Jeff A. Wiltzius, Transferee - Page 21

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          was substantially indebted at the time of the transfer.  United              
          States v. Fernon, supra at 613 n.10; Bay View Estates Corp. v.               
          Southerland, 154 So. at 899; Banner Constr. Corp. v. Arnold, 128             
          So. 2d at 896.                                                               
               House of Babes was insolvent after it was liquidated in                 
          August 1986 because it had no assets and no ability to pay its               
          debts thereafter.                                                            
               Petitioners contend that House of Babes was not insolvent               
          because there is no evidence that it formally assigned the                   
          buyer's note to House of Babes' shareholders.  We disagree.                  
          The parties stipulated that House of Babes was liquidated in                 
          August 1986.  The liquidation occurred on August 14, 1986.  House            
          of Babes had become liable for its 1984 and 1985 Federal income              
          taxes by August 1986.  Hagaman v. Commissioner, 100 T.C. 180                 
          (1993) (liable on last day of tax year).  Thus, House of Babes               
          was substantially indebted when it transferred the note to its               
          shareholders.  Even more basically, we have found, see par. A-1-             
          a, above, that the shareholders treated the note as theirs and               
          payment of the principal and interest on the note by the buyers              
          to House of Babes' shareholders shows that the note was                      
          transferred to them; it is inescapable that after that transfer              










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