- 20 -
their payment of credit card bills and attorney's fees and by the
value of the two smaller unimproved parcels which they
transferred to the United States in accordance with Mr. Fisher's
plea agreement.
A transferee may avoid liability for a tax deficiency under
a fraudulent transfer statute by reconveying the property to the
transferor under certain conditions. Mendelson v. Commissioner,
52 T.C. 727, 735 (1969); see also Eyler v. Commissioner, 760 F.2d
1129, 1134 (11th Cir. 1985), affg. in part and revg. in part T.C.
Memo. 1983-397. A transferee may avoid liability as a fraudulent
transferee by reconveying or retransferring the property to the
transferor prior to the Commissioner's taking action to collect
from the transferee. Eyler v. Commissioner, supra at 1134. A
transferee who pays the debts of his transferor, however, will
not be relieved of liability to the extent of the payment unless
the debts paid held priority over the tax claimed by the
Commissioner.17 Id. Petitioners bear the burden of refuting
transferee liability once the Commissioner has made a prima facie
showing of such liability. Ginsberg v. Commissioner, 35 T.C.
1148, 1156-1157 (1961), affd. 305 F.2d 664 (2d Cir. 1962).
17We note that whether a reconveyance to the transferor
relieves the transferee of liability is a matter of State law.
McLellan v. Commissioner, T.C. Memo. 1975-15. The parties have
pointed us to no Florida (or Arizona) cases which would provide
for a contrary result on these facts.
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