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1985; and (2) additions to tax for (a) fraud of $25,331 for 1984
and $40,694 for 1985 and 50 percent of the interest due on the
deficiencies for 1984 and 1985, and (b) substantial
understatement of tax of $12,666 for 1984 and $20,347 for 1985.
Respondent issued notices of transferee liability to
Wiltzius and Waldorf on June 8, 1993. In the notices of
liability, respondent determined that House of Babes failed to
report gross receipts of $153,755 in 1984 and $200,620 in 1985.OPINION
A. Transferee Liability
The Commissioner may collect unpaid income taxes of a
transferor of assets from a transferee of those assets. Sec.
6901(a), (c)(2); Commissioner v. Stern, 357 U.S. 39, 42 (1958);
Stansbury v. Commissioner, 104 T.C. 486, 489 (1995), affd. 102
F.3d 1088 (10th Cir. 1996). Respondent contends that petitioners
are liable as transferees for income tax and additions to tax
owed by House of Babes for 1984 and 1985. Petitioners disagree.
Petitioners bear the burden of proving that House of Babes
is not liable for tax and additions to tax. Sec. 6902(a).
Petitioners concede that House of Babes is liable for the tax in
the amounts determined by respondent.
Respondent bears the burden of proving that petitioners are
liable as transferees. Sec. 6902(a); Rule 142(d); Gumm v.
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