
706) reported on line 1 of Section IV of the MET-1. John
Wilson Taylor died on December 1, 1989, and was a resident of
the State of Michigan on the date of his death. No Maryland
estate tax return was filed for Mr. Taylor, and thus no