                        T.C. Memo. 2001-265



                      UNITED STATES TAX COURT



          EDDIE CORDES, INC., TRANSFEREE, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 18131-98.                     Filed October 4, 2001.


     O. Christopher Meyers, for petitioner.

     Gary L. Bloom, for respondent.



                        MEMORANDUM OPINION


     MARVEL, Judge:   In his notice of liability to Eddie Cordes,

Inc., respondent determined that petitioner Eddie Cordes, Inc.,

is liable as a transferee for Cordes Finance Corp.’s 1990 Federal

income tax deficiency of $1,320,434,1 penalties of $259,058 and




     1
      Monetary amounts are rounded to the nearest dollar.
                               - 2 -

$33,880, and interest (collectively, income tax liability).2    The

only issue for decision is whether the transferee liability of

petitioner, a successor by merger of Cordes Finance Corp., is

limited to the value of the assets it received in the merger.

                             Background

     This case was submitted to the Court fully stipulated under

Rule 122.3   We incorporate the stipulation of facts and the

supplemental stipulation of facts into our findings by this

reference.   Eddie Cordes, Inc. (petitioner), was an Oklahoma

corporation with its principal place of business in Lawton,

Oklahoma, at the time the petition in this case was filed.

     On June 3, 1997, we entered a decision against Cordes

Finance Corp., an Oklahoma corporation incorporated in 1964, for

its 1990 taxable year.    Cordes Fin. Corp. v. Commissioner, T.C.

Memo. 1997-162, affd. without published opinion 162 F.3d 1172

(10th Cir. 1998).   Pursuant to that decision, on August 22, 1997,

respondent assessed against Cordes Finance Corp. an income tax

deficiency of $1,320,434, penalties of $259,058 and $33,880, and

interest of $1,390,719.


     2
      This Court typically lacks jurisdiction over a taxpayer’s
interest liability in deficiency proceedings. E.g., LTV Corp. v.
Commissioner, 64 T.C. 589, 597 (1975). We do have jurisdiction,
however, in cases involving a transferee’s liability for interest
under sec. 6901. Lowy v. Commissioner, 35 T.C. 393, 395 (1960).
     3
      All section references are to the Internal Revenue Code in
effect for the years in issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure.
                              - 3 -

     On October 1, 1997, Cordes Finance Corp. and petitioner

entered into an “Agreement and Plan of Merger of Cordes Finance

Corp. with and into Eddie Cordes, Inc.” (merger agreement), under

which Cordes Finance Corp. merged into petitioner.   On December

30, 1997, the merger was effected under Oklahoma State law, and

Cordes Finance Corp. ceased to exist.

     The terms of the merger agreement provided that all of

Cordes Finance Corp.’s property, debts, and liabilities became

petitioner’s property, debts, and liabilities.   Specifically, the

merger agreement provided as follows:

     From and after the Effective Date,[4] the Surviving
     Corporation[5] * * * shall be liable and responsible for
     all the liabilities and obligations of the Constituent
     Corporations. The rights of the creditors of the
     Constituent Corporations, or of any person dealing with
     such corporations, or any liens upon the property of
     such corporations, shall not be impaired by this
     merger, and any claim existing or action or proceeding
     pending by or against either of such corporations may
     be prosecuted to judgment as if this merger had not
     taken place, or the Surviving Corporation may be
     proceeded against or substituted in place of the
     Merging Corporation.




     4
      The effective date of the merger agreement was defined
therein as 2 p.m., Oct. 1, 1997. The actual effective date of
the merger was Dec. 30, 1997.
     5
      “Surviving Corporation” and “Merging Corporation” are
defined in the merger agreement as Eddie Cordes, Inc.
(petitioner), and Cordes Finance Corp., respectively. The merger
agreement further provides that “Constituent Corporations” refers
collectively to Eddie Cordes, Inc., and Cordes Finance Corp.
                               - 4 -

     On August 14, 1998, respondent mailed to petitioner a notice

of liability.   In that notice, respondent determined that

petitioner was fully liable for Cordes Finance Corp.’s income tax

liability.

                            Discussion

     Section 6901(a) provides that the Commissioner may proceed

against a transferee of property to assess and collect Federal

income taxes, penalties, and interest owed by the transferor.

Sec. 301.6901-1(a)(3)(i), Proced. & Admin. Regs.    A transferee

under section 6901 includes a successor of a corporation.    Sec.

301.6901-1(b), Proced. & Admin. Regs.    Section 6901 does not

impose liability on the transferee but merely gives the

Commissioner a procedure or remedy to enforce the transferor’s

existing liability.   Commissioner v. Stern, 357 U.S. 39, 42

(1958).

     In a transferee liability proceeding before this Court, the

burden of proof is on respondent to show that a taxpayer is

liable as a transferee.   Sec. 6902(a); Rule 142(d).   Petitioner

conceded on brief that it is liable as a transferee of Cordes

Finance Corp.   Petitioner maintains, however, that the extent of

its liability is limited to the value of the assets received from

Cordes Finance Corp. in the merger and that respondent has the

burden of establishing that value.     Respondent contends that he

need not establish the value of those assets and that petitioner
                                     - 5 -

is liable for Cordes Finance Corp.’s entire income tax liability

as a transferee at law.6         For the reasons discussed below, we

hold for respondent.

       Although petitioner has conceded it is a transferee for

purposes of section 6901, proper resolution of the issue before

us requires us to examine the basis for petitioner’s transferee

liability.       Transferee liability may be grounded in equity or in

law.       Sec. 6901(a)(1)(A).    The surviving corporation in a

statutory merger will be held liable as a transferee at law for

the Federal income tax liability of the merged corporation if

respondent shows that the surviving corporation, expressly or by

operation of State law, assumed the liabilities of the merged

corporation.       Harder Servs., Inc. v. Commissioner, 67 T.C. 585,

598-599 (1976), affd. 573 F.2d 1290 (2d Cir. 1977).7




       6
      Petitioner contends that respondent may not prevail because
he failed to indicate expressly whether petitioner was liable as
a transferee at law or in equity. Respondent, however, is not
required to specify under which doctrine petitioner is liable.
Turnbull, Inc. v. Commissioner, 42 T.C. 582, 584 (1964),
supplementing T.C. Memo. 1963-335, affd. 373 F.2d 91 (5th Cir.
1967). Moreover, respondent clearly asserted in his answer,
opening brief, and reply brief that petitioner’s liability as a
transferee is based in law, rather than equity.
       7
      See also Texsun Supply Corp. v. Commissioner, 17 T.C. 433,
442 (1951); Kaufmann Dept. Stores Sec. Corp. v. Commissioner, 2
T.C. 656, 671 (1943), affd. 144 F.2d 776 (3d Cir. 1944);
Turnbull, Inc. v. Commissioner, T.C. Memo. 1963-335, supplemented
by 42 T.C. 582 (1964), affd. 373 F.2d 91 (5th Cir. 1967).
                                 - 6 -

     In connection with the merger between petitioner and Cordes

Finance Corp., petitioner assumed all of Cordes Finance Corp.’s

liabilities, without limitation.    The merger agreement

specifically provided “the Surviving Corporation * * * shall be

liable and responsible for all the liabilities and obligations of

the Constituent Corporations.”    Likewise, Okla. Stat. Ann. tit.

18, sec. 1088 (West 1986) provides:

          When any merger or consolidation shall have become
     effective * * * all debts, liabilities and duties of
     the respective constituent corporations, from that time
     forward, shall attach to said surviving or resulting
     corporation, and may be enforced against it to the same
     extent as if said debts, liabilities and duties had
     been incurred or contracted by it.

See also Turnbull, Inc. v. Commissioner, 42 T.C. 582 (1964)

(holding “attached” in a similar context meant the surviving

corporation “assumed” the liabilities of the merging

corporation), supplementing T.C. Memo. 1963-335, affd. 373 F.2d

91 (5th Cir. 1967); Okla. Stat. Ann. tit. 18, sec. 1.167(4) (West

1947) (a predecessor to Okla. Stat. Ann. tit. 18, sec. 1088 (West

1986)) (the surviving corporation shall be “liable for all the

liabilities and obligations of each of the constituent

corporations so merged”).8   Because petitioner’s transferee


     8
      See also Cherokee Labs., Inc. v. Pierson, 415 F.2d 85, 86
(10th Cir. 1969) (stating that under Okla. Stat. Ann. tit. 18,
sec. 1.167 (West 1947), “the surviving corporation is fully
liable and responsible for the acts and obligations of its
predecessors.”); In re Sunset Sales, Inc., 220 Bankr. 1005, 1013-
1014 (B.A.P. 10th Cir. 1998) (citing Am. Ry. Express Co. v.
                                                   (continued...)
                               - 7 -

liability arose from its contractual obligations under the merger

agreement and by operation of State law, petitioner’s liability

as a transferee is that of a transferee at law.

     Petitioner nevertheless argues that the liability of a

transferee, whether at law or at equity, is limited to the value

of the assets it received from the transferor and that respondent

bears the burden of proving that value.   Petitioner’s argument is

legally unsupportable.   When a taxpayer is a transferee at law,

the Commissioner need not establish the value of the assets

received by the transferee in order to sustain his burden of

proof.   Harder Servs., Inc. v. Commissioner, supra; Bos Lines,

Inc. v. Commissioner, T.C. Memo. 1965-71, affd. 354 F.2d 830 (8th

Cir. 1965); Turnbull, Inc. v. Commissioner, T.C. Memo. 1963-335,

supplemented by 42 T.C. 582 (1964); Am. Equitable Assurance Co.

of New York v. Commissioner, 27 B.T.A. 247 (1932), affd. 68 F.2d

46 (2d Cir. 1933).   Consequently, it is petitioner, the party who

seeks to place a limit on its transferee liability, who has the

burden of establishing that limit insofar as relevant.9   Rule


     8
      (...continued)
Snead, 221 P. 1032 (Okla. 1923)).
     9
      Petitioner argues that sec. 7491 operates to place the
burden of proving the value of the assets on respondent. Under
sec. 7491(a)(1), Congress requires the burden of proof to be
shifted to the Commissioner, subject to certain limitations,
where a taxpayer introduces credible evidence with respect to
factual issues relevant to ascertaining the taxpayer’s liability
for tax. Sec. 7491 is applicable to court proceedings arising in
                                                   (continued...)
                               - 8 -

142(a).

     Even if petitioner had persuaded us that its liability as a

transferee at law is limited to the value of the assets received

in the merger,10 petitioner has failed to prove the value of the

assets in question, and that failure is fatal.   Petitioner had

the burden of proving facts supporting its argument that its

liability as a transferee at law was limited.    Petitioner made no

effort to prove the value of the assets it received in the

merger.   We, therefore, must conclude, and so hold, that

petitioner is liable as a transferee at law for Cordes Finance

Corp.’s income tax liability as determined by respondent.


     9
      (...continued)
connection with examinations commencing after July 22, 1998.
Petitioner introduced no evidence establishing whether the
examination in this case commenced after July 22, 1998, and
consequently, has failed to demonstrate that sec. 7491 applies.
Ashley v. Commissioner, T.C. Memo. 2000-376. Moreover,
petitioner introduced no evidence (credible or otherwise)
respecting the value of the assets transferred to it in the
merger and thus failed to meet the threshold requirement of sec.
7491(a)(1).
     10
      The weight of authority appears to hold that transferee
liability at law is not limited to the value of the assets
received. Bos Lines, Inc. v. Commissioner, 354 F.2d 830, 837
(8th Cir. 1965), affg. T.C. Memo. 1965-71; see also Saltzman, IRS
Practice and Procedure, par. 17.06[1] (2d ed. 1991) (Transferee
liability at law is full liability, regardless of the value of
the assets received, unless limited by statute or agreement);
Transferee Liability, 628 Tax Mgmt. A-19 (BNA 1988).
Petitioner’s reliance on our decisions in Lesser v. Commissioner,
47 T.C. 564 (1967) and Napsky v. Commissioner, T.C. Memo. 1965-
284, affd. 371 F.2d 189 (7th Cir. 1966), for the proposition that
the liability of a transferee at law is limited to the value of
the property received from the transferor is misplaced because
both of those cases are distinguishable.
                                 - 9 -

     We have carefully considered all remaining arguments made by

petitioner for a contrary holding and, to the extent not

discussed, find them to be irrelevant or without merit.

     To reflect the foregoing,


                                              Decision will be entered

                                         under Rule 155.
