In Uncategorized on 02/16/2016 at 14:18

And IRS Doesn’t Even Have To Try

Sounds like another Midco (Notice 2001-16, 2001-1 C.B. 730, as modified by Notice 2008-20, IRB 2008-6, 2/11/2008), and Judge Foley isn’t buying the SOL ploy. As for “chase the transferor,” that gets even less traction.

The case is Estate of Janina M. Bowey, Deceased, David Hinshaw and Douglas Mack, Co-Executors, Docket No. 1045-13, filed 2/16/16.

There’s a heavy paper trail, as Dave and Doug seek summary J and partial summary J on behalf of the late Janina, whose wholly-owned C Corp was holding $1.4 million in cash, a hefty promissory note from the late Janina, and $1040 in prepaid tax expenses (don’cha love that number?). Unhappily, the late Janina’s C Corp owed $468K in tax.

So the late Janina uploaded all her stock to an outfit called MNA Holdings, LLC, in exchange for $1.248 million in cash, payoff of the late Janina’s six-figure note, and a promise to pay the $468K in tax.

Sound familiar?

Dave and Doug argue that IRS blew the Illinois Fraudulent Transfer Act SOL.

Nonstarter. “The period of limitations for assessment relating to transferee liability is determined by section 6901 (i.e., generally ‘within 1 year after the expiration of the period of limitation for assessment against the transferor’), not state law. See sec. 6901(c); Bresson v. Commissioner, 111 T.C. 172, 190 (1998), aff’d, 213 F.3d 1173 (9th Cir. 2000).” Order, at p. 2.

And chase-the-transferor gets nowhere just as fast. “The procedural elements of transferee liability are determined pursuant to section 6901, while the substantive elements are determined by state law. See Commissioner v. Stern, 357 U.S. 39, 42-45 (1958). Whether petitioner’s liability is contingent on respondent attempting to collect the tax from any other person, is a substantive question determined by state law. See Hagaman v. Commissioner, 100 T.C. 180, 183-184 (1993). The Illinois Uniform Fraudulent Transfer Act does not require a reasonable collection effort from respondent before asserting transferee liability against petitioner. M 740 ILCS section 160/1 et seq. Accordingly, respondent was not required to attempt to collect [C Corp]’s tax liability from MNA Holdings.” Order, at p. 2.

So no summary J for Dave and Doug. And Judge Foley sends them back to general docket.

Probably that’s a long walk.


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