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ATTORNEY FOR APPELLANTS: JOHN WILLIAM DAVIS, JR. DAVIS & ROOSE Goshen, IN

ATTORNEYS FOR APPELLEE: GREGORY F. ZOELLER ATTORNEY GENERAL OF INDIANA JONATHAN E. LAMB DEPUTY ATTORNEY GENERAL Indianapolis, IN _____________________________________________________________________

CLERK _____________________________________________________________________
of the supreme court, court of appeals and tax court

IN THE INDIANA TAX COURT

FILED

Nov 21 2011, 2:54 pm

ESTATE OF CHRISTINE L. NETERER, Deceased,

) ) ) Deborah Pollock and Marilyn Humbarger, ) Co-Personal Representatives, ) ) Appellants, ) ) v. ) Case No. 49T10-1006-TA-26 ) INDIANA DEPARTMENT OF STATE ) REVENUE, ) ) Appellee. ) _____________________________________________________________________ ON APPEAL FROM THE ELKHART CIRCUIT COURT The Honorable Terry C. Shewmaker, Judge Cause No. 20CO1-0610-EU-42 FOR PUBLICATION November 21, 2011 FISHER, Senior Judge Deborah Pollock and Marilyn Humbarger, as personal representatives of the Estate of Christine L. Neterer (Estate), appeal the Elkhart Circuit Courts (probate court) entry of summary judgment against the Estate and in favor of the Indiana Department of State Revenue, Inheritance Tax Division (Department). On appeal, they raise one

issue: whether the probate court erred in granting summary judgment in favor of the Department.1 FACTS AND PROCEDURAL HISTORY The following facts are not in dispute. Christine L. Neterer, an Indiana resident, died testate on September 18, 2006. At the time of her death, Neterer and her surviving sister each owned, as tenants in common, an undivided one-half interest in certain real property located in Elkhart County (hereinafter, "the subject property"). On October 19, 2006, an unsupervised estate was opened, Neterers will was admitted to probate, and her nieces, Deborah Pollock and Marilyn Humbarger, were appointed as co-personal representatives. On August 22, 2007, Pollock filed with the probate court the Estates Ind iana Inheritance Tax Return, attaching both an appraisal and a two-page document titled "Valuation of Decedents Interest in Real Estate." (Appellants Am. App. (hereinafter, "Appellants App.") Vol. II at 22-31.) The appraisal provided that the fair market value of the subject property in its entirety was $855,250.2 The Valuation of Decedents Interest in Real Estate stated that it was necessary to reduce the subject propertys appraised value by one-half, and then apply an aggregated discount of 30 percent (30%) to account for both a lack of marketability and a lack of control. As a result, the return reported that the fair market value of the subject property was $300,000. The Elkhart County Assessor subsequently filed her Report of Appraiser, which

1

Certain information in this case has been filed as "not for public access" and is confidential. See Ind. Administrative Rule 9. Consequently, the Court's opinion provides only that information essential to the resolution of the case and as appropriate to develop the law. See Admin. R. 9(G)(3), (4)(d).
2

Philip J. Hahn, a real estate broker, appraiser, and auctioneer, prepared the appraisal.

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indicated the return "correctly" valued the subject property. (See Appellants App. Vol. II at 42.) Thereafter, Pollock filed an amended return and the Elkhart County Assessor issued another Report of Appraiser, accepting all of the valuations reported in the amended return.3 On November 1, 2007, the probate court entered an Order

determining that based on the accepted valuations, the Estates inheritance tax liability was $31,937.98. The probate court forwarded a copy of its Order to the Department. Approximately one month later, on December 10, 2007, the Department sent a letter to the Estate requesting additional information to facilitate its audit of the amended return. After receiving the information, the Department, on December 31, 2007, sent the Estate a "Notice of Additional Inheritance Tax Due" (Notice), stating that the value of the subject property was $427,625 and the Estates actual inheritance tax liability was $45,224.48 because: 1) it had not reported the value of a life insurance policy in the return; 2) its deduction for monument expenses exceeded the statutory allowance for such deductions; and 3) it had not substantiated the propriety of the 30% discount. (See Appellants App. Vol. II at 97.) As a result, the Department requested that the Estate remit an additional $13,278.64 in inheritance tax, plus interest. On January 29, 2008, the Estate sent a letter to the Department explaining that while it had no "quibble" with the Departments adjustments regarding the life insurance policy and the monument deduction, it disagreed with the disallowance of the 30% discount. (See Appellants App. Vol. II at 101-03.) Nevertheless, the Estate offered to reduce the 30% discount by five percent. On February 11, 2008, the Department

declined the Estates offer and restated its request for the additional $13,278.64 in
3

The amended return included the fair market value of previously omitted stock, but did not adjust the subject propertys valuation.

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inheritance tax, plus interest. On February 13, 2008, the Estate paid the requested amount. Over a year and a half later, on or about December 1, 2009, the Estate filed a claim with the Department contending that it was entitled to a refund of the additional inheritance tax it paid. On December 4, 2009, the Department denied the Estates refund claim. On December 17, 2009, the Estate filed with the probate court a

Complaint challenging the Departments denial of its refund claim. The Estate and the Department subsequently filed motions for summary judgment.4 In its motion, the Estate argued that to the extent the Department disagreed with the probate courts Order determining the Estates inheritance tax liability, it was required to timely file with the probate court either a petition for rehearing or a petition for reappraisal. (See Appellants App. Vol. II at 71-74.) As the Department did neither, argued the Estate, it had absolutely no authority to disallow the 30% discount because the probate courts Order of November 1, 2007, established "for all time" the amount of tax owed by the Estate. (See Appellants App. Vol. II at 71; Appellees Confidential Suppl App. (hereinafter, "Appellees App.") at 2-3, 6-7.) In its motion, the Department claimed that the probate courts Order was only a provisional estimate of tax due. (See Appellants App. Vol. I at 119-21; Appellees App. at 3-5.) The Department also explained that the Estates appraisal was the best

indicator of the subject propertys fair market value because the Valuation of Decedents Interest in Real Estate was unverified, unsigned, prepared by an anonymous person,

4

To support their respective summary judgment motions, both the Estate and the Department designated the Estates original inheritance tax return, the appraisal, and the Valuation of Decedents Interest in Real Estate. The Estate also designated its amended inheritance tax return and the probate courts Order of November 1, 2007.

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and failed to disclose how the 30% discount was even calculated. (See Appellants App. Vol. I at 123-26, 129; Appellees App. 9-10.) On May 20, 2010, after holding a hearing on the parties motions, the probate court granted summary judgment in favor of the Department and against the Estate. In doing so, the probate court stated: A probate courts order determining tax due is co nsidered a provisional estimate of the tax that the [Department] may accept. Furthermore, pursuant to Ind[iana] Code

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