In United States v. Gill, 2021 U.S. Dist. LEXIS 12203 (S.D. Tex. 6/30/21), CL here, the court held that an FBAR nonwillful penalty survives the death of the person subject to the penalty. The decision turned on whether the FBAR nonwillful penalty was remedial or penal in nature. The general rule is that remedial liabilities survive death, but penal liabilities do not. The difference between these two categories is based on tests formulated in Hudson v. United States, 522 U.S. 100-101 (1997) (invoking the multi-factor test under Kennedy v. Mendoza-Martinez, 372 U.S. 144, 168–69, 83 S. Ct. 554 (1963)). Where the cause of action does not fall “neatly” in these categories, the decision is made by “primary purpose of the statute.” (Slip Op. p. 8.) Applying these tests, the Court finds the FBAR civil nonwillful penalty remedial.
A number of cases (cited by the court in the opinion) have held that the FBAR willful penalty (which in its typical application by the IRS produces larger penalties than would have applied under the nonwillful penalty) was remedial, thus permitting the penalty to survive death. Accordingly, it is not surprising that the nonwillful penalty survives death.
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