Abstract
The Second Circuit Court of Appeals, in Diebold v. Commissioner, describes the requirements for finding transferee liability under Section 6901 of the Internal Revenue Code of 1986, as amended, here specifically under New York law, as state law predominates the determination of whether a person will be liable for federal taxes as a transferee. This case involved a so-called “Midco” transaction, whereby the goal was to avoid the corporate level taxes on the disposition of the assets of a C corporation. A sale by the shareholders of their C corporation stock and a sale by the C corporation of its assets were recharacterized as a sale by the C corporation of its assets and then a liquidating distribution of the sale proceeds to the shareholders of the C corporation. This recharacterization allowed the Second Circuit to hold that the C corporation's shareholders had transferee liability under New York law with respect to the tax liability recognized by the C corporation on the sale of its assets. A remand to the Tax Court concerns whether such recharacterization satisfies federal law.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.