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A transfer made or obligation incurred by a debtor
is fraudulent as to a creditor whose claim arose before
the transfer was made or the obligation was incurred if
the debtor made the transfer or incurred the obligation
without receiving a reasonably equivalent value in
exchange for the transfer or obligation and the debtor
was insolvent at that time or the debtor became
insolvent as a result of the transfer or obligation.
[Cal. Civ. Code sec. 3439.05 (West 1997).]
This statute has been interpreted in the context of tax
disputes to require proof of four elements as a prerequisite to
imposing transferee liability: (1) The transferor owed a debt to
the IRS, (2) the claim of the IRS arose before the transfer was
made, (3) the transferor made the transfer without receiving
reasonably equivalent value in exchange, and (4) the transferor
was insolvent at the time of the transfer or became insolvent as
a result of the transfer. See Locke v. Commissioner, T.C. Memo.
1996-541, affd. without published opinion 152 F.3d 927 (9th Cir.
1998); O’Sullivan v. Commissioner, T.C. Memo. 1994-17.
Transferee liability is generally limited to the value of
the assets received from the transferor. See Gumm v.
Commissioner, supra at 480; Locke v. Commissioner, supra.
However, where the value of the assets transferred is less than
the tax debt of the transferor, the liability of the transferee
for interest from the date of the transfer to the date of the
notice of transferee liability is determined by State law. See
Stansbury v. Commissioner, 104 T.C. 486, 493 (1995); Swinks v.
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Last modified: May 25, 2011