A Little Sauce for the Gander: The Ninth Circuit Holds that a Bankruptcy Trustee Can Recoup Tax Payments from the IRS as Fraudulent Transfers Under Applicable State Law

Zazzali v. United StatesMost states have a version of the Uniform Fraudulent Transfer Act, or its predecessor, the Uniform Fraudulent Conveyance Act; these statutes permit creditors to set aside a variety of transfers made by debtors, including transfers made with an intent to hinder, delay or defraud creditors and transferees, as well as transfers made for less than fair value while the debtor was insolvent. The IRS is a frequent and enthusiastic litigant under these state statutes, which it relies upon to collect delinquent taxes from third parties who received a taxpayer’s property.

On August 31st, the Ninth Circuit ruled that the IRS is also subject to these laws, holding that a bankruptcy trustee could rely on state law to recoup tax payments made to the IRS.… Read More