Share on email
Email Article
Share on print
Print Article
Share on pocket
Save to Pocket

Alta V Limited Partnership v. Commissioner (T.C. Memo. 2020-8)

On January 13, 2020, the Tax Court issued a Memorandum Opinion in the case of Alta V Limited Partnership v. Commissioner (T.C. Memo. 2020-8). The issue presented in Alta V was whether the petitioners were liable as transferees for their portion of the unpaid, determined, and assessed deficiency, penalties, and additions to tax with respect to the transferor’s corporate income tax.

Transferee Liability Under the Code – IRC § 6901(a)

The liability of a transferee of the property of a taxpayer who owes Federal income tax is assessed, paid, and collected in the same manner and subject to the same provisions as the underlying taxes. IRC § 6901(a). For purposes of IRC § 6901, the term “transferee” includes, inter alia, a donee, heir, legatee, devisee, distributee, and shareholder of a dissolved corporation. See IRC § 6901(h); Treas. Reg. § 301.6901-1(b). Transferee liability under IRC § 6901 includes additions to tax, penalties, and interest owed by the transferor. Kreps v. Commissioner, 42 T.C. 660, 670 (1964), aff’d, 351 F.2d 1 (2d Cir. 1965). The Tax Court has jurisdiction over transferee liability cases. See IRC § 6901(f); IRC § 6902; Tax Court Rule 13(a).

IRC § 6901 does not independently impose tax liability upon a transferee but, instead, provides a procedure through which the IRS may collect unpaid tax (owed by a transferor of assets) from the transferee who received those assets. Commissioner v. Stern, 357 U.S. 39, 42 (1958). An independent basis for liability must be available, and this basis is generally found under applicable State law or equity principles. IRC § 6901(a)(1)(A); Ginsberg v. Commissioner, 305 F.2d 664, 667 (2d Cir. 1962), aff’g 35 T.C. 1148 (1961).

Three requirements must be met for the IRS to assess transferee liability against a party under IRC § 6901: (1) the transferee party must be subject to liability under applicable State law or equity principles, (2) the party must be a transferee under IRC § 6901 pursuant to Federal law or equity principles, and (3) the transferor must be liable for the unpaid tax. Swords Tr. v. Commissioner, 142 T.C. 317, 336 (2014); see Cullifer v. Commissioner, T.C. Memo. 2014-208, at *43, aff’d, 651 F. App’x 847 (11th Cir. 2016). The IRS bears the burden of proving that a party is liable as a transferee of the taxpayer’s property but not of proving that the taxpayer is liable for the tax. See IRC § 6902(a); IRC § 7454(c); Tax Court Rule 142(d).

The Tax Court uses state law to determine whether a taxpayer is liable, as transferee, for the unpaid tax of the transferor. See Stern, 357 U.S. at 45. The principle of substance over form applies to determinations of transferee liability issues. See generally Scott v. Commissioner, T.C. Memo. 1998-426, aff’d, 236 F.3d 1239 (10th Cir. 2001).

Original opinion: (T.C. Memo. 2020-8) Alta V Limited Partnership v. Commissioner

FavoriteLoadingAdd to favorites

Like this article?

Share on facebook
Share on Facebook
Share on twitter
Share on Twitter
Share on linkedin
Share on Linkdin
Share on pocket
Share on email
Share on print

Leave a Reply

Tax analysis that you (actually) want to read:

served up weekly, with a heaping helping of snark.


What's on your mind?

Are you curious about a particular tax topic and wish we would write about it?  Do you want to heap lavish praise upon your fearless editor?  Did we royally muck something up?   Let us know in any event!
Close Favorite Posts Panel
  • Favorite list is empty.
FavoriteLoadingClear your favorites list

Your favorite posts saved to your browsers cookies. If you clear cookies also favorite posts will be deleted.