      WILLIAM SCOTT STUART, JR., TRANSFEREE, ET AL., 1
         PETITIONERS v. COMMISSIONER OF INTERNAL
                  REVENUE, RESPONDENT
            Docket Nos. 1685–11, 1686–11,    Filed April 1, 2015.
                        1687–11, 1688–11.

        R issued notices of transferee liability to Ps to collect L’s
      unpaid Federal income tax pursuant to I.R.C. sec. 6901. R
      argues that the following two-step analysis applies in deter-
      mining whether Ps are liable for L’s unpaid tax: (1) applying
      doctrines pertinent to interpreting the Internal Revenue Code,
      determine whether the form of the subject transactions should
      be disregarded in favor of deciding, on the basis of the sub-
      stance of the transactions, whether Ps are transferees for pur-
      poses of I.R.C. sec. 6901 and (2) apply State law to the trans-
      actions resulting from the first step. Held: Following our
      report in Swords Trust v. Commissioner, 142 T.C. 317 (2014),
      R’s two-step analysis is rejected; additional reasons are
      stated. Held, further, transferee liability is established under
      the Nebraska Uniform Fraudulent Transfer Act (UFTA)
      because L’s transfer was constructively fraudulent as to R and
      the transfer was made for the benefit of Ps. Held, further,
      unmatured tax liabilities are ‘‘claims’’ within the meaning of
      that term as defined in UFTA. Held, further, Ps, for whose
      benefit the transfer was made, are transferees within the
      meaning of I.R.C. sec. 6901.

  1 Cases of the following petitioners are consolidated herewith: Arnold
John Walters, Jr., Transferee, docket No. 1686–11; James Stuart, Jr.,
Transferee, docket No. 1687–11; and Robert Edwin Joyce, Transferee,
docket No. 1688–11.

                                                                         235
236                144 UNITED STATES TAX COURT REPORTS                                  (235)


   Steven Spencer Brown and Denis John Conlon, for peti-
tioners.
   H. Barton Thomas, Jr., and George W. Bezold, for
respondent.
   HALPERN, Judge: These four cases have been consolidated
for purposes of trial, briefing, and opinion. Little Salt
Development Co. (Little Salt or company) is a Nebraska cor-
poration. Petitioners were shareholders of Little Salt in 2003
until, in August, they sold their shares. Respondent deter-
mined and assessed a deficiency in Little Salt’s 2003 Federal
income tax of $145,923, along with an accuracy-related pen-
alty of $58,369. Little Salt did not pay those amounts
(together, unpaid 2003 tax). By separate notices of liability
(notices), respondent determined that petitioners, as trans-
ferees of Little Salt’s property, were liable for Little Salt’s
unpaid 2003 tax to the extent of the net value of the assets
that each purportedly received from Little Salt. 2 Respondent
calculated each petitioner’s respective liability as follows:

               Petitioner                                                   Liability

      William Scott Stuart, Jr. ....................................        $119,609
      Arnold John Walters, Jr. ....................................           59,804
      James Stuart, Jr. .................................................     59,804
      Robert Edwin Joyce .............................................        59,804

Petitioners assign error to respondent’s determinations of
their transferee liability.
  Unless otherwise indicated, all section references are to the
Internal Revenue Code (Code) in effect at the time of the
purported transfers in issue, and all Rule references are to
the Tax Court Rules of Practice and Procedure. All dollar
amounts have been rounded to the nearest dollar.

                                     FINDINGS OF FACT

   The parties have stipulated certain facts and the authen-
ticity of certain documents. The facts stipulated are so found,
and the documents stipulated are accepted as authentic.
  2 A transferee’s liability generally is limited to the value of the assets re-

ceived from the transferor. See Hagaman v. Commissioner, 100 T.C. 180
n.1 (1993).
(235)                       STUART v. COMMISSIONER                      237


Petitioners
  At the time they filed the petitions, all petitioners resided
in Nebraska except for William Scott Stuart, Jr. (Dr. Stuart),
who resided in Minnesota. Together with the Estate of
Charles Craft (which is not a party), they owned all the
shares of Little Salt at the time of the stock sale discussed
infra.
Little Salt
   Little Salt, a so-called C corporation (subject to the tax on
corporations imposed by section 11), was organized under the
laws of Nebraska in 1960. It is a fiscal year taxpayer whose
fiscal year ends on September 30. As of August 6, 2003, its
shares were owned as follows:
         Name                      Number of shares   Percentage ownership

William Scott Stuart, Jr.                    20             33.336
Robert Edwin Joyce                           10             16.666
Arnold John Walters, Jr.                     10             16.666
James Stuart, Jr.                            10             16.666
Estate of Charles Craft1                     10             16.666
  1 Charles   Craft died on June 24, 2003.

  During 2003, Mr. Joyce was president of the company; Mr.
Walters was both secretary and treasurer. All of Little Salt’s
shareholders (shareholders), other than the representative of
Mr. Craft’s estate, were directors.
Land Sale
   Until June 11, 2003, Little Salt owned 160 acres of saline
wetlands (land) on the outskirts of Lincoln, Nebraska. On
that date, it sold the land to the City of Lincoln, Nebraska,
pursuant to an assignment of contract by the Nebraska
Game and Parks Commission (commission) to the city. Before
its sale, the land was used for farming and for duck hunting.
The land is a habitat for the Salt Creek tiger beetle, a criti-
cally endangered species. The city purchased the land for
$472,000, and, after subtracting settlement charges, Little
Salt received $471,111. After it sold the land (land sale),
Little Salt’s only asset was cash. Little Salt realized a gain
of $432,148 on the land sale. After the land sale, the com-
pany did not engage in any business activity.
238          144 UNITED STATES TAX COURT REPORTS           (235)


Stock Sale
   During Little Salt’s negotiations with the commission
leading up to the land sale, one of the commission’s per-
sonnel, Bruce Sackett, received a telephone call and two let-
ters from a representative of MidCoast Investments, Inc.
(MidCoast). In the first letter, MidCoast describes itself as a
company interested in purchasing the stock of C corporations
that have sold their assets and that, as a result, have
realized a significant taxable gain. In both letters, MidCoast
represents that it would purchase the Little Salt shares from
the shareholders and would pay them significantly more
than the shareholders would receive if they were to dissolve
the company and receive the proceeds of the sale in redemp-
tion of their shares. In the second letter, MidCoast describes
its post-share-acquisition plan as follows: ‘‘[U]nder
MidCoast’s ownership, the company will re-engineer its oper-
ations into the asset recovery business—i.e. the purchase and
collection of delinquent account receivables.’’ Mr. Sackett
delivered the two letters to Mr. Joyce, Little Salt’s president.
Mr. Sackett had not investigated MidCoast, and he had no
further contact with MidCoast after delivering the letters to
Mr. Joyce.
   Subsequently, by letter dated April 23, 2003, addressed to
the shareholders, MidCoast proposed to acquire all of Little
Salt’s outstanding shares. The letter specified that the price
to be paid would be ‘‘equal to the cash in the Company as
of the * * * [closing date] reduced by sixty-four and 92/100
percent (64.92%) of the Company’s combined state and fed-
eral corporate income tax liability for its current tax year
(the ‘Deferred Tax Liability’).’’
   The letter contained an example showing net assets in
Little Salt of $472,000, which, when reduced by a combined
Federal and State tax liability of $171,040, resulted in a net
Little Salt value of $301,788. The example added an ‘‘Asset
Recovery Premium’’ of $60,000 to Little Salt’s net value,
which resulted in a price of $361,788 to be paid by MidCoast
to the shareholders for their shares.
   The letter also contained MidCoast’s covenant ‘‘that it shall
cause the Company [i.e., Little Salt] to pay the Deferred Tax
Liability to the extent that the Deferred Tax Liability is due
given the Company’s post-closing business activities and
(235)              STUART v. COMMISSIONER                     239


shall file all federal and state income tax returns on a timely
basis related thereto.’’
   All of the shareholders signed a copy of the letter, agreeing
to be bound by its terms and conditions. Dr. Stuart testified
that, before signing the letter, he ‘‘may have very briefly
skimmed it’’, because he ‘‘relied on * * * [his] partners in
this transaction.’’ Mr. James Stuart, Jr. (Mr. Stuart), testi-
fied that he ‘‘probably [did] not’’ read it before signing it. Mr.
Walters ‘‘glanced through it.’’ Mr. Joyce testified that he is
‘‘sure that he probably did [read it].’’
   By mid-June 2003, the shareholders had determined to
proceed with selling their shares to MidCoast (sometimes,
stock sale). They retained local attorney W. Michael Morrow
to represent them. Mr. Morrow was not hired to investigate
MidCoast or analyze whether the stock sale was a tax
shelter. His investigation of MidCoast was limited to his
review of MidCoast’s corporate documents. MidCoast hired
local attorney W. Scott Davis to represent it.
   Through July and early August 2003, Messrs. Morrow and
Davis (and their clients) addressed the prerequisites for the
stock sale. The share purchase agreement (agreement) identi-
fies the purchasers as MidCoast Credit Corp. and MidCoast
Acquisition Corp. (which, collectively, along with MidCoast
Investments, Inc., we will also refer to as MidCoast) and pro-
vides that it is between MidCoast, Little Salt, and the share-
holders. It recites that the shareholders are the owners of
100% of the shares of Little Salt and that MidCoast desires
to purchase those shares from the shareholders and that the
shareholders desire to sell their shares to MidCoast. It con-
tains numerous premises, promises, representations, warran-
ties, and covenants, among which are the following.
   • MidCoast agrees to purchase from the shareholders their
shares in Little Salt, and the shareholders agree to sell to
MidCoast those same shares.
   • The price for all of the shares is $358,826, to be paid by
wire transfer to Mr. Morrow’s firm’s trust account.
   • The combined Federal and State income tax liability of
Little Salt ‘‘resulting from the sale, conveyance or other dis-
position of its assets and * * * [its] operations’’ for its cur-
rent (2003) fiscal year as of the closing date ‘‘is $167,737.00
(‘the Tax Liability’)’’.
240          144 UNITED STATES TAX COURT REPORTS                        (235)


  • After the closing date, it will have no liabilities other
than the Tax Liability.
  • MidCoast will cause Little Salt ‘‘to pay the Tax Liability,
to the extent that the Tax Liability is due given the Com-
pany’s post-Share Closing business activities, and shall file
all federal and state income taxes on a timely basis related
thereto.’’
  • As a condition of MidCoast’s obligations under the agree-
ment, at or before the closing date, ‘‘[Little Salt] shall have
transferred all of its monies (which monies shall be in an
amount not less than $467,721) to * * * [Mr. Davis’ firm’s
trust account], as Escrow Agent under a separate escrow
agreement entered into on or about the date hereof.’’
  • Governing law is the law of the State of Nebraska.
  The record contains no copy of the escrow agreement
referred to in the second immediately preceding paragraph,
and Mr. Walters, secretary and treasurer of the company,
testified that he was aware of no escrow agreement or escrow
agent. On that basis, we find that there was no separate
escrow agreement.
  The price ($358,826) set forth in the agreement for the
shares had been determined by Little Salt’s accountant,
David A. Ellingson. He calculated Little Salt’s unpaid 2003
combined Federal and State tax liability as of June 30, 2003,
to be $167,737. He determined that 64.92% of that amount
was $108,895, which he subtracted from Little Salt’s cash
balance of $467,721, to arrive at the purchase price of
$358,826.
  On July 31, 2003, Mr. Davis sent to Mr. Morrow a draft
letter (draft letter) regarding the exchange of funds to accom-
plish the closing of the stock sale. In pertinent part, the draft
letter states:
   At closing, your clients will cause Little Salt to transfer all of the cash
 in the account of Little Salt to this law firm’s trust account. Purchaser
 will then immediately provide funds to this law firm’s trust account for
 the entire purchase price. Upon receipt of the cash from Little Salt into
 this firm’s trust account, this law firm will direct the purchase price be
 transferred to your law firm’s trust account. * * * You as the represent-
 ative for the individual, selling shareholders will receipt for the purchase
 price and make appropriate distribution of the purchase price to your cli-
 ents.
   Neither your law firm nor this law firm undertakes any duties of
 escrow agent * * *. However, both of our firms are obligated to follow
(235)                 STUART v. COMMISSIONER                             241


  the instructions of our respective clients, and to that end, this letter is
  intended to memorialize the instructions we have both received in order
  to carry out the closing of the transaction. Under the law of Nebraska,
  we are fiduciaries with respect to the funds that we hold for the benefit
  of our clients in our respective trust accounts in any event.

   On August 5, 2003, Mr. Morrow sent to Mr. Davis a letter
that, among other things, discussed the cash payments. Mr.
Davis was to confirm to Mr. Morrow that he had on deposit
in his firm’s trust account the $358,826 share purchase price
and that he would transfer that amount to Mr. Morrow’s
firm’s trust account simultaneously with Little Salt’s transfer
of $467,721 to Mr. Davis’ firm’s trust account. The letter con-
tains language almost identical to the second quoted para-
graph of the draft letter.
   On August 6, 2003, MidCoast transferred $358,826 into
Mr. Davis’ firm’s trust account.
   The parties to the agreement executed it, and it was effec-
tive on, August 7, 2003. Mr. Joyce signed it as president of
Little Salt. On that date, Mr. Morrow delivered instructions
from Mr. Walters, Little Salt’s secretary and treasurer, to
Wells Fargo Bank, Little Salt’s bank, instructing the bank to
transfer all of its cash ($467,721) to Mr. Davis’ firm’s trust
account. Nine minutes later, Mr. Morrow received in his
firm’s trust account from Mr. Davis’ firm’s trust account
$358,826. On August 8, 2003, Mr. Morrow sent the Little
Salt shareholders their pro rata shares of the $358,826 that
he had received.
   Little Salt’s transfer of its cash to Mr. Davis’ firm’s trust
account left it with no cash and no tangible assets.
Disposition of Funds
  On August 7, 2003, after the receipt in his firm’s trust
account of $467,721 from Little Salt, Mr. Davis, at
MidCoast’s direction, caused that amount to be transferred to
an account in the name of Little Salt at SunTrust Bank. On
the next day, August 8, 2003, $467,000 was transferred from
Little Salt’s SunTrust Bank account to another account at
that bank entitled ‘‘MidCoast Credit Corp. Accounts Pay-
able’’. Little Salt recorded the August 8 transfer on its books
as a receivable due from shareholder (shareholder loan).
Little Salt’s September 30, 2003 (yearend), balance sheet
shows the amount due as $327,000, reflecting a reduction of
242         144 UNITED STATES TAX COURT REPORTS            (235)


$140,000, apparently as credits for operating expenses and
professional fees. As of January 27, 2004, Little Salt’s and
MidCoast’s records show the balance due to Little Salt from
MidCoast to be $394,429. MidCoast’s files contain no promis-
sory notes.
Knowledge
   When on August 7, 2003, Mr. Morrow delivered Little
Salt’s instructions to its bank, Mr. Morrow did not know of
any instructions that MidCoast may have given to Mr. Davis
with respect to Little Salt’s cash delivered to his trust
account, nor did he know of MidCoast’s plans with respect to
Little Salt.
   Dr. Stuart did not read the agreement before he signed it.
He did not know it required Little Salt to transfer all of its
money out of the corporation before the closing. He testified
that he ‘‘knew nothing’’ about MidCoast.
   Mr. Stuart testified that he could not recall (‘‘I don’t
know’’) whether he read the agreement. He could not recall
seeing the provision of the agreement that required Little
Salt to transfer all of its money out of the company. He testi-
fied that he was unaware of MidCoast’s promise with respect
to Little Salt’s tax liabilities.
   Mr. Walters, Little Salt’s secretary and treasurer, testified
that he scanned the agreement. He was aware of MidCoast’s
obligation to pay the Tax Liability, but he did nothing to
determine whether MidCoast would actually fulfill its obliga-
tion; he accepted its word.
   Mr. Joyce, president of Little Salt, testified that he knew
MidCoast was getting Little Salt’s cash but, at the time of
the sale, he did not know what it would choose to do with
the cash. He testified that MidCoast’s statement in one of the
letters received from Mr. Sackett that it would re-engineer
its operations into the asset recovery business meant nothing
to him. He added: ‘‘I had no idea what MidCoast’s intentions
were with our corporation other than the little information
we got from letters and their brochures about wanting to
merge them into their operation. How that played into [our]
operation, I didn’t know and I wasn’t privy to that.’’
(235)             STUART v. COMMISSIONER                    243


Tax Returns and Payments
   On December 15, 2003, Little Salt filed its 2003 Form
1120, U.S. Corporation Income Tax Return. It reported tax-
able income of $432,148, total tax of $146,930, and tax due
of $148,456. It made no payment with the return. It reported
on Schedule L, Balance Sheets per Books, that, as of the end
of the year, it had cash of $278, a loan of $467,000 due from
MidCoast, and no other assets; it reported no liabilities.
   On February 18, 2005, Little Salt filed its 2004 Form 1120.
It reported interest income of $1,739, apparently from the
shareholder loan, a bad debt deduction of $450,370 resulting
from the worthlessness of the shareholder loan, and, taking
into account certain other deductions, negative taxable
income of $483,970. It reported no gross receipts or cost of
goods sold. The bad debt deduction produced a net operating
loss that Little Salt carried back to, and deducted for, 2003.
It reported on Schedule L that, as of the end of the year, it
had trade notes and accounts receivable of $903 and no
liabilities.
   Respondent examined both Little Salt’s 2003 and 2004
returns and disallowed both the 2004 bad debt deduction and
the loss carried back to, and deducted for, 2003. On October
5, 2007, he determined a deficiency in Little Salt’s 2003 Fed-
eral income tax of $145,923 and an accuracy-related penalty
of $58,369.
   The parties stipulate that Little Salt was entitled to nei-
ther deduction. Respondent issued to Little Salt a notice of
deficiency within three years of February 18, 2005, the date
it filed its 2004 Form 1120. Little Salt failed to timely peti-
tion the Tax Court, and, on April 21, 2008, respondent
assessed the deficiency in tax and penalty that he had deter-
mined for 2003. Respondent has attempted to collect the
unpaid 2003 tax from Little Salt, but he has not been
successful. The amount remains unpaid.
   After Little Salt failed to file Nebraska income tax returns
and other required annual reports, the State of Nebraska
Corporation Division placed Little Salt into inactive status on
April 16, 2004.
244         144 UNITED STATES TAX COURT REPORTS              (235)


Notices of Transferee Liability
   Respondent sent the notices in November 2010. In an
attachment to each notice respondent stated his rationale for
concluding that the shareholders were transferees of Little
Salt’s property and liable as such for its unpaid 2003 tax.
Respondent explained that he would recast the transaction
by which the shareholders disposed of their shares in Little
Salt as he saw the substance of the transaction; i.e., not as
the shareholders’ sale of those shares to MidCoast, but
rather, as a liquidating distribution of all of Little Salt’s cash
to its shareholders in redemption of its outstanding shares,
followed by the shareholders’ payment of a portion of that
cash to MidCoast as an accommodation fee for its participa-
tion in the assumed sale.
Petitions
   Petitioners timely petitioned for review of the notices, each
assigning as error respondent’s determinations that (1) Little
Salt had a deficiency in tax for 2003 of $145,923 and
incurred an accuracy-related penalty of $58,369 and (2) peti-
tioners are liable as transferees of Little Salt’s assets. Each
also raised as an affirmative defense that the period of
limitations for assessing transferee liability had run when
the notices were sent. Respondent denied petitioners’ assign-
ments of error and defense.

                            OPINION

I. Introduction
   We must determine whether petitioners are liable as trans-
ferees of the property of Little Salt for the unpaid 2003 tax.
Although petitioners assign as error respondent’s determina-
tion of the unpaid 2003 tax, they make no objection on brief
to respondent’s proposed finding of fact that Little Salt is
liable for the unpaid 2003 tax. We think that there is ample
evidence to support that proposed finding, and we so find. On
that basis, there is no merit to petitioners’ first assignment
of error. That leaves for discussion petitioners’ affirmative
defense of the period of limitations and their remaining
assignment of error, that they are not liable as transferees
of Little Salt’s property. We will address those issues in turn.
(235)              STUART v. COMMISSIONER                   245


II. Period of Limitations
   In general, the Commissioner must assess transferee
liability within one year after expiration of the period of
limitations on the transferor. See sec. 6901(c). The applicable
period of limitations may be extended by agreement. See sec.
6901(d). When a petition is filed with the Court with respect
to a notice of transferee liability, the running of the period
of limitations is further suspended, from the date of mailing
of the notice until 60 days after the decision of the Court
becomes final. See sec. 6901(f ). The period of limitations on
assessment and collection of tax with respect to the trans-
feror is set forth in section 6501. Pursuant to section 6501(h),
a deficiency attributable to a net operating loss carryback
may be assessed at any time before the expiration of the
period within which a deficiency for the taxable year of the
loss that results in the carryback may be assessed. The bar
of the statutory period of limitations is an affirmative
defense, and the party raising this defense must specifically
plead it and prove it. See Rules 39, 142(a); Amesbury Apart-
ments, Ltd. v. Commissioner, 95 T.C. 227, 240 (1990).
   Respondent has set forth a chain of events, including
extensions by the shareholders pursuant to section 6901(d)(1)
of the section 6901(c) period of limitations, that appears to
belie petitioners’ claim that the period of limitations for
assessing transferee liability had run when the notices were
sent. Petitioners’ only argument is that if, pursuant to
respondent’s theory in the notices, the shareholders on
August 7, 2003, received distributions in liquidation of their
Little Salt shares then, thereafter, ‘‘[Little Salt] could no
longer exist for purposes of filing a tax return for the year
ended September 30, 2004 (claiming a net operating loss car-
ried back to the prior year) to extend the statute of
limitations for the year ended September 30, 2003 under
I.R.C. § 6501(h).’’
   Petitioners are mistaken in their understanding of a cor-
poration’s obligation to file a Federal income tax return. ‘‘A
corporation in existence during any portion of a taxable year
is required to make a return.’’ Sec. 1.6012–2(a)(2), Income
Tax Regs. Moreover: ‘‘For Federal income tax purposes, the
annulment of a corporation’s charter does not necessarily
have the effect of discontinuing the corporate entity. * * * If
246           144 UNITED STATES TAX COURT REPORTS                       (235)


a corporation retains assets, even though under State law its
legal existence has been terminated and the corporation is in
the process of liquidation, it will be treated as a continuing
taxable entity.’’ Hill v. Commissioner, 66 T.C. 701, 705
(1976); see also sec. 1.6012–2(a)(2), Income Tax Regs. 3 If a
corporation is in the process of liquidation and if its ‘‘affairs
are substantially unsettled, it will remain in existence for
Federal income tax purposes.’’ Hill v. Commissioner, 66 T.C.
at 705. There is evidence here of Little Salt’s activities
through at least early 2005, when it filed its 2004 Form 1120
and claimed a loss that it carried back to, and claimed for,
2003. Even crediting respondent’s theory that a liquidating
distribution was made, petitioners have failed to carry their
burden of showing that Little Salt’s existence discontinued or
its obligation to make a Federal income tax return ended
before February 18, 2005, when it filed its 2004 Form 1120.
   Petitioners’ affirmative defense relying on the statutory
period of limitations as a bar to respondent’s collection of
transferee liability from them fails.
III. Transferee Liability
  A. Introduction
  Section 6901 provides that the liability, at law or in equity,
of a transferee of property ‘‘shall * * * be assessed, paid, and
collected in the same manner and subject to the same provi-
sions and limitations as in the case of the taxes with respect
to which the liabilities were incurred’’. By way of illustration,
but not by way of limitation, section 6901(h) provides that
the term ‘‘transferee’’ includes ‘‘donee, heir, legatee, devisee,
and distributee’’.
  While the definition of persons considered transferees for
purposes of section 6901 is extensive, the section does not
independently impose tax liability upon a transferee but pro-
vides a procedure through which the Commissioner may col-
  3 Under Nebraska law, the secretary of state is directed automatically to

dissolve a corporation subject to the State’s Business Corporation Act that
does not timely pay its occupation (franchise) tax and file the required re-
ports. See Neb. Rev. Stat. Ann. sec. 21–323 (LexisNexis 2008). Neverthe-
less, a corporation subject to such automatic dissolution ‘‘continues its cor-
porate existence’’ as necessary to wind up and liquidate its business and
affairs. Id.
(235)                 STUART v. COMMISSIONER                             247


lect unpaid taxes owed by the transferor of the property from
a transferee if an independent basis exists under applicable
State law or State equity principles or, in some cases, Fed-
eral law for holding the transferee liable for the transferor’s
debts. See Commissioner v. Stern, 357 U.S. 39, 45 (1958);
Hagaman v. Commissioner, 100 T.C. 180, 183 (1993). Thus,
usually, State law determines the elements of liability, and
section 6901 provides the remedy or procedure to be
employed by the Commissioner as a means of enforcing that
liability. See Swords Trust v. Commissioner, 142 T.C. 317,
335–336 (2014). The Commissioner bears the burden of
proving that the transferee is liable as a transferee of prop-
erty of the taxpayer but need not prove that the taxpayer
was liable for the tax. Sec. 6902(a); Rule 142(d).
   A transferee’s liability for Federal taxes of the transferor
of property includes any additions to tax, penalties, and
interest that have been assessed with respect to the tax. See
Kreps v. Commissioner, 42 T.C. 660, 670 (1964), aff ’d, 351
F.2d 1 (2d Cir. 1965). Transferee liability is several, and the
Commissioner is free to proceed against one or more of any
number of potential transferees. See Phillips v. Commis-
sioner, 283 U.S. 589, 603–604 (1931).
  B. Applicable State Law
  1. Uniform Fraudulent Transfer Act
   The existence and extent of transferee liability is deter-
mined by the law of the State where the transfer occurred.
Estate of Miller v. Commissioner, 42 T.C. 593, 598 (1964); see
Commissioner v. Stern, 357 U.S. at 45. In these consolidated
cases, that State is Nebraska. Nebraska has adopted the
Uniform Fraudulent Transfer Act (UFTA), Neb. Rev. Stat.
Ann. secs. 36–701 through 36–712 (LexisNexis 2014), which
provides creditors with certain remedies, including avoid-
ance, when a debtor makes a fraudulent transfer. See id. sec.
36–708(a)(1). If avoidance of a transfer is established, a cred-
itor, subject to certain limitations, may recover judgment for
the value of the asset transferred, or the amount necessary
to satisfy the creditor’s claim, whichever is less. Id. sec. 36–
709(b). The judgment may be entered against:
    (1) the first transferee of the asset or the person for whose benefit the
  transfer was made; or
248           144 UNITED STATES TAX COURT REPORTS                       (235)

    (2) any subsequent transferee other than a good faith transferee who
  took for value or from any subsequent transferee.
    [Id.]

  Neb. Rev. Stat. Ann. sec. 36–705(a) establishes when a
transfer is fraudulent as to present and future creditors:
    (a) A transfer made or obligation incurred by a debtor is fraudulent
  as to a creditor, whether the creditor’s claim arose before or after the
  transfer was made or the obligation was incurred, if the debtor made the
  transfer or incurred the obligation:
    (1) with actual intent to hinder, delay, or defraud any creditor of the
  debtor; or
    (2) without receiving a reasonably equivalent value in exchange for the
  transfer or obligation, and the debtor:
    (i) was engaged or was about to engage in a business or a transaction
  for which the remaining assets of the debtor were unreasonably small
  in relation to the business or transaction; or
    (ii) intended to incur, or believed or reasonably should have believed
  that he or she would incur, debts beyond his or her ability to pay as they
  became due.

  Neb. Rev. Stat. Ann. sec. 36–706 establishes when a
transfer is fraudulent only as to present creditors:
    (a) A transfer made or obligation incurred by a debtor is fraudulent
  as to a creditor whose claim arose before the transfer was made or the
  obligation was incurred if the debtor made the transfer or incurred the
  obligation without receiving a reasonably equivalent value in exchange
  for the transfer or obligation and the debtor was insolvent at that time
  or the debtor became insolvent as a result of the transfer or obligation.
    (b) A transfer made by a debtor is fraudulent as to a creditor whose
  claim arose before the transfer was made if the transfer was made to
  an insider for an antecedent debt, the debtor was insolvent at that time,
  and the insider knew or reasonably should have known that the debtor
  was insolvent.
  Fraud under UFTA may be either actual or constructive. 4
  The term ‘‘claim’’ means ‘‘a right to payment, whether or
not the right is reduced to judgment, liquidated, unliqui-
  4 Neb. Rev. Stat. Ann. sec. 36–705(a)(1) (LexisNexis 2014) concerns itself

with ‘‘actual’’ fraud, requiring a creditor to show the debtor’s intent, i.e.,
that he ‘‘made the transfer * * * with actual intent to hinder, delay, or de-
fraud any creditor of the debtor.’’ (Emphasis added.) Neb. Rev. Stat. Ann.
secs. 36–705(a)(2) and 36–706(a), on the other hand, are essentially uncon-
cerned with intent and focus, instead, on economic effect, e.g., whether the
creditor received ‘‘a reasonably equivalent value in exchange for the trans-
fer’’. Such intentless fraud is generally described as ‘‘constructive’’ fraud.
See, e.g., Wiand v. Lee, 753 F.3d 1194, 1199 (11th Cir. 2014); Cullifer v.
Commissioner, T.C. Memo. 2014–208, at *49–*51.
(235)              STUART v. COMMISSIONER                   249


dated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured, or unsecured.’’ Id. sec.
36–702(3).
   ‘‘Value is given for a transfer or an obligation if, in
exchange for the transfer or obligation, property is trans-
ferred or an antecedent debt is secured or satisfied, but value
does not include an unperformed promise made otherwise
than in the ordinary course of the promisor’s business to fur-
nish support to the debtor or another person.’’ Id. sec. 36–
704(a).
   A debtor is considered ‘‘insolvent’’ under UFTA ‘‘if the sum
of the debtor’s debts is greater than all of the debtor’s assets
at a fair valuation.’’ Id. sec. 36–703(a). The term ‘‘debt’’
means ‘‘liability on a claim.’’ Id. sec. 36–702(5). With excep-
tions not here relevant, the term ‘‘asset’’ means ‘‘property of
a debtor’’. Id. sec. 36–702(2).
   The burden is on the creditor to prove by clear and con-
vincing evidence the elements necessary to show that a
transfer made by a debtor is fraudulent as to the creditor.
See Dillon Tire, Inc. v. Fifer, 589 N.W.2d 137, 142 (Neb.
1999).
   An action under UFTA to declare a transfer fraudulent as
to a creditor invokes equity jurisdiction of a court. See id. at
141.
  2. Nebraska Business Corporation Act
  The Nebraska Business Corporation Act provides that
claims against a dissolved corporation may in some cir-
cumstances and with limitations be enforced against the cor-
poration’s shareholders when corporate assets have been
distributed in liquidation. See Neb. Rev. Stat. Ann. sec. 21–
20,157(4) (LexisNexis 2008 & Supp. 2014).
  3. Trust Fund Doctrine
   Under the common law trust fund doctrine, ‘‘property of
the corporation constitutes a trust fund in the hands of its
officers and directors, and a transaction between them
whereby the corporation’s property is diverted from the cor-
poration to their own use and benefit will not be upheld.’’
Elec. Dev. Co. v. Robson, 28 N.W.2d 130, 139 (Neb. 1947).
250         144 UNITED STATES TAX COURT REPORTS                     (235)


  C. Parties’ Arguments
  1. Respondent’s Arguments
  a. Two-Step Analysis
  Respondent argues that, in determining whether, pursuant
to section 6901, he may use administrative procedures to col-
lect Little Salt’s unpaid 2003 tax liability from petitioners,
we should engage in a two-step analysis.
 First, the court should determine under federal law whether the trans-
 action that gives rise to the liability was properly characterized and
 whether the recipient was a transferee under section 6901(h). Once that
 analysis is done, if the transaction is recast or otherwise disregarded
 under federal tax law principles and the recipient is a transferee, then
 the court should look to state law to determine whether the transferees
 received fraudulent transfers.

   To make the first step (i.e., to determine the proper char-
acter of the transaction and to determine whether the share-
holders are transferees within the meaning of section 6901),
respondent argues that we must disregard the form chosen
by the shareholders to liquidate their investments in Little
Salt (i.e., a sale of shares to MidCoast) and consider, instead,
the substance of the transaction. Respondent views that sub-
stance as follows: ‘‘The Little Salt shareholders are each
transferees of cash from Little Salt because the Stock Sale
was in substance a shareholder distribution of cash to them
followed by payment of a fee or commission to MidCoast.’’ In
support of his argument that substance should govern over
form, respondent invokes many familiar doctrines pertinent
to interpretation of the Internal Revenue Code (Code), along
with supporting authority.
   Taxpayers generally are free to structure their business transactions
 as they wish, even if motivated in part by tax reduction considerations.
 Gregory v. Helvering, 293 U.S. 465 (1935); Rice’s Toyota World, Inc. v.
 Commissioner, 81 T.C. 184, 196 (1983), affd. on this issue 752 F.2d 89
 (4th Cir. 1985).
   However, a transaction that lacks economic purpose and substance
 other than sought-after tax avoidance may be treated as a sham and dis-
 regarded for federal income tax purposes. Frank Lyon Co. v. United
 States, 435 U.S. 561 (1978); Rice’s Toyota World, Inc. v. Commissioner,
 81 T.C. at 196. The economic substance of a transaction, rather than its
 form, controls. Commissioner v. Court Holding Co., 324 U.S. 331 (1945);
 Gregory v. Helvering, 293 U.S. 465; Amdahl Corp. v. Commissioner, 108
 T.C. 507, 516–17 (1997).
(235)                 STUART v. COMMISSIONER                             251


    The ‘‘labels, semantic technicalities, and formal written documents do
  not necessarily control the tax consequences of a given transaction.’’
  Houchins v. Commissioner, 79 T.C. 570, 589 (1982).
    For Federal income tax purposes a transaction may be disregarded if
  the transaction was not entered into for valid business purposes but
  rather for ‘‘tax benefits not contemplated by a reasonable application of
  the language and purpose of the Code or its regulations.’’ Feldman v.
  Commissioner, T.C. Memo. 2011–297 slip op. at 27 (quoting Palm
  Canyon X Invs., LLC v. Commissioner, T.C. Memo. 2009–288). Even if
  a transaction is not treated as a sham, it still may be recast in order
  to reflect its true nature. Gaw v. Commissioner, T.C. Memo. 1995–531.

  As respondent sees it, the simultaneous exchange of funds
by Little Salt to MidCoast, and by MidCoast to the share-
holders, through Mr. Davis’ firm’s trust fund, followed by
MidCoast’s transitory deposit of the funds received from
Little Salt into a new Little Salt bank account before their
return to MidCoast in exchange for its worthless promise to
repay Little Salt served no purpose but to put most of Little
Salt’s cash into the hands of the shareholders and, in
exchange for a fee paid to MidCoast, to give them a plausible
basis to deny that they were transferees of the company’s
property. As respondent puts it:
     The Stock Sale is a subterfuge. In reality, it is nothing but a liquida-
  tion of Little Salt and a distribution of its assets to its shareholders
  making them transferees liable for Little Salt’s income tax liability.

                        *   *    *   *    *   *    *
  Little Salt had ceased all business operations as of the Asset Sale. * * *
  There being no business, there was no apparent business reason for the
  Stock Sale. In effect, * * * the parties simply exchanged unequal
  amounts of fungible cash, and the difference represented MidCoast’s fee
  for assisting the Little Salt shareholders in avoiding the incidence of
  Little Salt’s deferred tax liability.
  b. Equitable Rules
    Even were we to disregard antiabuse doctrines pertinent to
interpreting the Code, respondent believes that we would
reach the same result by applying the equitable rules perti-
nent to considering fraudulent transfer claims. See Dillon v.
Fifer, 589 N.W.2d at 141 (‘‘Equity looks through forms to
substance. Thus, a court of equity goes to the root of the
matter and is not deterred by forms.’’); see also Boyer v.
Crown Stock Distrib., Inc., 587 F.3d 787, 793 (7th Cir. 2009)
(‘‘ ‘[F]raudulent conveyance doctrine . . . is a flexible principle
252         144 UNITED STATES TAX COURT REPORTS                      (235)


that looks to substance, rather than form, and protects credi-
tors from any transactions the debtor engages in that have
the effect of impairing their rights[.]’ ’’ (quoting Douglas G.
Baird, Elements of Bankruptcy 153–154 (4th ed. 2006))).
  c. State Law Liability
   With respect to his satisfying the second step, i.e., showing
State law liability, respondent cites the following bases under
which he may collect Little Salt’s unpaid tax and penalty
from petitioners: (1) under the Nebraska Business Corpora-
tion Act, as a claimant against a dissolved corporation’s
shareholders having received corporate assets in a liqui-
dating distribution, (2) under UFTA, on account of the dis-
tributions’ being fraudulent as to him within the meaning of
Neb. Rev. Stat. Ann. sec. 36–705(a)(2) or 36–706(a), or (3)
under the trust fund doctrine.
   Additionally, if we are to respect the form of the stock sale
(and likewise the transfer by Little Salt of its cash to
MidCoast), respondent argues that, nonetheless, the transfer
to MidCoast was fraudulent as to him, and, pursuant to Neb.
Rev. Stat. Ann. sec. 36–709(b)(1), he is entitled to a judgment
against the shareholders, ‘‘the person[s] for whose benefit the
transfer was made.’’
  2. Petitioners’ Arguments
  Petitioners view the facts as follows:
   Little Salt sold land that it owned in Nebraska on June 11, 2003. It
 received proceeds from the sale which it deposited into its bank account.
 The Petitioners thereafter each sold their stock in Little Salt to
 MidCoast on August 7, 2003. At that time, and immediately thereafter,
 Little Salt had $467,721 on hand at the bank. Thus, Little Salt was sol-
 vent prior to, during and after the stock sale.

  Petitioners’ argument rejecting any liability under UFTA
appears to proceed as follows. Little Salt’s proceeds from the
land sale remained with it until the shareholders sold their
shares to MidCoast on August 7, 2003. Therefore, notwith-
standing that at some time thereafter Little Salt may have
made a transfer fraudulent as to respondent, no judgment
can be entered against them under Neb. Rev. Stat. Ann. sec.
36–709(b)(1) since none of the proceeds from the land sale
were ever transferred to them. As they put in their
answering brief: ‘‘As established in the Petitioner’s [sic]
(235)                 STUART v. COMMISSIONER                            253


Opening Brief, there can be no transferee liability under
* * * [UFTA]. Most importantly, there were no transfers
from Little Salt to the Petitioners’’. For the same reason,
they believe that they cannot be held liable for Little Salt’s
tax debts under the Nebraska Business Corporation Act or
the trust fund doctrine.
  They reject respondent’s attempt to recharacterize the
stock sale as a payment by Little Salt to them of cash in
redemption of their shares. They add that the shareholders
did not have the ‘‘requisite knowledge’’ (i.e., ‘‘that the Little
Salt taxes would not be paid by MidCoast’’) to support re-
characterizing the stock sale.
  D. Discussion
  1. Two-Step Analysis
   Recently, in Swords Trust v. Commissioner, 142 T.C. 317,
we faced another situation in which the shareholders of a
corporation with a large unpaid Federal income tax liability
had sold their shares. In furtherance of collecting the unpaid
liability from the shareholders as transferees of the corpora-
tion’s property, the Commissioner sought to recharacterize
the stock sale as a liquidating distribution in which the
shareholders received cash in redemption of their shares. The
Commissioner argued for the same two-step analysis that he
argues for here. Previously, we had not explicitly adopted or
rejected that analysis although our approach had been to
recast a transaction only when State law allowed such re-
casting. Id. at 340. Three U.S. Courts of Appeals had rejected
the Commissioner’s two-step analysis. See Diebold Found.,
Inc. v. Commissioner, 736 F.3d 172, 184–185 (2d Cir. 2013),
vacating and remanding T.C. Memo. 2012–61, 2012 WL
716191; Sawyer Trust of May 1992 v. Commissioner, 712
F.3d 597, 604–605 (1st Cir. 2013), rev’g and remanding T.C.
Memo. 2011–298; Starnes v. Commissioner, 680 F.3d 417,
428–429 (4th Cir. 2012), aff ’g T.C. Memo. 2011–63, 2011 WL
894608. 5 We found that the rationales of the three decisions
  5 Since  we decided Swords Trust v. Commissioner, 142 T.C. 317 (2014),
the U.S. Court of Appeals for the Ninth Circuit has joined its three sisters
in rejecting the Commissioner’s two-step analysis. See Salus Mundi Found.
v. Commissioner, 776 F.3d 1010 (9th Cir. 2014), rev’g and remanding T.C.
Memo. 2012–61. In Feldman v. Commissioner, 779 F.3d 448, 454 (7th Cir.
                                               Continued
254           144 UNITED STATES TAX COURT REPORTS                     (235)


were similar, typified by the rationale of the Court of
Appeals for the Fourth Circuit in Starnes. Swords Trust v.
Commissioner, 142 T.C. at 338–340. In Starnes v. Commis-
sioner, 680 F.3d at 428–429, the court, citing Commissioner
v. Stern, 357 U.S. 39, held that the question of whether a
person or an entity is a ‘‘transferee’’ for purposes of section
6901 is separate from the question of whether the transfer
was fraudulent for State law purposes. It concluded that
‘‘Stern forecloses the Commissioner’s efforts to recast trans-
actions under federal law before applying state law to a par-
ticular set of transactions.’’ Starnes v. Commissioner, 680
F.3d at 429. We held in Swords Trust v. Commissioner, 142
T.C. at 338, that, like the three Courts of Appeals, we would
reject the Commissioner’s two-step analysis.
   Our holding in Swords Trust on that point is controlling,
and, for that reason, we need say no more. Nevertheless,
because in this Court and in other courts, see, e.g., Salus
Mundi Found. v. Commissioner, 776 F.3d 1010 (9th Cir.
2014), rev’g and remanding T.C. Memo. 2012–61, the
Commissioner persists in his two-step analysis, we offer an
additional reason for rejecting that analysis. Before the
enactment of the original predecessor provision to section
6901, the rights of the Federal Government as creditor of a
tax debt were enforceable against someone other than the
taxpayer only through procedures cumbersome in comparison
to the summary administrative remedy allowed against the
taxpayer himself. 6 The purpose of the change in the law was
to provide for the enforcement of such third-party liability to
the Government by the procedures already in existence for
the enforcement of tax deficiencies. H.R. Conf. Rept. No. 69–
356, at 43 (1926), 1939–1 C.B. (Part 2) 361, 371. The proce-
2015), aff ’g T.C. Memo. 2011–297, the Court of Appeals for the Seventh
Circuit concluded that transferee liability cases under sec. 6901 proceed in
two steps: first, the Commissioner must establish that the target is a
transferee within the meaning of sec. 6901; second, he must establish the
transferee’s liability under State law. The court acknowledged that the
independent State law inquiry would make a difference in outcome when
there was a conflict between the applicable Federal doctrine (applying
antiabuse doctrines to restructure a transaction) and the State law that
determines substantive liability, but it found no such conflict on the facts
before it. Id. at 458.
  6 See Michael I. Saltzman & Leslie Book, IRS Practice and Procedure,

para. 17.01, at 17–3 through 17–4 (rev. 2d ed. 2002).
(235)                   STUART v. COMMISSIONER                            255


dures were to be effective against a transferee of property of
the taxpayer, but ‘‘[w]ithout in any way changing the extent
of such liability of the transferee under existing law’’. Id. at
43, 1939–1 C.B. (Part 2) at 371. Moreover, notwithstanding
Congress’ enactment of a summary method for collecting a
transferee’s liability, section 6901 is not the exclusive method
for the Commissioner to collect a transferee’s liability. For
example, the section does not replace the older judicial rem-
edies of instituting proceedings to collect a corporate tax from
its shareholders or to set aside a fraudulent conveyance. See,
e.g., Leighton v. United States, 289 U.S. 506 (1933) (equity
suit to compel shareholders to account for corporate property
to satisfy corporation’s tax liability not foreclosed by failure
to employ (now section 6901) collection authority); United
States v. Russell, 461 F.2d 605 (10th Cir. 1972) (expiration
of section 6901(c) period of limitations to assess section
6901(a) transferee liability is no bar to civil action in debt to
collect estate tax from surviving joint tenant); United States
v. Estate of Kime, 950 F. Supp. 950 (D. Neb. 1996) (executor’s
personal liability for estate tax imposed pursuant to 31
U.S.C. sec. 3713(b); fraudulent conveyances of property nec-
essary to satisfy tax debt set aside under UFTA). 7 Nothing
in section 6901 accords the Commissioner any right not
enjoyed by other creditors seeking to use the judicial enforce-
ment mechanisms if the Commissioner proceeds outside of
section 6901 to set aside a fraudulent transfer or to enforce
against a transferee of property the transferor’s liability for
tax. And if the Commissioner so proceeds, the question of
whether the person against whom the Commissioner pro-
ceeds is a transferee within the meaning of section 6901 is
moot. Section 6901 merely identifies those persons (trans-
ferees of property) against whom the Commissioner may
  7 In   Saltzman & Book, supra, para. 17.01, at 17–6, the authors add:
  Similarly, the Service may institute an action to collect a fiduciary’s li-
  ability under 31 USC § 3713. The transferee may also be held liable for
  the debts of the debtor under the Bankruptcy Code, which has its own
  fraudulent conveyance statute,15 even if the issue of liability is decided
  in the bankruptcy court, not the Tax Court, under Section 6901. [The
  second comma in the second to the last line (which appears in the origi-
  nal) appears to be an error. The final phrase of the sentence likely
  should read: ‘‘not the Tax Court under Section 6901.’’]
    1511   USC § 548.
256        144 UNITED STATES TAX COURT REPORTS            (235)


employ the summary collection authority afforded to him by
section 6901(a) once, independent of that section, he has
fixed the person’s substantive liability under State or Federal
law as a transferee of the taxpayer’s property. If without
invoking section 6901 he could not fix that liability, then he
cannot resort to his summary collection authority to obtain
a different result. That is what is implied by the Supreme
Court’s statements in Commissioner v. Stern, 357 U.S. at 44,
that the predecessor of section 6901 was ‘‘purely a procedural
statute’’ and ‘‘we must look to other sources for definition of
the substantive liability.’’
   Notwithstanding our rejection of respondent’s two-step
analysis, for the reasons that follow we agree that
respondent may proceed pursuant to section 6901 to sum-
marily collect some of Little Salt’s 2003 unpaid tax from peti-
tioners.
  2. Liability Under UFTA
  a. Introduction
   On August 7, 2003, Little Salt transferred all of its cash
to Mr. Davis’ firm’s trust account (sometimes, transfer).
Respondent argues that Little Salt, a debtor, made the
transfer ‘‘without receiving a reasonably equivalent value in
exchange for the transfer’’, which, pursuant to Neb. Rev.
Stat. Ann. secs. 36–705(a)(2) and 36–706(a), was construc-
tively fraudulent with respect to him, a creditor of Little
Salt’s. Respondent makes no claim that Little Salt made the
transfer ‘‘with actual intent to hinder, delay, or defraud’’
respondent, so as to cause the transfer to be actually fraudu-
lent with respect to respondent and to bring into play Neb.
Rev. Stat. Ann. sec. 36–705(a)(1). Principally, respondent
relies on Neb. Rev. Stat. Ann. sec. 36–706(a).
  b. Neb. Rev. Stat. Ann. Sec. 36–706(a)
  i. Introduction
  A transfer is fraudulent with respect to a creditor within
the meaning of Neb. Rev. Stat. Ann. sec. 36–706(a) where (1)
the creditor’s claim arose before the transfer, (2) the trans-
feror does not receive ‘‘a reasonably equivalent value in
exchange for the transfer’’, and (3) the transferor was insol-
vent as a result of the transfer.
(235)              STUART v. COMMISSIONER                     257


  ii. When the Claim Arose
   Little Salt received $471,111 from the land sale and, on
August 7, 2003, transferred $467,721 to Mr. Davis’ firm’s
trust account. On that date, the shareholders sold their
shares in Little Salt to MidCoast for $358,826, a price deter-
mined by subtracting from the amount of Little Salt’s cash
in the bank 64.92% of the company’s combined 2003 Federal
and State tax liability. Mr. Ellingson, Little Salt’s account-
ant, had determined that, as of June 30, 2003, Little Salt’s
estimated combined 2003 Federal and State tax liability was
$167,737. Little Salt’s 2003 tax year ended on September 30,
2003. It filed its 2003 Form 1120 on December 15, 2003,
showing a tax due of $148,456. It did not pay that amount,
and, on October 5, 2007, respondent determined a deficiency
in Little Salt’s 2003 income tax of $145,923.
   The term ‘‘claim’’ is expansively defined for purposes of
UFTA. It means ‘‘a right to payment’’ and includes, among
others, a right to payment ‘‘whether or not * * * reduced to
judgment,’’ ‘‘contingent,’’ or ‘‘unmatured.’’ Neb. Rev. Stat.
Ann. sec. 36–702(3). Many years ago, we said: ‘‘[T]ransferee
liability extends to after-accruing taxes in the sense of retro-
active liability for taxes in the year of transfer or prior years.
In other words, the liability need not have been known when
the transfer was made.’’ Wyche v. Commissioner, 36 B.T.A.
414, 419 (1937); see also Scott v. Commissioner, 117 F.2d 36,
38 (8th Cir. 1941), aff ’g 1939 WL 12120 (B.T.A.); 14A
Mertens Law of Federal Income Taxation, sec. 53.40 (2014)
(‘‘A transferee is retroactively liable for the transferor’s taxes
in the year of the transfer and also prior years, to the extent
of the assets received from the transferor. This rule applies
even where the transferor’s tax liability was unknown at the
time of the transfer.’’). In Estate of Glass v. Commissioner, 55
T.C. 543, 574–575 (1970), aff ’d per curiam, 453 F.2d 1375
(5th Cir. 1972), we rejected the taxpayer-transferee’s argu-
ment that the corporate transferor’s tax liability for the year
in which the transfer occurred could not be calculated and,
thus, did not accrue, until the corporation’s yearend since,
hypothetically, after the transfer, the corporation could have
incurred losses that would have reduced its tax liability. We
relied on the rule that ‘‘tax liability accruing at the end of
the taxable year in which the transfer occurred must be
258           144 UNITED STATES TAX COURT REPORTS                       (235)


considered in determining the transferor corporation’s sol-
vency immediately after the transfer.’’ Id. at 575; see also LR
Dev. Co., LLC v. Commissioner, T.C. Memo. 2010–203, 2010
WL 3604164, at *44 (‘‘Even if during its short taxable year
ended December 31, 2000, * * * [transferor] might have
engaged in additional transactions or activities that might
have reduced or eliminated the tax attributable to * * * [its]
sale of certain of its assets to petitioner, that tax nonetheless
was a contingent liability as of and immediately after that
sale.’’ (citing Illinois UFTA)).
   The cited cases are authority principally with respect to
determining whether the transferor’s tax liability for the year
of the transfer should be considered in determining whether
the transferor was insolvent at the time of the transfer or
was made insolvent by the transfer. They are not specifically
authority with respect to the meaning of the term ‘‘claim’’ in
Neb. Rev. Stat. Ann. sec. 36–702(3). Nevertheless, the term
‘‘insolvency’’ means ‘‘[t]he condition of being unable to pay
debts as they fall due’’. Black’s Law Dictionary 867 (9th ed.
2009); see also Neb. Rev. Stat. Ann. sec. 36–703(a) (‘‘A debtor
is insolvent if the sum of the debtor’s debts is greater than
all of the debtor’s assets at a fair valuation.’’). And the term
‘‘debt’’ means ‘‘[l]iability on a claim’’. Black’s Law Dictionary
462; accord Neb. Rev. Stat. Ann. sec. 36–702(5). Thus, the
determination that a debtor is insolvent subsumes the
conclusion that his debts involve claims. We are satisfied on
the basis of the authority that we have cited that, because,
generally, unmatured tax liabilities are taken into account in
determining a debtor’s solvency, they are ‘‘claims’’ and should
be treated as such under the expansive definition of the term
‘‘claim’’ in Neb. Rev. Stat. Ann. sec. 36–702(3). 8 See United
States v. Exec. Auto Haus, Inc., 234 F. Supp. 2d 1253, 1257
  8 Moreover, under Uniform Fraudulent Transfer Act (UFTA) sec. 1 cmt.

at 10 (1984) the definition of the term ‘‘claim’’ for purposes of UFTA sec.
1(3) is derived from sec. 101(4) of the Bankruptcy Code, Pub. L. No. 95–
598, sec. 101(4), 92 Stat. at 2550. S. Rept. No. 95–989 (1978), 1998
U.S.C.C.A.N. 5787, accompanied H.R. 8200, 95th Cong. (1978), which, as
enacted, became Pub. L. No. 95–598. The Senate report states with respect
to the definition of the term ‘‘claim’’ that the term is defined in the broad-
est possible sense, contemplating ‘‘all legal obligations of the debtor, no
matter how remote or contingent’’. S. Rept. No. 95–989, supra at 22, 1998
U.S.C.C.A.N. at 5807.
(235)             STUART v. COMMISSIONER                    259


(M.D. Fla. 2002) (finding, with reference to Florida equiva-
lent to Neb. Rev. Stat. Ann. sec. 36–706(a), that Govern-
ment’s claim could be deemed to have arisen, even if tax-
payer was unaware of its tax liability at time of transfer).
  On August 7, 2003, the day of the transfer, respondent
had, within the meaning of Neb. Rev. Stat. Ann. sec. 36–
702(3), a claim against Little Salt for unpaid taxes.
  iii. Reasonably Equivalent Value
   Little Salt was a party to the agreement, and on August
7, 2003, pursuant to the agreement, it transferred $467,721
to Mr. Davis’ firm’s trust account.
   We must determine whether, in exchange for the transfer,
Little Salt received reasonably equivalent value. See Neb.
Rev. Stat. Ann. sec. 36–706(a). In relevant part, Neb. Rev.
Stat. Ann. sec. 36–704(a) provides that value is given for a
transfer ‘‘if, in exchange for the transfer * * *, property is
transferred’’. Value, however, does not include an
unperformed promise made otherwise than in the ordinary
course of the promisor’s business to furnish support to the
debtor or to another. Id.
   Pursuant to the agreement, MidCoast covenanted to cause
Little Salt to pay the Tax Liability (a defined term), ‘‘to the
extent that the Tax Liability is due given the Company’s
post-Share Closing business activities’’. And while that cov-
enant was executory, it is not for that reason excluded from
the statute’s definition of value since it was not an unfilled
promise to furnish support to any person. See Gardner v.
Tyson (In re Gardner), 218 B.R. 338, 346–347 (Bankr. E.D.
Pa. 1998) (only type of unperformed promise that does not
constitute value, as a matter of law (under Pennsylvania
UFTA) is an unfulfilled promise to furnish support to the
debtor or another person); Manchec v. Manchec, 951 So. 2d
1026, 1028–1029 (Fla. Dist. Ct. App. 2007) (promise of future
royalties was not an unperformed promise excepted from the
Florida UFTA definition of value because it was not a
promise of support); see also UFTA sec. 3 cmt. at 16–17
(1984) (act adopts view of cases interpreting Uniform
Fraudulent Conveyance Act that, in a variety of cir-
cumstances, an executory promise (other than some promises
of support) constitutes value).
260        144 UNITED STATES TAX COURT REPORTS             (235)


    The agreement defines the Tax Liability as Little Salt’s
combined Federal and State income tax liability resulting
from the land sale and its operations to the closing date,
amounting to $167,737. Whatever value we might assign to
MidCoast’s covenant to cause Little Salt to pay that amount
(or some lesser amount if Little Salt incurred 2003 post-
closing-date tax losses), that value could not exceed $167,737,
which is far from being substantially equivalent to the
$467,721 that Little Salt transferred to Mr. Davis’ firm’s
trust account. Also, pursuant to the agreement, MidCoast did
pay to the shareholders $358,826. The general rule, however,
is that a debtor does not receive reasonably equivalent value
if it makes a transfer in exchange for a benefit to a third
party. E.g., Official Comm. of Unsecured Creditors of Crystal
Med. Prods., Inc. v. Pedersen & Houpt (In re Crystal Med.
Prods., Inc.), 240 B.R. 290, 300 (Bankr. N.D. Ill. 1999). Little
Salt did not receive value reasonably equivalent to the
$467,721 that it transferred to Mr. Davis’ firm’s trust
account on account of MidCoast’s purchase of the share-
holders’ shares.
    Petitioners’ argument is that ‘‘Little Salt did not transfer
anything pursuant to the Stock Sale.’’ That, of course, is not
what the agreement says. Petitioners continue, however:
‘‘[Little Salt] had $471,221 in the bank both before and after
the transaction.’’ Petitioners cite in support of that propo-
sition Starnes v. Commissioner, T.C. Memo. 2011–63. Appar-
ently, petitioners want us to find that Little Salt received
substantially equivalent value for the transfer because, at
the direction of MidCoast, Mr. Davis transferred $467,721 to
a new Little Salt account, where the funds sat for one day
before being returned to MidCoast. In Starnes, Tarcon (a cor-
poration) sold all of its assets for cash. Two weeks later, its
shareholders sold their shares to MidCoast for a price deter-
mined in a manner similar to how the price for Little Salt’s
shares was determined. Before the closing, the Tarcon share-
holders transferred all of Tarcon’s cash to MidCoast’s attor-
ney’s trust account. The closing statement showed a
disbursement of an equal amount from that account to a
‘‘ ‘post-closing’ bank account’’ of Tarcon’s. The Commissioner
argued that Tarcon received nothing because the share pur-
chase agreement between the Tarcon shareholders and
MidCoast did not specifically identify a money transfer to
(235)              STUART v. COMMISSIONER                   261


Tarcon with respect to the sale. While the Tarcon share-
holders and MidCoast may not have specifically agreed to a
postclosing return of Tarcon’s cash to it, we found that the
closing statement evidenced such an intent. Id., 2011 WL
894608, at *8. Indeed, in affirming our Memorandum
Opinion, the Court of Appeals stated: ‘‘ There was substantial
evidence that the Former Shareholders expected the funds to
be transferred back to Tarcon, as of course they were within
a day of the closing.’’ Starnes v. Commissioner, 680 F.3d at
432 n.9.
  Here the agreement is silent as to the disposition of Little
Salt’s funds deposited into Mr. Davis’ firm’s trust account.
Although the agreement specifies that the funds are trans-
ferred to Mr. Davis’ law firm ‘‘as escrow agent under a sepa-
rate * * * agreement entered into on or about the date
hereof ’’, there was no escrow agreement. Mr. Walters, sec-
retary and treasurer of the company, testified that he was
aware of no escrow agreement or escrow agent. Moreover, in
correspondence between Mr. Morrow (the shareholders’ and
Little Salt’s attorney) and Mr. Davis (MidCoast’s attorney),
each makes it clear that neither thought either’s law firm
was undertaking any duties as an escrow agent. Nor is there
here a closing statement available to all parties to the agree-
ment showing a disbursement of Little Salt’s cash to a new
Little Salt account and from which we might assume Little
Salt’s and the shareholders’ knowledge of and agreement to
such a transfer. Indeed, the contrary is the case here. Mr.
Davis’ draft letter of July 31, 2003, states that, in part, its
purpose is to memorialize his instructions received from
MidCoast, but it contains no instruction with respect to the
disposition of Little Salt’s cash. Mr. Morrow did not know of
any instructions that MidCoast may have given Mr. Davis
with respect to Little Salt’s cash delivered to his trust
account, nor did he know of MidCoast’s plans with respect to
Little Salt. Mr. Joyce, president of Little Salt, who signed the
agreement for the company, testified that he knew MidCoast
was getting Little Salt’s cash but, at the time of the sale, he
did not know what it would choose to do with the cash.
  Whatever instructions MidCoast gave Mr. Davis with
respect to his disposition of the Little Salt funds received
into his firm’s trust account, those instructions and
MidCoast’s intended disposition of the funds were unknown
262           144 UNITED STATES TAX COURT REPORTS                     (235)


to Little Salt and to its shareholders on August 7, 2003,
when they entered into the agreement. Unlike the facts
found in Starnes v. Commissioner, T.C. Memo. 2011–63, the
record here does not support the conclusion that the share-
holders expected MidCoast to transfer the Little Salt funds
back to it. And while MidCoast did cause Mr. Davis to
redeposit those funds into a new Little Salt bank account at
Sun Trust Bank (where they remained overnight), MidCoast
was not obligated by the agreement to do so. MidCoast’s
transfer was gratuitous, in the sense that it was voluntary
and not in consideration of the shareholders’ or Little Salt’s
performances under the agreement. In Nostalgia Network,
Inc. v. Lockwood, 315 F.3d 717, 720 (7th Cir. 2002), where
one question was whether value was received for purposes of
section 160/4(a) of Illinois UFTA, 740 Ill. Comp. Stat. 160/
(4)(a) (West 2010), the court said: ‘‘[W]e think the inquiry
should stop at the first stage of analysis, that is, should stop
after it is determined that the transfer was not supported by
consideration. If it was gratuitous, the fact that some or for
that matter all of it may later have seeped back to the debtor
does not legitimize the transfer.’’
  Little Salt did not receive reasonably equivalent value on
account of the transfer. See Neb. Rev. Stat. Ann. sec. 36–
706(a).
  iv. Insolvency
   Respondent argues that Little Salt became insolvent upon
its transfer of all its cash (its only asset) to Mr. Davis’ firm’s
trust account: ‘‘As its liabilities exceeded its assets (which
were then zero) Little Salt was rendered insolvent imme-
diately before petitioners purportedly sold their shares.’’ Peti-
tioners answer: ‘‘Little Salt had cash in the bank in the
amount of $467,221 [sic] both before and after the Stock
Sale, more than sufficient to pay the tax liability in ques-
tion.’’
   A debtor is insolvent under UFTA ‘‘if the sum of * * * [its]
debts is greater than all of * * * [its] assets at a fair valu-
ation.’’ Id. sec. 36–703(a). 9 Insolvency is determined at the
  9 The  test of Neb. Rev. Stat. Ann. sec. 36–701(a) is a balance sheet test
(if debts exceed assets, equity is negative). In addition, Neb. Rev. Stat.
Ann. sec. 36–703(b) contains a rebuttable presumption that a debtor that
is generally not paying its debts as they become due is insolvent. Since we
(235)                STUART v. COMMISSIONER                          263


time of the allegedly fraudulent transfer. See id. sec. 36–
706(a); see also, e.g., Phongsisattanak v. Blue Heron, Inc. (In
re Phongsisattanak), 353 B.R. 594, 598–599 (B.A.P. 8th Cir.
2006). Following the transfer, Little Salt faced an estimated
liability of $167,737 for combined unpaid 2003 Federal and
State income taxes. That estimated liability constituted a
claim within the meaning of Neb. Rev. Stat. Ann. sec. 36–
702(3), see discussion supra pp. 256–259, and, for that rea-
son, it constituted a debt for purposes of determining
whether, on account of the transfer, Little Salt became insol-
vent within the meaning of Neb. Rev. Stat. Ann. sec. 36–
703(a). See Neb. Rev. Stat. Ann. sec. 36–702(5) (‘‘Debt means
liability on a claim.’’); e.g., LR Dev. Co., LLC v. Commis-
sioner, 2010 WL 3604164, at *44 (transferor insolvent under
Illinois UFTA ‘‘because its liabilities, including * * * contin-
gent [capital gains tax] liability, exceeded its assets’’); United
States v. Exec. Auto Haus, Inc., 234 F. Supp. 2d at 1257
(unknown tax claim taken into account in determining insol-
vency under Florida UFTA).
   Little Salt’s transfer of all of its cash to the Davis firm’s
trust account denuded it of assets unless we are to attach
value (1) to the $467,721 that MidCoast lodged overnight
with Little Salt or (2) to MidCoast’s covenant pursuant to the
agreement to cause the company to pay its 2003 estimated
tax.
   Whatever fair valuation one might attach to the $467,721
that MidCoast transferred to Little Salt, those funds were
not, as discussed in the immediately preceding section of this
report, received in consideration of Little Salt’s transfer of
the funds to MidCoast. Whether a transfer was fraudulent
when made depends on conditions that existed when it was
made. See Boyer, 587 F.3d at 795; Nostalgia Network, Inc.,
315 F.3d at 720. Because it was not received in consideration
for the transfer, we will disregard the $467,721 that
MidCoast lodged with Little Salt as an asset to be taken into
account in determining whether Little Salt was made insol-
vent by the transfer.
   Also, notwithstanding the lack of any expert (or other)
valuation testimony, we find that MidCoast’s covenant to

find that Little Salt was insolvent under the balance sheet test, we need
not concern ourselves with the rebuttable presumption.
264         144 UNITED STATES TAX COURT REPORTS               (235)


cause Little Salt to pay its 2003 estimated tax lacked any
fair value. The term ‘‘fair valuation’’ is not defined in UFTA,
but it is well known in bankruptcy law. See, e.g., 11 U.S.C.
sec. 101(32)(A) (2012) (defining ‘‘insolvent’’). ‘‘[F]air valuation
* * * means a fair market price that can be made available
for payment of debts within a reasonable period of time, and
‘fair market value’ implies a willing seller and a willing
buyer.’’ Am. Nat’l Bank & Trust Co. of Chicago v. Bone, 333
F.2d 984, 986–987 (8th Cir. 1964). Assets that are not salable
are not taken into account. See, e.g., Briden v. Foley, 776
F.2d 379, 382 (1st Cir. 1985). MidCoast did not, by the agree-
ment, promise that it would pay Little Salt’s combined esti-
mated tax liability of $167,737. It promised only that it
would ‘‘cause’’ the company to pay that liability to the extent,
if any, that it was due ‘‘given the Company’s post-Share
Closing business activities’’. The trailing phrase adds nothing
to what precedes it; i.e., that Little Salt would pay whatever
were its 2003 tax bills (whether it had subsequent business
activities that reduced those bills (perhaps to zero) or not).
And MidCoast’s promise to ‘‘cause’’ the company to pay its
tax bills, without a concomitant promise to pay what the
company lacked assets to pay, had little intrinsic value,
whether to the company or to the shareholders. Moreover,
that promise does not seem susceptible to liquidation in the
market. Who would pay anything to the company or to the
shareholders for it? How would it provide the company a
ready source to pay its tax bills if it had insufficient cash to
do so? See Constructora Maza, Inc. v. Banco de Ponce, 616
F.2d 573, 577 (1st Cir. 1980) (‘‘Reduction in the face value of
assets may be appropriate if those assets are not susceptible
to liquidation, and thus cannot be made available for pay-
ment of debts, within a reasonable period of time.’’ (dis-
cussing discounting of accounts receivable)). Because the
promise appears to have little intrinsic value, and because
whatever value it had would not be readily realizable in a
market transaction, we find that MidCoast’s promise to cause
Little Salt to pay its 2003 tax bills had no value, determined
under a fair valuation standard.
   On August 7, 2003, Little Salt transferred $467,721 to the
Davis firm’s trust account, which left it with assets with nil
fair value and a combined estimated tax liability of $167,737.
(235)               STUART v. COMMISSIONER                  265


The transfer, therefore, caused it to become insolvent within
the meaning of Neb. Rev. Stat. Ann. sec. 36–703(a).
  v. Conclusion
  Little Salt’s transfer of $467,721 to the Davis firm’s trust
account was fraudulent with respect to respondent within the
meaning of Neb. Rev. Stat. Ann. sec. 36–706(a).
  c. Neb. Rev. Stat. Ann. Sec. 36–705(a)(2)
  i. Introduction
   Under UFTA, a transfer is constructively fraudulent with
respect to a present or future claim if the transfer was made
without the debtor’s receiving ‘‘a reasonably equivalent value
in exchange’’ and if either (1) the debtor’s remaining assets
‘‘were unreasonably small’’ in relation to a present or antici-
pated business transaction or (2) the debtor ‘‘intended to
incur, or believed or reasonably should have believed that he
or she would incur, debts beyond his or her ability to pay as
they became due.’’ Id. sec. 36–705(a)(2). And while we have
treated respondent’s claim for Little Salt’s unpaid 2003 tax
as (1) arising before the transfer and (2) being fraudulent
with respect to respondent pursuant to Neb. Rev. Stat. Ann.
sec. 36–706(a), we believe that the transfer would be fraudu-
lent with respect to respondent under Neb. Rev. Stat. Ann.
sec. 36–705(a)(2) even if respondent’s claim was viewed as
arising when Little Salt’s 2003 tax liability accrued (at the
end of the year) or became due (December 15, 2003). For rea-
sons we have already stated, Little Salt’s transfer to the
Davis firm’s trust account was not made for reasonably
equivalent value.
  ii. Unreasonably Small Assets
  Neb. Rev. Stat. Ann. sec. 36–705(a)(2) is different from
Neb. Rev. Stat. Ann. sec. 36–706 in that it tests for near
insolvency—for situations in which insolvency is all but cer-
tain in the near future—rather than for current insolvency.
See, e.g., Boyer, 587 F.3d at 794 (interpreting Indiana UFTA;
test applies where debtor is left with ‘‘such meager assets
that bankruptcy is a consequence both likely and foresee-
able’’). Neb. Rev. Stat. Ann. sec. 36–705(a)(2) contains two,
disjunctive tests for near insolvency, and the debtor is nearly
insolvent if either test is satisfied. ASARCO LLC v. Ams.
266         144 UNITED STATES TAX COURT REPORTS             (235)


Mining Corp., 396 B.R. 278, 396 (Bankr. S.D. Tex. 2008)
(interpreting Delaware UFTA). Both tests are satisfied here.
   The first test, Neb. Rev. Stat. Ann. sec. 36–705(a)(2)(i), is
satisfied if the debtor was engaged in, or was about to
engage in, a transaction for which its remaining assets were
unreasonably small in relation to the transaction. At the
time of the transfer, Little Salt had an estimated combined
tax liability of $167,737 and could anticipate postyearend
transactions with Federal and State tax authorities in which
it would report its income and settle its 2003 tax bills. The
unreasonably-small-assets test denotes a financial condition
short of equitable insolvency (i.e., the inability of a debtor to
pay its debts as they mature). In re Vadnais Lumber Supply,
Inc., 100 B.R. 127, 137 (Bankr. D. Mass. 1989). It, instead,
encompasses difficulties that are liable to lead to insolvency
at some time in the future. Dahar v. Jackson (In re Jackson),
459 F.3d 117, 124 (1st Cir. 2006) (interpreting New Hamp-
shire UFTA); Moody v. Sec. Pac. Bus. Credit, Inc., 971 F.2d
1056, 1070 (3d Cir. 1992) (interpreting Pennsylvania UFTA).
It calls for the court to examine the ability of the debtor to
generate enough cash to pay its debts and to remain finan-
cially stable after the transfer. Dahar, 459 F.3d at 123;
Moody, 971 F.2d at 1070. The standard to be applied is
‘‘reasonable foreseeability.’’ Moody, 971 F.2d at 1073;
ASARCO, 396 B.R. at 397. The determination requires an
objective assessment of the company’s financial projections.
ASARCO, 396 B.R. at 397. A court should consider only those
cash inflows that it is reasonable for the company to expect
to receive, whether from new equity, cash from operations, or
available credit. Id.
   Little Salt’s management at the time of the transfer (i.e.,
Mr. Joyce, its president, and Mr. Walters, its secretary and
treasurer) had no knowledge of MidCoast’s business expecta-
tions or its financial projections for the company, nor did
they inquire of MidCoast as to those matters. Moreover, fol-
lowing the transfer, Little Salt had no operating assets, no
employees, intangible assets of no discernable value, and no
customers. The company’s 2003 and 2004 Federal income tax
returns are evidence that MidCoast’s only plan for the com-
pany was a tax scheme to eliminate its taxable income.
Those returns are clear evidence that, after the stock sale,
the company did not engage in any business activity. They
(235)              STUART v. COMMISSIONER                    267


show that, at each September 30 yearend, the company
reported neither business assets, business liabilities, or other
indicia of a business, such as cost of goods sold. The returns
are also evidence of MidCoast’s tax scheme to generate a
phony bad debt deduction for the company by parking the
cash MidCoast received from the company back with it for 24
hours before ostensibly lending it back to MidCoast, giving
rise to a debt that MidCoast did not pay and that Little Salt
erroneously claimed gave rise to a 2004 bad debt deduction
and a net operating loss that the company carried back to,
and deducted for, 2003. Little Salt’s failure to engage in any
post-stock-sale business activity and MidCoast’s implementa-
tion of the tax scheme within minutes of receiving Little
Salt’s cash lead us to conclude that MidCoast’s plans could
not reasonably be expected to eliminate Little Salt’s 2003 tax
debts. Given those debts, if the transfer did not itself cause
Little Salt to become insolvent, insolvency in the near future
was a foregone conclusion. Consequently, the transfer was
fraudulent with respect to respondent within the meaning of
Neb. Rev. Stat. Ann. sec. 36–705(a)(2)(i).
  iii. Unable To Pay Debts
   The inability-to-pay test found in Neb. Rev. Stat. Ann. sec.
36–705(a)(2)(ii) can be satisfied either by a showing of intent,
i.e., the debtor ‘‘intended to incur, or believed’’ that he would
incur debts beyond his ability to pay as they came due, or by
an objective showing; i.e., the debtor ‘‘reasonably should have
believed’’ the same. The objective alternative measures
whether a debtor, as a going concern, would reasonably have
been able to pay its debts after making the challenged
transfer. See ASARCO, 396 B.R. at 400. Little Salt was not
a going concern at the time of the transfer. It would, there-
fore, have been unreasonable at that time to believe that the
company could, from its business operations, satisfy its 2003
tax debt when that debt came due. Consequently, the
transfer was fraudulent with respect to respondent within
the meaning of Neb. Rev. Stat. Ann. sec. 36–705(a)(2)(ii).
  d. Remedies
   Having shown that Little Salt’s transfer of all of its cash
was fraudulent with respect to him, respondent may obtain
‘‘avoidance of the transfer * * * to the extent necessary to
268         144 UNITED STATES TAX COURT REPORTS             (235)


satisfy * * * [his] claim’’. See id. sec. 36–708(a)(1). Moreover,
because the transfer is voidable, respondent may recover
judgment equal to the lesser of the value of the asset trans-
ferred or the amount necessary to satisfy his claim. See id.
sec. 36–709(b). Here, that is the latter amount. The judgment
may be entered against ‘‘the first transferee of the asset’’,
‘‘the person for whose benefit the transfer was made’’, or cer-
tain subsequent transferees. See id. Neb. Rev. Stat. Ann. sec.
36–708(b) is based on UFTA sec. 8 (1984), which is derived
from section 550 of the Bankruptcy Code, 11 U.S.C. sec. 550
(2012). See UFTA sec. 8 cmt. (2), at 31 (1984). Transferees
are those who receive the money or other property. Those
who get a benefit because someone else received the money
or property are persons for whose benefit the transfer was
made. See Bonded Fin. Servs., Inc. v. European Am. Bank,
838 F.2d 890, 896 (7th Cir. 1988) (discussing 11 U.S.C. sec-
tion 550(a)(1)). The paradigm ‘‘person for whose benefit the
transfer was made’’ is a guarantor, who receives no money
but is no longer exposed to the liability when the underlying
obligation has been satisfied. See id. at 895. A person may
also be a benefited person if he receives something valuable
from the transferee. In Gibbons v. Stemcor USA (In re B.S.
Livingston & Co.), 186 B.R. 841 (D.N.J. 1995), the defend-
ants were benefited when they sold the core of the debtor’s
business to a third party in exchange for lucrative positions
in the new company.
   The agreement contains MidCoast’s promise to purchase
from the shareholders all of their Little Salt shares for
$358,826. MidCoast’s fulfillment of that promise, however,
was conditioned on Little Salt’s prior transfer of $467,721 to
the Davis firm’s trust account for the benefit of MidCoast.
MidCoast was, thus, a transferee (the first transferee) of
$467,721 from Little Salt. (The Davis firm, MidCoast’s agent,
with no right to put the money to its own purposes, is dis-
regarded. See Bonded Fin. Servs., 838 F.2d at 893.) The
shareholders undoubtedly benefited from Little Salt’s
transfer of the money to MidCoast because without it—as
evidenced by the terms of the draft letter and the order of
the actual cash transfers on August 7, 2003—Mr. Davis
would not have released $358,826 from his firm’s trust
account to Mr. Morrow for disbursement to the shareholders.
That amount was substantially in excess of the amount that
(235)             STUART v. COMMISSIONER                   269


the shareholders would have received had they forgone the
agreement with MidCoast, not caused Little Salt to transfer
$467,721 to MidCoast, and, instead, liquidated the company.
Had they done that, then, after paying (or arranging to pay)
its combined estimated tax liability of $167,737 out of its
cash balance of $467,721, Little Salt would have had left
$299,984 to distribute to the shareholders in redemption of
their shares. The shareholders benefited to the tune of
$58,842, at the expense of the tax collectors, both Federal
and State. They were, within the meaning of Neb. Rev. Stat.
Ann. sec. 36–709(b)(1), ‘‘the person[s] for whose benefit the
transfer was made’’. See, e.g., Gibbons, 186 B.R. 841. Because
we make that finding, we need not determine whether
MidCoast’s transfer of $358,826 to the shareholders was
fraudulent as to respondent pursuant to Neb. Rev. Stat. Ann.
sec. 36–705 or 36–706, entitling him to avoidance of the
transfer under Neb. Rev. Stat. Ann. sec. 36–708, and a judg-
ment against the shareholders, ‘‘first transferees’’, under
Neb. Rev. Stat. Ann. sec. 36–709(b). See Sawyer Trust of May
1992 v. Commissioner, 712 F.3d at 611 (‘‘[T]here were poten-
tially two fraudulent transfers: one transfer from the com-
pany to the * * * [MidCoast equivalent], and another
transfer from * * * [that entity] to the Trust [the stock
seller][.]’’); Cullifer v. Commissioner, T.C. Memo. 2014–208,
at *63–*73 (‘‘Transferee-of-Transferee Liability’’).
   The shareholders’ benefit, $58,842, is substantially less
than the prescription in Neb. Rev. Stat. Ann. sec. 36–709
that respondent may recover judgment for ‘‘the amount nec-
essary to satisfy * * * [his] claim’’. We have found scant
authority addressing the measure of recovery in beneficiary
cases under Neb. Rev. Stat. Ann. sec. 36–709 or 11 U.S.C.
sec. 550(a). The issue is discussed in Larry Chek & Vernon
O. Teofan, ‘‘The Identity and Liability of the Entity for
Whose Benefit a Transfer Is Made Under Section 550(a): An
Alternative to the Rorschach Test’’, 4 J. Bankr. L. & Prac.
145, 163–172 (1995). The shareholders’ benefit was $58,842,
and that is the amount for which we adjudge they are
proportionally liable to respondent. Cf. Neb. Rev. Stat. Ann.
sec 36–709(d)(3); Sawyer Trust of May 1992 v. Commissioner,
T.C. Memo. 2014–59, at *17 (under Massachusetts UFTA,
‘‘good-faith transferee is entitled to a judgment liability
270        144 UNITED STATES TAX COURT REPORTS            (235)


reduction to the extent of the value it gave the debtor for the
transfer’’).
  3. Nebraska Business Corporation Act
   Respondent predicates his claim under Neb. Rev. Stat.
Ann. sec. 21–20,157(4) on our recasting the stock sale as a
liquidation coupled with a fee paid to MidCoast. Since we
decline to do that, we need not further consider respondent’s
argument for the application of Neb. Rev. Stat. Ann. sec. 21–
20,157(4).
  4. Trust Fund Doctrine
  Respondent likewise predicates his claim under the
common law trust fund doctrine on recasting the stock sale
as a liquidation, and, since we do not do that, we need not
further consider his trust fund claim.
  5. Section 6901
   Having determined that, pursuant to UFTA, respondent is
entitled to a judgment against petitioners to satisfy a portion
of his claim against Little Salt for its unpaid 2003 tax, we
must finally determine whether petitioners are transferees
within the meaning of section 6901. The purpose of the sec-
tion 6901 is to allow the Commissioner summarily to enforce
a transferee’s liability established under State statutory
provisions or otherwise. See H.R. Conf. Rept. No. 69–356,
supra at 43, 1939–1 C.B. (Part 2) at 371. In Stanko v.
Commissioner, 209 F.3d 1082 (8th Cir. 2000), rev’g T.C.
Memo. 1996–530, the Court of Appeals determined that the
appellant, a successor transferee, was liable to the Commis-
sioner under the Nebraska Fraudulent Conveyance Act
(replaced by UFTA) for the unpaid tax of the first trans-
feree’s wholly owned corporation. The court considered
whether, as a successor transferee, appellant was a trans-
feree within the meaning of section 6901. The court noted
that the statute does not define the term ‘‘except to clarify
that it includes a ‘donee, heir, legatee, devisee, and dis-
tributee.’ ’’ Id. at 1085 n.2 (referencing section 6901(h)). It
held: ‘‘[T]he Commissioner may proceed under § 6901 against
any ‘transferee’ who is liable under state law for the debts
of the transferor/taxpayer.’’ Id.
   In Cole v. Commissioner, T.C. Memo. 1960–278, rev’d, 297
F.2d 174 (8th Cir. 1961), we considered whether a wife was
(235)             STUART v. COMMISSIONER                   271


liable as a transferee in the amount of $12,000 on account of
her husband’s payment of that amount to discharge an
encumbrance upon her separately owned real property. The
encumbrance secured an indebtedness on which both the
husband and wife were indebted. At the time of the hus-
band’s payment, he was indebted to the Commissioner for
unpaid taxes of more than $12,000. Applying Missouri law,
we found that the husband’s payment was fraudulent with
respect to his creditors since it was without consideration
and he was insolvent when he made it. We determined that
the Commissioner could collect $12,000 from the wife pursu-
ant to section 311(a) of the Internal Revenue Code of 1939
(the predecessor to section 6901). The question on appeal was
whether, under Missouri law, the wife became a transferee
of assets of her husband on account of his payment of their
joint obligation and the discharge of the encumbrance on her
property. The court held that she did not because, under Mis-
souri law, the ‘‘settlement of an honest debt is not a fraudu-
lent conveyance or assignment, even though the debtor is
insolvent at the time and the transfer disables him from
paying his other creditors.’’ Cole v. Commissioner, 297 F.2d
at 175. No question was raised as to whether, as only a bene-
ficiary (and not the recipient) of the husband’s payment of
the debt, the wife could be a transferee within the meaning
of section 311 of the Internal Revenue Code of 1939. We were
reversed only because we erred in finding there to have been
a fraud on the husband’s creditors. The Court of Appeals con-
cluded its opinion by stating: ‘‘Frances Cole was unquestion-
ably the beneficiary of a preferential payment of a debt by
her husband, but she was not a transferee of his assets in
fraud of his creditors.’’ Id. at 176 (emphasis added). The
emphasized words would have been unnecessary had the
court thought that Frances Cole was not a transferee within
the meaning of section 311 of the Internal Revenue Code of
1939.
   In Shartle v. Commissioner, T.C. Memo. 1988–354, a cor-
poration indebted to the Internal Revenue Service for out-
standing tax liabilities became insolvent upon its transfer of
two parcels of real property to the former wife of its sole
owner. The parcels were transferred by order of court in
settlement of the former wife’s property rights acquired
during her marriage to the owner. We found the transfer to
272        144 UNITED STATES TAX COURT REPORTS             (235)


be fraudulent with respect to the Commissioner pursuant to
section 1336.04 of the Ohio Uniform Fraudulent Conveyance
Act, Ohio Rev. Code Ann. sec. 1336.04 (Anderson 1961). The
owner argued that the Commissioner could not collect from
him pursuant to section 6901 because he did not receive any
of the corporation’s assets. We answered: ‘‘Although * * *
[the owner] did not physically receive any of * * * [the cor-
poration’s] assets, said assets were transferred in satisfaction
of his legal obligation to * * * [his former wife]. * * * [He]
received the same benefit from * * * the assets as if they
had been physically transferred to him.’’ We treated him as
a constructive recipient of the assets. We found that he was
a transferee of the corporation’s assets from whom the
Commissioner could collect the corporation’s tax liability
pursuant to section 6901.
  The three cited cases are evidence of the expansive reading
that courts have given term ‘‘transferee’’ in applying section
6901. A person can be a transferee within the meaning of the
section if he is an indirect transferee of property, Stanko v.
Commissioner, 209 F.3d 1082, is a constructive recipient of
property, Shartle v. Commissioner, T.C. Memo. 1988–354, or
merely benefits in a substantial way from a transfer of prop-
erty, Cole v. Commissioner, T.C. Memo. 1960–278. The deter-
minative factor is liability to a creditor (the Commissioner)
for the debt of another under a State fraudulent conveyance,
transfer, or similar law. We have found that, pursuant to
Neb. Rev. Stat. Ann. sec. 36–709(b)(1), the shareholders are
collectively liable to respondent for $58,842 as ‘‘person[s] for
whose benefit’’ Little Salt transferred $467,721 to MidCoast.
They are, on that basis, transferees within the meaning of
section 6901.
IV. Conclusion
   For the reasons stated, we sustain respondent’s determina-
tion that petitioners are liable as transferees with respect to
their respective shares of $58,842 of Little Salt’s unpaid 2003
tax.
                   Decisions will be entered under Rule 155.

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