Feldman v. Commissioner of Internal Revenue

Federal 7th Circuit Court
Civil Court
Income Tax
Citation
Case Number: 
Nos. 12-3144 et. al Cons.
Decision Date: 
February 24, 2015
Federal District: 
U.S. Tax Court
Holding: 
Affirmed
U.S. Tax Court did not err in finding that petitioners-shareholders of dissolved closely-held corporation were personally liable for corporation’s federal tax liability under 26 USC section 6901, where petitioners participated in tax shelter that attempted to offset capital gains accrued by corporation through sale of its assets to third-party with losses incurred by third-party through other, unrelated transactions. Tax Court could properly find that subject sale of corporate assets was in substance liquidation of corporate assets with no purpose other than tax avoidance that rendered petitioners “transferees” for purposes of section 1901, where record shows that: (1) third-party did not actually pay petitioners anything for their stock in said corporation, which was not in business at time of stock sale; and (2) each petitioner received pro-rata distribution of corporation’s cash on hand in exchange for their stock. Moreover, instant stock sale qualified as transfer under Wisconsin’s fraudulent transfer statute, where sale left corporation insolvent for purposes of paying its tax liability under circumstances where petitioners knew that federal tax liability would not be paid.