Marilyn Ames, Office of Chief Counsel, IRS retiree, discusses United States v. Henco Holding Corp..
In yet another case involving an intermediary transaction tax shelter, the Eleventh Circuit Court of Appeals reaches back to a 1933 Supreme Court case to show how broad the government’s powers to reach transferees of a taxpayer’s assets are. In United States v. Henco Holding Corp., 127 AFTR2d 2021-362, 2021 WL 165324 (11th Cir. 2021), the shareholders of a corporation arranged a transaction in which a third-party purchaser received the assets of a corporation, an intermediary received a fee for participating in the transaction, the shareholders received the net cash from the asset sale, and the government was left with an empty bag when the corporate taxpayer could not pay the capital gains tax on the sale, which occurred in 1997. The Internal Revenue Service audited the return of the corporate taxpayer, Henco Holding Corporation, and after several extensions of the statute of limitations, issued a notice of deficiency to Henco in 2007 with respect to the sale transaction in an amount over $56 million. Henco defaulted on the notice of deficiency, but requested a collection due process hearing when the IRS began collection procedures. When the collection activity was sustained by Appeals and a notice of determination was issued, Henco then filed a petition with the Tax Court challenging both the collection action and the underlying tax liability. The Tax Court sustained both the assessments and the IRS collection action.
To see the full article, click: Holding Transferees Liable Without a Transferee Assessment
To download the full opinions, click: United States v. Henco Holding Corp., 127 AFTR2d 2021-362, 2021 WL 165324 (11th Cir. 2021)