This segment of my discussion of Starnes v. Commissioner, 2012 U.S. App. LEXIS 10948 (4th Cir. May 31, 2012), will examine the dissenting opinion, which argues that the Tax Court should have been overturned and the taxpayers tagged for transferee liability.
The dissent starts by looking at the substance of the transaction: after the sale of the warehouse, Tarcon had $3,091,955 in the bank and total tax liabilities of $881,628, and the four former shareholders were then free to distribute the net cash, which would result in a distribution to each of them of $552,582. Starnes, 2012 U.S. App. LEXIS 10948 at *64-*65 (Wynn, J.… Read More
This will continue my discussion of Starnes v. Commissioner, 2012 U.S. App. LEXIS 10948 (4th Cir. May 31, 2012), in which a divided Fourth Circuit panel addressed transferee liability for federal taxes. Before addressing the case in more detail, a little background is in order.
In Notice 2001-16, 2001-1 C.B. 730 (Feb. 26, 2011), the IRS announced that it would be scrutinizing transactions that involved the sale of a corporation’s stock to one corporation and its assets to another in what are known as “intermediary transaction tax shelters.” The central feature of these transactions were separate sales of the assets and stock of a corporation, which due to the presence of an intermediary (the purchaser of the stock) resulted in no payment of tax on the gain on the sale of the assets.… Read More
State law generally provides a creditor with a remedy when someone who owes a debt engages in a fraudulent conveyance in an effort to put money or property out of reach. Since law suits can be cumbersome, Congress gave the IRS special powers to collect from transferees, enacting Section 6901(a) of the Code, which provides that transferees of property are subject to liabilities for income, estate or gift taxes. Specifically, liabilities of a transferee are to be “assessed, paid, and collected in the same manner and subject to the same provisions as in the case of the taxes with respect to which the liabilities were incurred.” Id.… Read More
Sometimes people do the dumbest things when they think they are being tricky, clever, or both. This principle is illustrated nicely by a recent opinion in an action brought to enforce a federal tax lien, United States v. Tyler, 2012 U.S. Dist. LEXIS 34093 (E.D. Pa. Mar. 13, 2012).
David J. Tyler, the taxpayer, was assessed in 2002 for additional tax liabilities from 1992 through 1998 but failed to pay, triggering a federal tax lien under Section 6321 of the Internal Revenue Code. In August 2003, the taxpayer and his wife transferred their residence, which was held in a tenancy by the entirety, to Mrs.… Read More