An estate that paid taxes based on a Bernard Madoff investment account later found to be worthless is not eligible for a refund, a state appeals court held on Monday.

 Post-death circumstances bear on fair market value of an estate only when reasonably foreseeable at the time of death, and in 2006, no one suspected that Madoff was running the largest Ponzi scheme in U.S. history, the court said in Estate of Warshaw v. Director, Div. of Taxation, A-884-12.

 Theodore Warshaw died on May 27, 2006, with an estate that included an individual retirement account with Bernard L. Madoff Investment Securities LLC. In July 2007, the estate, valued at $1,463,773, paid $88,677 in estate tax.

 Warshaw had invested $627,173 in the IRA and part of the estate value was $1,113,338 in distributions the IRA had made during his life. His widow earned distributions of $185,148 in 2007 and $90,477 in 2008.

 But after Madoff’s arrest in December 2008 on securities fraud charges, it became apparent the account was worthless. In January 2009, Warshaw’s executor requested a refund. The state Division of Taxation said no, finding the value as of death was not altered by subsequent events.

 Madoff pleaded guilty in March 2009. The next month, the estate sued in Tax Court, arguing the worthless IRA reduced the estate’s value below the $675,000 tax-exemption threshold. The division insisted that the value was established as of the date of death.

 Tax Court Judge Joseph Andresini said Madoff’s continuing fraud was a relevant determination of the IRA’s fair market value. The account statements were fraudulent on the date of death and a hypothetical willing buyer who investigated the IRA would have learned it contained no assets, he said, granting the motion for a refund.

 Reversing, Appellate Division Judges Anthony Parrillo and Douglas Fasciale said the estate’s assertion that the IRA was worthless on the date of death was “belied by the record.” Warshaw withdrew $486,165 more than he invested, and the IRA continued to pay out after his death.

 There is no evidence “anyone had knowledge that Bernard L. Madoff Investment Securities was running a Ponzi scheme around the date of decedent’s death. As a result, there was no basis to question the date-of-death value of the IRA,” the judges.

 The estate’s attorney, David Edelblum of Feingold & Edelblum in Hackensack, did not return calls. The state was represented by Assistant Attorney General Lewis Scheindlin.

 Christopher Porrino, director of the Division of Law, says the court came to the right conclusion about valuation of estates for tax purposes.