In B.F. Hawk v. Commissioner, the Sixth Circuit held that a decedent’s estate, his widow and two marital trusts were liable as transferees for income taxes owed by the decedent’s business. The Sixth Circuit held that under the Tennessee Uniform Fraudulent Transfer Act, an asset sale followed by the stock sale was a sham transaction that used alleged “loans” to disguise a liquidating distribution.
The estate, widow and trusts have now filed a petition with the Supreme Court.
The questions presented in the Petition for Certiorari are as follows:
Whether the Sixth Circuit’s decision conflicts with the decisions of the First, Second, Fourth, and Ninth Circuits regarding whether an alleged transferee’s knowledge is required for collapsing transactions under the Uniform Fraudulent Transfer Act.
Whether the Sixth Circuit’s reliance on state tax cases rather than creditor rights cases to justify collapsing under Tennessee’s Uniform Fraudulent Transfer Act (“TUFTA”) conflicts withCommissioner v. Stern, 357 U.S. 39 (1958) andFrank Sawyer Trust of May 1992 v. Commissioner, 712 F.3d 597 (CA1 2013)
Whether the Sixth Circuit’s imposition of strict liability under 26 U.S.C. § 6901 conflicts with Stern and the Fourth Circuit’s decision in Starnes v. Commissioner, 680 F.3d 417 (CA4 2012).
Whether the Sixth Circuit’s application of federal doctrines to collapse transactions under TUFTA violates Stern’s required two-step analysis and the decisions of the First, Second, Fourth, Seventh, and Ninth Circuits interpreting Stern to prohibit such application.
Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal..