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II. Issues Relating to Transferee Liability
A. Background
Respondent contends that Larry, Ronnie, and Sylvia are
liable as transferees of Frank and Katherine’s Federal income tax
liabilities for the years in issue because Frank and Katherine
fraudulently conveyed funds and assets to Larry, Ronnie, and
Sylvia. Petitioners contend that Larry, Ronnie, and Sylvia are
not liable as transferees because Frank and Katherine did not
have the requisite fraudulent intent.
Section 6901(a) provides that the liability of a transferee
of property “shall * * * be assessed, paid, and collected in the
same manner and subject to the same provisions and limitations as
in the case of the taxes with respect to which the liabilities
were incurred”. Section 6901 does not impose liability on the
transferee, but merely gives the Commissioner a procedure or
remedy to enforce the transferor’s existing liability. See
Commissioner v. Stern, 357 U.S. 39, 42 (1958); see also Hagaman
v. Commissioner, 100 T.C. 180, 183 (1993). Respondent bears the
burden of proving that Larry, Ronnie, and Sylvia are liable as
transferees of Frank and Katherine. See sec. 6902(a); Rule
142(d).
To prevail under section 6901(a), respondent must show the
existence and extent of transferee liability as determined under
the law of the State in which the transfer occurred. See
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