173 F.2d 736 | 5th Cir. | 1949
The petition for review of the Tax Court’s decision in this case was originally filed by Levi Cliriton Harrison and relates to the degree of his liability as transferee of the. Awoeb Oil ■ Company, a dissolved corporation, for deficiency in income and declared-value excess-profits taxes of that corporation. The Tax Court held Harrison liable, as transferee of Awoeb, for income tax in the amount of $10,917.07. for the calendar year 1941 and for income and declared-value excess-profits taxes in the amounts of .$52,125.20 and $26,573.99, respectively, for the calendar year .1942, together with interest thereon, as provided by law. The taxpayer in his petition did not question the amount of the corporation’s tax deficiency as determined by the Tax Court but limited the issue to that portion of the Tax Court’s decision which assessed .the total transferee liability against him individually rather than against his wife and him on a community basis. While the case was pending and prior to its being heard in this court, the petitioning taxpayer died, and his widow, Mrs. Loula Mae Harrison,. as independent testamentary executrix of the estate of Levi Clinton Harrison, by ap
Awoeb Oil Company was taken over by Harrison in order to carry out certain business purposes. At the time this corporation was dissolved in December 1942, its stock was wholly owned by Harrison and his wife in community. On dissolution, all assets of the corporation were distributed to Levi Clinton Harrison, Transferee. These assets had a fair market value of $332,668.04. Some of them had been pledged against notes amounting to $239,500. Harrison paid the notes, thereby reducing the corporation’s assets in his hands to $93,168.04. In 1945, the Internal Revenue Department determined a deficiency in the corporation’s income and excess-profits taxes, the amount of which, plus interest, constituted the petitioner’s liability as transferee of the assets of Awoeb. A revised computation of the original tax liability resulted in the amounts heretofore set out, totaling $89,616.26, together with interest thereon. Harrison admitted a transferee liability but claimed his liability was limited to $46,584.02, the value of half of the assets that remained. He founded this contention on the theory that, since the stock of the corporation was owned in community, the distribution to him was a distribution to the community, and the tax liability should, therefore, be allocated on a community basis between his wife and him. The opinion of the Tax Court upon which its decision was predicated was that, whether this liability^ be regarded Harrison’s personal debt or payable from the property held by him as a trustee for the corporation’s creditors, he would be liable as a transferee to the extent of the value of the assets received by him as transferee.
Section 311 of the Internal Revenue Code,
As Mertens
Harrison’s liability is measured by laws of transferee liability generally. Notwithstanding Texas law
In short, we are here not faced with personal liability but with trustee liability to the extent of the fund placed in Harrison’s hands, from which he is bound to pay all taxes due from the transferor to the extent of the fund. A transferee of private property, burdened with debts of the transferor, receives the property as a trustee, charged with such debts, and is required to disgorge so much of the property as is necessary to discharge the indebtedness.
In the present case, the indebtedness ($89,616.26), together with interest thereon, exceeded the value ($93,168.04) of the corporate assets that Harrison, as transferee, held; hence, no beneficial interest therein passed to the community estate. This being true, no' assets were acquired by the community within the meaning of art. 4619, Vernon’s Civil Statutes of Texas. Cf. La Force v. Bracken, Tex. Civ.App., 163 S.W.2d 239, affirmed 141 Tex. 18, 169 S.W.2d 465.
The decision of the Tax Court is
Affirmed.
“Transferred assets
“(a) Method of collection. The amounts of the following liabilities shall, except as hereinafter in this section provided, be assessed, collected, and paid in the same manner and subject to the same provisions and limitations as in the case of a deficiency in a tax imposed by this chapter (including the provisions in case of delinquency in payment after notice and demand, the provisions authorizing distraint and proceedings in court for collection, and the provisions prohibiting claims and suits for refunds):
“(1) Transferees. The liability, at law or in equity, of a transferee of property of a taxpayer, in respect of the tax (including interest, additional amounts, and additions to the tax provided by law) imposed upon the taxpayer by this chapter.”
Law of Federal Income Taxation, vol. 9, pp. 494-495, § 53.06. See also Phillips v. C. I. R., 283 U.S. 589, 51 S.Ct 608, 75 L.Ed. 1289.
Vernon’s Civil Statutes of Texas, art. 4619.