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incur, debts beyond his or her ability to pay as they
became due.
Therefore, in order to establish that Messrs. DeMarta and Norwalk
are liable as transferees for the amounts they received from the
corporation, respondent must prove: (1) The corporation
transferred the assets with "actual intent to hinder, delay, or
defraud" the Internal Revenue Service; or (2) the corporation
made the transfer without receiving a reasonably equivalent value
in exchange for the transfer.
Actual intent may be established from circumstances
surrounding the transfer of the assets. Menick v. Goldy, 280
P.2d 844 (Cal. Ct. App. 1955); Burns v. Radoicich, 176 P.2d 77
(Cal. Ct. App. 1947). As respondent recognizes, transferee
liability generally results:
when stockholders receive corporate distributions for
which they do not pay an adequate and full
consideration at a time when the corporation is
insolvent, or thereby becomes insolvent, or is in
process of liquidation. [Lesser v. Commissioner, 47
T.C. 564, 585 (1967).]
After carefully reviewing the record, we find that respondent has
not met his burden of proving either actual intent to defraud or
that the shareholders received assets for which they did not pay
adequate and full consideration. Accordingly, we hold that
Messrs. DeMarta and Norwalk are not liable as transferees.
Decisions will be entered
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