Or, “Prejudge Not, Lest Ye Be Prejudged”

 Live and learn, I always say. In my blogpost “Deep in the Heart of Texas,” 4/10/15, I asked what State law has to do with prejudgment interest on transferee tax liability.

Judge Laro answered my question in Richard H. Cullifer, Transferee, Docket No. 20177-11, filed 5/13/15, which I just picked up. Sorry for the delay.

“In a transferee liability case the Commissioner is entitled to recover prejudgment interest to the extent that such interest is authorized under the applicable State law. See, e.g., Rubenstein v. Commissioner, T.C. Memo. 2010-274, 2010 WL 5071596, at *l-2.” Order, at pp. 1-2.

Though Judge Laro takes a look at Texas law, it really doesn’t matter. Texas law allows prejudgment interest from written notice of claim.

“Texas courts define a claim as ‘a demand for compensation or an assertion of a right to be paid.’ Respondent asserts that he notified petitioner of the claim in writing in the form of a letter… informing petitioner that a transferee liability investigation of petitioner was being conducted. On the basis of respondent’s characterization of this letter as a notification that respondent was conducting an investigation, we cannot conclude that it constituted a written notice of claim under Texas law. If respondent were to be entitled to prejudgment interest under Texas law, the prejudgment interest would therefore begin to accrue from the earlier of 180 days from respondent’s issuance of the notice of liability… or petitioner’s petition filing…. We need not examine whether respondent may be entitled to prejudgment interest post-dating the notice of liability. Respondent concedes that he is not entitled to collect prejudgment interest after the issuance of the notice of liability because section 6601 allows for interest to accrue as of that date. Respondent therefore concedes his entitlement to any prejudgment interest.” Order, at p. 2.

And anyway, IRS’s numbers for whatever interest IRS is entitled to don’t add up, and Cullifer’s do.

Always glad to learn, and pass learning along.