Tax Court in Brief | Slone v. Commissioner

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The Tax Court in Brief February 7 – February 11, 2022

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Tax Litigation: The Week of February 7 – February 11, 2022

Slone v. Comm’r, T.C. Memo 2022-6 | February 7, 2022 | Lauber, J. |

Dkt. Nos. 6629-10, 6630-10, 6631-10, 6632-10 (Consolidated)

Opinion

Short Summary: These four “sister” and consolidated Slone opinions stem from a stock-sale transaction commonly known as an “intermediary company” or “Midco” transaction which ultimately resulted in a $13,494,884 federal income tax deficiency and a $2,698,997 accuracy-related penalty, plus accrued interest, against a judgment-proof corporation. Thus, the Commissioner pursued the tax liability (including penalties and interest) against transferees of the corporation’s assets.

Key Issues:

Short Answers:

Primary Holdings:

Key Points of Law:

Insights: Under Section 6901, the Commissioner has wide statutory latitude to pursue tax liability against a person who is the transferee of assets of a taxpayer who owes income tax, estate tax, or gift tax. Transferee liability depends on a blend of state law and federal law. Tax shelters, such as Midco transactions, that are designed to inappropriately avoid corporate-level taxation place benefitting (and perhaps unknowing) shareholders in jeopardy for transferee liability, including for penalties and interest assessed against the corporation years before the shareholders are notified of the potential transferee liability.