In Uncategorized on 01/13/2020 at 17:04

At Least For Chops

Sandy Shockley’s midco attempt to dodge tax on the family’s nine-figure unload of their broadcasting empire has heretofore been discussed in my blogpost “Gude Faith, He Maun Fa’ That,” 6/22/15.

Now it’s the turn of her fellow-transferees, some investment LLCs unrelated to the Shockleys, and the Wisconsin State Investment Board. Here’s Alta V Limited Partnership, Transferee, et al., 2020 T. C. Memo. 8, filed 1/13/20.

The non-Shockley transferees claim they gave up some put rights, to sell their shares back to the Shockley corporation, but these hadn’t matured when the midco sale went down, so Judge Mary Ann (“S.E.C.” = She Eschews Cognomens) Cohen tosses the “reasonably equivalent value” counter to the Wisconsin Uniform Fraudulent Transfers Act (WIUFTA). Since the put rights hadn’t matured, and since the shares to which the put rights attached had been sold, they had no value.

“We conclude that petitioners’ incidental surrender of their right of redemption as part of the transfer of their … shares constitutes neither value nor reasonably equivalent value. We have previously held that … received nothing in exchange, or, at best, received petitioners’ shares of … stock, which–because of the distributions essentially liquidating [corporation]–were worthless. It follows under the facts presented here that petitioners’ right of redemption was equally worthless. Thus, the deemed transferor [corporation] did not receive value, reasonably equivalent or otherwise, in exchange for the proceeds from the sale of its assets.” 2020 T. C. Memo. 8, at p. 31.

And as we saw in my above-cited blogpost, good faith on the transferee’s part plays no role. The creditor is the beneficiary. Calling it a fraudulent transfer is a misnomer; the transferee may be pure as the driven cliché, but that avails naught.

But we shouldn’t get the chops, say the non-Shockley transferees. The creditor gets their claim, not a bonus. And there is lots of supporting caselaw.


“Petitioners held substantial percentages of the outstanding stock and were each represented on the [corporation] board. The [corporation] board considered the various sale options… and elected to proceed with an intermediary transaction…. Petitioners were also represented throughout the transaction. Significantly the intermediary transaction could not have taken place without petitioners’ consent. Even if the other [corporation] board members and shareholders had elected to proceed, they did not control a sufficient number of shares to compel petitioners to participate….” 2020 T. C. Memo. 8, at p. 37.

IRS concedes the Section 6651(a)(2) addition, but tries to wild-card in Section 6651(a)(3) in their seriatim brief. No go with that, but Section 6662(a), Section 6651(a)(1), and interest are all OK.

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