That’s what IRS is claiming Transupport, Inc., Docket No. 16422-18L, 1/19/21, did to its officers, so its RCP (Reasonable Collection Potential) should be adjusted accordingly. Transupport claims this is a new issue, and anyway, the AO at their CDP didn’t properly evaluate its RCP.

Because inventories.

Y’all remember Transupport, Inc., of course, with their collection of obsolete, crashed-smashed-and-trashed militaria, for which they never kept an itemized inventory. What, no? Well, I’m sure Rafe Eledge of Antiques Roadshow wouldn’t get weepy if la famille Foote brung in their stuff, but you can check ’em out in my blogposts “No Inventory? No Fraud,” 9/14/15, and “No Inventory? – No Change,” 11/23/16. OK?

Judge Mary Ann (“S. E. C. = “She Eschews Cognomens”) Cohen is off the case, but ex-Ch J L Paige (“Iron Fist”) Marvel is on this one, the CDP off the NITL that followed the overcompensation SNOD.

“We conclude that both substantive questions presented by the parties (i.e., the fair market value of petitioner’s inventories and whether any of petitioner’s payments to its officers constitute voidable fraudulent transactions) are subsidiary determinations necessary to ascertaining petitioner’s ability to fully pay its liabilities. The initial hearing did not resolve these issues, however, so we cannot properly review whether the Commissioner abused his discretion in rejecting petitioner’s proposed collection alternative on this record. Accordingly, we will grant petitioner’s motion to remand for further development of the record regarding petitioner’s ability to pay, including both substantive subsidiary determinations noted above.” Order, at pp. 1-2.

There’s the usual joust about what the junk is worth, with numbers all over the lot. Now ex-Ch J Iron Fist isn’t going to make her own appraisal, but just check out Appeals’ factual basis for whatever number the AO came up with. The administrative record here is less than pellucid. And since both sides want remand, what’s the biggie?

“While both parties agree that remand is appropriate in this case, petitioner seeks to limit remand to consideration of the fair market value of its inventories only. Petitioner’s arguments for such a limitation are unconvincing. While we agree that properly valuing petitioner’s inventories is an important aspect of determining its reasonable collection potential and, therefore, whether the Commissioner abused his discretion in rejecting petitioner’s proposed collection alternative, we do not agree that it is the only permissible consideration on remand. Of equal importance is a determination of whether petitioner improperly drained itself of assets available for collection through allegedly fraudulent transfers to its officers via excessive compensation.

“Petitioner attempts to limit remand by characterizing any consideration of allegedly fraudulent transfers as a ‘new issue’. Petitioner relies on numerous cases, from this Court and higher courts, that stand for the proposition that remand does not create a new hearing and so does not permit consideration of new issues. Petitioner is correct that the cases upon which it relies stand for that proposition. Petitioner is mistaken, however, in considering the question of whether any excessive compensation constitutes a voidable fraudulent transfer to be a “new issue”. Rather, this question is a subsidiary determination essential to resolving the main issue in the initial hearing–petitioner’s ability to pay.” Order, at p. 6.

Anyhow, the administrative record .

“The record in this case is not a model of clarity. It reveals that Compliance may not have finalized its valuation of petitioner’s inventories. It also reveals that petitioner provided a third-party valuation, albeit belatedly. The record and respondent’s admissions in his answer show that the AO F agreed to consider petitioner’s valuation report after issuing the Notice of Determination and raised the possibility that he may rescind the determination. As to the issue of valuing petitioner’s inventories, in short, the record is hopelessly murky as to any basis for reviewing whether respondent abused his discretion.

“Additionally, the record indicates that the parties discussed the excessive compensation issue during the hearing and that petitioner’s counsel sought to decrease compensation amounts to enhance the chances that respondent accept a proposed collection alternative. The notice of determination reflects these conversations by stating that ‘compensation was excessive and not reasonable’, but it does not determine the specific amount of excessive compensation that may represent an asset available for collection. Far from being a new issue, this question is simply underdeveloped; remand will allow the record to be supplemented and the necessary determinations to be made, which will allow petitioner to meaningfully avail itself of this Court’s jurisdiction to review those determinations. As it stands now, however, we cannot review whether respondent’s determination as to excessive compensation was reasonable because there was no final determination of an amount that may be voidable and therefore available for collection for us to review.” Order, at pp. 7-8. Name omitted).

I think ex-Ch J Iron Fist has some muddy waters here. To talk of voidable or fraudulent transfers metastisizes what should be a dissipation of assets issue, i.e., one that applies only to what the taxpayer did, into a third-party issue, i. e., what happens to the party who got the dissipated assets. The latter’s way premature. If excessive compensation was paid to the officers and directors of Transupport, Inc., who were all family members, then if the inventory plus cash on hand (without reference to excessive compensation a/k/a dissipated assets) will pay in full, or if same plus ongoing net profit (without regard to excessive compensation) will pay the full liability within the lien period, why bother about which officer or director got what?

Suppose a taxpayer bought whiskey instead paying taxes, but still has some saleable whiskey and cash on hand; does Old Grand-Dad have transferee liability?