                        T.C. Memo. 1997-150



                      UNITED STATES TAX COURT



            HARVEY M. PERT, TRANSFEREE, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent

     KATHLEEN M. PERT, F.K.A. KATHLEEN M. RIFFE, TRANSFEREE,
   Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 13783-94, 13784-94.          Filed March 24, 1997.



     B. Gray Gibbs, for petitioners.

     Michael A. Pesavento, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     COLVIN, Judge:   Kathleen M. Pert (Mrs. Pert), formerly known

as Kathleen M. Riffe, was married to Timothy C. Riffe (Mr. Riffe)

until he died, and later married to Harvey M. Pert (Mr. Pert).
                                     - 2 -


Mr. Riffe and Mrs. Pert filed joint income tax returns from 1986

to 1989.

        Respondent determined that Mrs. Pert is liable as a

transferee of the assets of Mr. Riffe for his and Mrs. Pert's

unpaid income tax and interest and Mr. Riffe's additions to tax

from 1986 to 1989.       Respondent also determined that Mr. Pert is

liable for Mr. Riffe's and Mrs. Pert's income tax and Mr. Riffe's

additions to tax as a successor transferee of the assets of Mr.

Riffe, or as a transferee of the assets of Mrs. Pert.

                       Mr. Riffe's and Mrs. Pert's
               Unpaid Joint Federal Income Tax Liabilities

                             Fees and
Tax Period                  Collection       Assessed   Payments   Unpaid
  Ending           Tax        Costs          Interest     Made     Balance
   1986          $37,342    $   12            $25,158    $43,976   $18,5241
   1987           19,991        12             12,885          0    32,888
   1988           14,684         0              6,574      5,000    16,260

              Total Unpaid Income Tax Liability                    $67,672
1
 Respondent determined these amounts without explaining apparent
math discrepancy.

                   Mr. Riffe's Unpaid Additions to Tax

      Tax                Substantial
    Period    Fraud     Understatement   Negligence     Accuracy Total
     1986    $42,869        $9,335        $     0       $     0 $52,204
     1987           0        4,998          7,443             0  12,441
     1988           0        3,205            734             0   3,939
     1989           0            0              0         3,819   3,819

      Total $42,869        $17,538           $8,177     $3,819   $72,403

        Mr. Riffe's unpaid income tax from 1986 to 1989 is $140,075.

Mr. Riffe's liability is larger than Mrs. Pert's liability
                                 - 3 -


because it includes additions to tax and penalties pursuant to a

stipulated decision for 1987 and closing agreements for 1986,

1988, and 1989.

     In Pert v. Commissioner, 105 T.C. 370, 377, 380 (1995), we

held that petitioners could not dispute the tax liabilities of

Mr. Riffe and Mrs. Pert because she signed closing agreements for

1986, 1988, and 1989 and agreed to a stipulated decision for

1987.     We also held that the statute of limitations does not bar

respondent from assessing transferee liability against

petitioners for 1986.     Id. at 379.

     We must decide the following issues:

     1.    Whether Mrs. Pert is liable as a transferee of Mr.

Riffe's assets for his unpaid income tax and additions to tax for

1986, 1987, 1988, and 1989.    We hold that she is.1

     2.    Whether respondent failed to prove the value of the

property transferred from Mr. Riffe's estate to Mrs. Pert, as

petitioners contend; the value of assets transferred is $399,535,

as respondent contends; or the value is some other amount.      We

hold that the value of assets transferred is $399,535.


     1
      In light of our holding, we need not decide respondent's
contentions that Mrs. Pert is liable as a fiduciary of Mr.
Riffe's estate for Mr. Riffe's unpaid income tax and additions to
tax for 1986, 1987, 1988, and 1989, and that Mrs. Pert is liable
for Mr. Riffe's unpaid income tax and additions to tax for 1986,
1987, 1988, and 1989, because she signed a statement filed with
the probate court in which she said that she would pay respondent
the taxes which may become due from Mr. Riffe's estate.
                                 - 4 -


      3.   Whether Mr. Pert is liable as a successor transferee of

Mr. Riffe's assets for Mr. Riffe's unpaid income tax and

additions to tax for 1986, 1987, 1988, and 1989.     We hold that he

is.

      4.   Whether Mr. Pert is liable as a transferee of Mrs.

Pert's assets for Mrs. Pert's unpaid income tax for 1986, 1987,

1988, and 1989.     We hold that he is.

      5.   Whether respondent failed to prove the value of the

assets that Mrs. Pert transferred to Mr. Pert from Mr. Riffe's

estate, as petitioners contend; the value is $222,206, as

respondent contends; or the value is some other amount.     We hold

that the value of assets transferred to Mr. Pert is $126,112.

      6.   Whether respondent properly credited tax payments that

Mrs. Pert made on June 27 and December 11, 1991.     We hold that

respondent did.

      7.   Whether we should enter decision in Mrs. Pert's favor

because the U.S. Bankruptcy Court for the Middle District of

Florida discharged Mrs. Pert's liability as a transferee in a

previously filed bankruptcy.     We hold that we should not.

      Unless otherwise noted, section references are to the

Internal Revenue Code of 1986 as in effect during the years in

issue.     Rule references are to the Tax Court Rules of Practice

and Procedure.
                                 - 5 -


                           FINDINGS OF FACT

A.   Petitioners

     Mr. and Mrs. Pert lived in Palm Harbor, Florida, when they

filed their petitions.

B.   Transferor Timothy C. Riffe

     Mr. Riffe died on February 11, 1991.     Decedent and Mrs. Pert

had timely filed joint Federal individual income tax returns for

1986, 1987, 1988, and 1989.

     1.   Mr. Riffe's Businesses

     During 1986, 1987, 1988, and 1989, Mr. Riffe owned

businesses known as West Coast Pest Control and West Coast

Florida Pressure Cleaning.     West Coast Pest Control sprayed

pesticides on lawns.     West Coast Florida Pressure Cleaning used a

pressure cleaning process to wash cars for car dealers.     Mr.

Riffe owned the car wash business before he married Mrs. Pert.

Mrs. Pert worked long hours in both businesses and ran the car

wash business.     Mr. Riffe was the sole owner of occupational

licenses for both of these businesses.     He had sole signature

authority over the bank accounts for the businesses.

     Mr. Riffe's and Mrs. Pert's joint income tax returns for

1986, 1987, 1988, and 1989, include Schedules C for the car wash

business in Mr. Riffe's name.     They reported on their 1988 return

that the business paid Mrs. Pert $13,800 in wages.     Their 1989
                                - 6 -


return also included a Schedule C for Mr. Riffe's lawn spraying

business.

     2.     Mr. Riffe's Safe Deposit Boxes

     On October 23, 1987, Mr. Riffe leased safe deposit box 276

solely in his name from Barnett Bank of Pinellas County (Barnett

Bank).    He was the only person listed on the signature card and

the only person authorized to open safe deposit box 276.     He

opened safe deposit box 276 more than 300 times from 1987 to

1991.

     On January 14, 1991, Mr. Riffe leased safe deposit box 204

from First Gulf Bank (safe deposit box 204).     He was the only

person listed on the signature card and the only person

authorized to open safe deposit box 204.     He opened it three

times before he died.

     Mr. Riffe also leased a safe deposit box solely in his name

from North Carolina National Bank (NCNB).

     3.     Mr. Riffe's Solely Owned Property

     On February 27, 1989, Mr. Riffe's grandparents gave him Lot

30, College Hill, Florida.    Mr. Riffe was the sole owner of Lot

30, College Hill, until he died.    He was the sole owner of Lot 3,

Block 95, Town of Sutherland, Florida, from November 20, 1989,

until he died.
                                - 7 -


       On January 16, 1991, Mr. Riffe deposited $350,000 at the

Barnett Bank.    Several days later, he withdrew $325,000 and

bought five cashier's checks for $65,000, which he deposited in

accounts at Citizens and Southern Bank (C&S), NCNB, Sun Bank of

Tampa Bay, Florida Bank of Commerce, and First Gulf Bank.

       4.   Mr. Riffe's Death

       Mr. Riffe died in a boating accident in a 22-foot Aqua Sport

boat near his home on February 11, 1991.     He was the sole owner

of the boat.    When he died, Mr. Riffe and Mrs. Pert lived in a

residence at Lot 28, College Hill.      The total balance in his six

bank accounts (see par. B-3, above) was $115,358 when he died.

C.     Opening the Safe Deposit Boxes

       Detective John Barna (Barna), an experienced narcotics

investigator with the Pinellas County, Florida, Sheriff's office,

began to investigate Mr. Riffe's financial activities shortly

after Mr. Riffe died.    On February 15, 1991, 4 days after Mr.

Riffe died, Barna obtained a search warrant for safe deposit box

204.    In it were two sealed bags with $132,000 in cash primarily

in denominations of $50s and $100s bundled by paper straps.     The

Pinellas County Sheriff's office searched only safe deposit box

204.
                               - 8 -


D.   Mr. Riffe's Estate

     1.   Administration of Mr. Riffe's Estate

     Mr. Riffe died testate.   Mrs. Pert was the personal

representative and sole beneficiary of Mr. Riffe's estate.

Donald F. Kaltenbach (Kaltenbach) represented Mrs. Pert in her

capacity as personal representative of Mr. Riffe's estate.    He

had previously represented hundreds of personal representatives

of estates and was familiar with documents filed in probate

proceedings.

     Early in the probate proceedings, Mrs. Pert and Kaltenbach

knew that respondent was investigating the tax liabilities of Mr.

Riffe and Mrs. Pert.   On February 28, 1991, Revenue Agent Joe

Elliott (Elliott) questioned Mrs. Pert about her assets, the

business operations of West Coast Pest Control and West Coast

Florida Pressure Cleaning, how she derived income from the

businesses, and her cash on hand.   Mrs. Pert denied that she or

Mr. Riffe had a cash hoard or any large sums of cash on hand.

Mrs. Pert told Elliott that she had to borrow money from friends

and family because she had no funds and she had no signature

authority over any of the business bank accounts.   Kaltenbach was

present when Elliott interviewed Mrs. Pert on February 28, 1991.

On March 1, 1991, Elliott went to Mrs. Pert's residence to get

books and records to start an income tax audit.
                                - 9 -


     On March 20, 1991, Kaltenbach and Mrs. Pert deposited

$115,358 at Peoples State Bank (acct. No. 105209804) for Mr.

Riffe's estate to pay estate bills.     The $115,358 came from Mr.

Riffe's six bank accounts.

     On April 16, 1991, the Pinellas County Sheriff's office gave

Mrs. Pert the $132,000 that Barna had seized from safe deposit

box 204.    Before giving her the money, the Sheriff's office

required her to present letters of administration.

     2.     Inventory of Decedent's Assets

     In a Florida probate proceeding a decedent's estate must

file an inventory which lists in reasonable detail each asset

owned by the decedent and the estimated fair market value of each

asset when the decedent died.    Fla. Stat. Ann. sec. 733.604(1)

(West 1988).    Kaltenbach prepared an inventory based on

information from Mrs. Pert and a friend of hers whom Kaltenbach

knew and trusted.    He intended to include only property that was

owned solely by Mr. Riffe and not to include jointly owned

property.    He listed the following property in the inventory:
                              - 10 -


                                                    Estimated Fair
               Assets                                Market Value
           Real Property
     1.    Lot 28, College Hill (homestead)         Not included in
                                                        valuation
     2.    Lot 30, College Hill                        $15,000
     3.    Lot 3, Block 95                              30,000

           Personal Property
     4.    Peoples State Acct. # 105209804             $115,358

           Under C&S Acct. # 836150
     5.    Certificates of Deposit                      100,000
     6.    Government Obligation Taxable                100,000
     7.    C&S Tax-Free Income Bond                      45,000
     8.    Cash Equivalent Tax-Free Fund                  5,000
     9.    C&S Money Market # FV0081203284               18,000

     10.   22' Aqua Sport Boat                            5,000
     11.   West Coast Pest Control                       35,000
     12.   West Coast Florida Pressure Cleaning           4,000
     13.   1987 GMC Van ID # 1GTFR24H9HF725519            5,000
     14.   1988 GMC Pick-up ID # 2GCFC24H771306969       10,000
     15.   1987 GMC ID # 1GTFR24H6F720973                 4,000
     16.   1987 GMC Astro Van ID # 1G8DM15ZOGB198509      5,000

                Total Property - Wherever Located      $496,358

The value of the boat was the estimated value after the accident

in which Mr. Riffe died.

     Mrs. Pert signed the inventory under penalty of perjury on

May 13, 1991.   Kaltenbach filed it with the probate court.

Kaltenbach did not believe that he needed to have appraisals

because the total value of the estate was more than $60,000 (the

threshold for formal administration) but less than $600,000 (the

threshold for filing a Federal estate tax return), and because

Mrs. Pert was the sole beneficiary of the estate.
                              - 11 -


     3.    Property Passing Outside of Probate

     Mrs. Pert was required to report the value of property

passing outside of probate, including jointly owned property, to

the Florida Department of Revenue (Preliminary Notice and

Report).   On May 13, 1991, Mrs. Pert reported that Lot 28,

College Hill, which she valued at about $41,000, passed outside

of probate, and that the total value of all property in which Mr.

Riffe had an interest was $537,358.

     On June 5, 1991, Elliott met with Mrs. Pert's tax attorney

to discuss adjustments Elliot had made to Mr. Riffe's and Mrs.

Pert's income for 1986, 1987, 1988, and 1989, and to give Mrs.

Pert's tax attorney a copy of Elliott's report detailing the

adjustments based on unreported income and including the addition

to tax for fraud.

     Mrs. Pert married Mr. Pert on September 7, 1991, while she

was administering Mr. Riffe's estate.   Mr. Pert had known Mr.

Riffe for many years.

     Mrs. Pert, as representative of Mr. Riffe's estate, signed

documents under penalty of perjury on March 23, 1992 (petition to

extend time for filing final accounting and petition for

discharge), June 19, 1992 (petition to extend time for filing

final accounting and petition for discharge), and October 8, 1992

(statement regarding creditors with attachment showing debt owed
                               - 12 -


to Internal Revenue Service (IRS)), in which she stated that

respondent had tax claims against Mr. Riffe's estate.

     On October 6, 1992, Mrs. Pert wrote a check to herself for

$3,294 to close out the Peoples State Bank account.

     Mr. Riffe's estate asked the probate court to close the

estate.    To allow the case to close, Kaltenbach prepared the

following document, which Mrs. Pert signed on October 8, 1992:

                                            Dated:     October 8, 1992

     Re:    Estate of Timothy Christopher Riffe, aka
            Timothy C. Riffe, aka Tim Riffe
            File Number 91-676-E3


          The undersigned, KATHLEEN M. PERT, formerly known
     as KATHLEEN M. RIFFE, as Personal Representative of the
     above-captioned Estate, will attend to the preparation
     of Timothy C. Riffe's Final 1040 Individual Return as
     well as the Final 1041 Estate Income Tax Return.

          In addition, KATHLEEN M. PERT, individually and as
     Personal Representative of the above-captioned Estate,
     shall be responsible for any and all obligations which
     may become due to the Internal Revenue Service and
     shall hold the law firm of Donald F. Kaltenbach, P.A.
     harmless from any and all liability therefor.

          The above-mentioned assurances are being made by
     the Personal Representative in order to close out the
     Estate of Timothy Christopher Riffe.


                                     /s/ Kathleen M. Pert

     Mrs. Pert signed this document to show the probate court

that she would pay any claims by the IRS from the estate that

might become due, to allow her to be released from her fiduciary
                              - 13 -


duties to the estate, and to allow Mr. Riffe's estate to be

distributed to her.

     On October 8, 1992, Mr. Riffe's estate reported that it had

distributed all of its assets to Mrs. Pert according to the plan

stated in the petition for discharge.    Mr. Riffe's estate used

$96,823 of the $115,358 deposited in Peoples State Bank to pay

estate expenses, including $57,963 for income tax for Mr. Riffe

for tax years 1986 to 1990.   The remaining $18,535 was

distributed to Mrs. Pert or paid on her behalf while she

administered the estate.

     Mr. Riffe's estate was closed on October 17, 1992.

E.   Mr. Pert's Financial Resources

     1.   Mr. Pert's Businesses

     Mr. Pert started a lawn maintenance business in the late

1980's called Perticular Lawn Service.

     After he married Mrs. Pert, Mr. Pert helped her run West

Coast Pest Control.   Mr. and Mrs. Pert combined their landscaping

and lawn spraying businesses to form Perticular Lawn, Inc.

      Mrs. Pert transferred the car washing business and a

Chevrolet truck with a pressure washing machine to her father.

Mr. Pert incorporated Perticular Lawn, Inc. in 1992 and sold it

in 1992 or 1993.
                                  - 14 -


     2.     Mr. Pert's Finances

     Mr. Pert had a drug habit (not further described in the

record) in the early 1980's, and he had financial troubles from

1985 to 1989.     Ford Motor Credit Co. obtained a judgment against

him in 1987 for $3,098 plus costs and interest.

     On December 21, 1990, Mr. Pert's father gave Mr. Pert

$40,000, which he deposited in C&S.        He withdrew the $40,000 on

January 7, 1991.

     Around July 1991, Mr. Pert's father gave Mr. Pert real

property worth $46,000.     Mr. Pert sold the property shortly after

he received it.

     On October 15, 1991, Mr. Pert bought a certificate of

deposit in the amount of $30,952.

     In 1988, 1989, and 1990, Mr. Pert made less than $11,000 per

year.     He reported that he had gross income as follows:    $8,108

for 1988, $8,589 for 1989, and $10,680 for 1990.       Mr. and Mrs.

Pert reported that they had taxable income of $34,906 for 1991,

$16,098 for 1992, and $42,395 for 1993.

     3.      Mr. Pert's Homes

     Mr. Pert owned a home at 1332 Hawaii Avenue that he bought

in the mid 1980's.     Mr. and Mrs. Pert lived there about a year

after they were married.     Thereafter, they moved to a house that

Mrs. Pert built on Lot 30, College Hill.       They lived there for

about 8 months.     They then moved to a motel for about 30 days,
                                - 15 -


and then to 610 Sandy Hook Road.    Mr. and Mrs. Pert had a young

son and they were expecting another child when they stayed at the

motel.    Mr. and Mrs. Pert lived modestly.

     4.     Mr. Pert's Boat

     Mr. Pert bought a boat for $11,000 shortly after he married

Mrs. Pert in 1991.     He traded in that boat in 1995 for a $24,000

22-foot Hydrasport fishing boat.    He financed the purchase of the

second boat and owed $11,000 as of the date of trial.

F.   The Cash Transactions

     On March 20, 1991, Kaltenbach and Mrs. Pert opened the

Peoples State Bank account for Mr. Riffe's estate and deposited

$115,358, as described above at par. D-3.     On that day, Mrs. Pert

wrote a $5,000 check to herself.    On April 9, 1991, she wrote a

$5,000 check to herself for a downpayment on a car.

     On April 16, 1991, Mrs. Pert deposited $268,000 (items 5-9

on the inventory) in cash in C&S account No. 87051982.    On April

18, 1991, she closed that account, deposited $250,000 in C&S

trust account No. 836150 and deposited $18,091 in C&S ultima

account No. 81203284.     Mrs. Pert opened the C&S accounts in her

name.     On May 6, 1991, Mrs. Pert used part of the $250,000 from

account No. 836150 to buy a $100,000 certificate of deposit, and

$97,256 to buy a $100,000 U.S. Treasury bill.    On June 5, 1991,

Mrs. Pert used part of the $250,000 to pay $45,020 to buy shares

of the C&S tax-exempt bond fund.
                              - 16 -


     On June 27, 1991, Mrs. Pert paid $50,000 to the IRS for Mr.

Riffe's taxes.   On July 2, 1991, respondent applied $28,976 of

the $50,000 payment to 1986 and $21,024 to 1989 ($50,000 total).

     On November 5, 1991, Mrs. Pert transferred $50,000 from C&S

trust account No. 836150 to C&S ultima account No. 81203284.

     On November 7, 1991, Mrs. Pert withdrew $199,628 from C&S

trust account No. 836150.   On November 8, 1991, at the Florida

Bank of Commerce, Mrs. Pert used the $100,000 from C&S trust

account No. 836150 to buy a $100,000 certificate of deposit (CD

1766), and Mr. Pert bought certificate of deposit No. 2775 for

$43,072 (CD 2775).   The same employee at Florida Bank of Commerce

opened both certificate of deposit accounts for Mr. and Mrs. Pert

on November 8, 1991.

     On December 11, 1991, Mrs. Pert paid $20,000 to the IRS for

Mr. Riffe's taxes.   On December 20, 1991, respondent applied

$15,000 of the $20,000 payment to 1986 and $5,000 to 1988.

     When CD 1766 matured around May 12, 1992, Mrs. Pert used

$50,000 of the proceeds to open joint checking account No.

0302052577 at Citizens Bank of Clearwater.   She used the other

$50,000 to buy joint certificate of deposit No. 0300033611 with

Mr. Pert at Citizens Bank of Clearwater.

     On June 16, 1992, Mr. Pert withdrew $6,000 in cash from

joint checking account No. 0302052577.   On June 17, petitioners

prematurely redeemed certificate of deposit No. 0300033611 in the
                                    - 17 -


amount of $49,716, and paid a $469 penalty.       On June 17, 1992,

the bank distributed the $49,716 to petitioners in three cashiers

checks as follows:     cashier's check No. 18580 for $20,000 to Mr.

Pert, cashier's check No. 18581 for $20,000 to Mr. Pert, and

cashier's check No. 18582 for $9,716 to Mrs. Pert.       On June 18,

1992, Mr. Pert withdrew $5,000 in cash from joint checking

account No. 0302052577.      Mr. Pert withdrew a total of $11,000

from Citizen's Bank.

     On June 18, 1992, Mr. Pert used cashier's check No. 18580 to

open account No. 2623699909 with $20,000 at Sun Bank of Tampa Bay

in his name.   On June 29, 1992, Mr. Pert added Mrs. Pert to the

Sun Bank account.    On June 30, 1992, he deposited $20,000.     Mr.

Pert withdrew the following amounts from the Sun Bank account:

                June   18,   1992        $5,000
                June   26,   1992         5,000
                June   30,   1992         3,000
                July   20,   1992         3,000
                July   22,   1992         4,000
                July   31,   1992         3,000
                Feb.   28,   1993         7,000

                       Total            $30,000

     On June 18, 1992, Mr. Pert used cashier's check No. 18581 to

open a joint account at Barnett Bank of Pinellas County.       Mr.

Pert withdrew the following amounts from Barnett Bank:

                June   19,   1992        $5,000
                June   26,   1992         5,000
                June   29,   1992         5,000
                July    2,   1992         5,000
                July   20,   1992         3,000
                July   21,   1992         3,000
                                - 18 -


                July 22, 1992            4,000
                July 31, 1992            3,000

                     Total           $33,000

     From June 16, 1992, to February 28, 1993, Mr. Pert withdrew

a total of $74,000 from Citizens Bank, Sun Bank, and Barnett

Bank.

     On November 23, 1992, respondent issued the notice of

deficiency to Mr. Riffe's estate, including the determination for

the addition to tax for fraud.

     During 1991, 1992, 1993, and 1994, petitioners opened more

than 20 bank accounts, most of which were closed within 6 months.

Some of those accounts were opened only for 2 days.

G.   Petitioners' Purchase of 610 Sandy Hook Road

     On March 23, 1992, Mrs. Pert distributed Lot 30, College

Hill, to herself as sole beneficiary of Mr. Riffe's estate.     She

had a new house built on that property in 1992.   On April 19,

1993, Mrs. Pert sold the house and land for $60,000.   After

deducting selling expenses, Mrs. Pert received $56,942 from the

sale.   On April 20, 1993, Mrs. Pert bought a cashier's check

payable to Secure Title in the amount of $53,018.   She withdrew

$3,925 from the original proceeds.

     On February 16, 1993, Mr. Pert's parents wired $59,866 to

his money market account.

     On March 4, 1993, Mr. Pert paid the Ford Motor Credit Co.

judgment (see par. E-2, above) in full.
                                 - 19 -


     On April 20, 1993, Mrs. Pert transferred $53,018 in cash to

Mr. Pert.   Mr. Pert used the $53,018 and other funds, including

the $59,866 gift from his parents, to buy a house at 610 Sandy

Hook Road for $128,000.      He took title to the Sandy Hook property

in his name.    He quitclaimed the Sandy Hook property to himself

and Mrs. Pert about a month later.

H.   Vehicles

     1.     1992 Ford Explorer

     In April 1991, Mrs. Pert used $5,000 from Peoples State Bank

account No. 105209804 (the account she had used to pay

administrative expenses of Mr. Riffe's estate) as a downpayment

for a Volkswagen.     Mrs. Pert made the monthly payments on the

loan to buy the Volkswagen from May to December 1991 from C&S

ultima account No. 81203284.      She paid the $17,005 balance that

she owed for the Volkswagen from C&S ultima account No. 81203284.

     On June 15, 1992, Mr. Pert bought a 1992 Ford Explorer for

$22,112.    He traded Mrs. Pert's Volkswagen, for which he was

given credit of $12,778, and paid the remaining $9,335 with a

check drawn from Citizens Bank of Clearwater account No.

0302052577.     Mr. Pert titled the Ford Explorer in the name of

Perticular Lawn, Inc.

     2.     1987 GMC Truck

     Mr. Pert used a 1987 GMC Truck that had been used by West

Coast Pest Control.
                              - 20 -


I.   Mrs. Pert's Bankruptcy

     On December 22, 1993, Mrs. Pert filed a voluntary petition

for relief from creditors under chapter 7 of the U.S. Bankruptcy

Code, listing respondent as the primary creditor.   In her

petition, Mrs. Pert listed as assets a joint interest in Sandy

Hook Road worth $130,000, $12 cash on hand, $57 in a joint

checking account, household goods and furnishings worth $3,108,

and other items including clothes, jewelry, and firearms worth

$530.

J.   Closing Agreements and Notices of Transferee Liability

     On April 23, 1993, Mrs. Pert signed closing agreements for

1986, 1988, and 1989 for herself and as personal representative

of Mr. Riffe's estate.   See Pert v. Commissioner, 105 T.C. 370,

373 (1995).   On June 4, 1993, this Court entered a stipulated

settlement agreement in Riffe v. Commissioner, docket No. 15214-

91, for 1987.   Id.

     On May 27, 1994, respondent issued notices of transferee

liability to Mr. and Mrs. Pert determining that each petitioner

was liable as a transferee of Mr. Riffe's assets.

                              OPINION

     We must decide whether, and if so to what extent, Mrs. Pert

is liable as a transferee of Mr. Riffe's assets, and whether, and

if so to what extent, Mr. Pert is liable as a transferee of Mr.
                               - 21 -


Riffe's assets or as a successor transferee of Mrs. Pert's

assets.

A.   Background

     1.   Transferee Liability

     The Commissioner may collect unpaid income taxes of a

transferor of assets from a transferee or a successor transferee

of those assets.   Sec. 6901(a), (c)(2); Commissioner v. Stern,

357 U.S. 39, 42 (1958); Stansbury v. Commissioner, 104 T.C. 486,

489 (1995), affd. 102 F.3d 1088 (10th Cir. 1996).    Petitioners

bear the burden of proving that the transferor is not liable for

tax and additions to tax.    Sec. 6902(a).   In accordance with our

holding in Pert v. Commissioner, supra, Mr. Riffe and Mrs. Pert

are liable for the tax and additions to tax in the amounts set

forth in the stipulated decision in docket No. 15214-91 and in

the closing agreements with respondent.

     The Commissioner bears the burden of proving that a taxpayer

is liable as a transferee.    Sec. 6902(a); Rule 142(d); Gumm v.

Commissioner, 93 T.C. 475, 479-480 (1989), affd. without

published opinion 933 F.2d 1014 (9th Cir. 1991).    State law

generally determines the extent of a transferee's liability.

Commissioner v. Stern, supra at 45; Gumm v. Commissioner, supra

at 479.   We apply Florida law in deciding whether petitioners are

liable as transferees under section 6901 because all of the
                               - 22 -


transfers occurred there.    Commissioner v. Stern, supra; Fibel v.

Commissioner, 44 T.C. 647, 657 (1965).

     2.    Transferee Liability Under Florida Law

     Under Florida law, a transferee may be held liable for the

debts of a transferor if the transferor conveys assets to the

transferee fraudulently or in a manner that is "per se"

fraudulent.   Fla. Stat. Ann. secs. 726.105, 726.106 (West 1988);

Hagaman v. Commissioner, 100 T.C. 180, 184 (1993) (transferee

liability established by applying Florida fraudulent conveyance

law); Schad v. Commissioner, 87 T.C. 609, 614 (1986), affd.

without published opinion 827 F.2d 774 (11th Cir. 1987).

     One way that a creditor may show that a conveyance is

fraudulent is by showing that the transferor actually intended to

defraud or hinder creditors.   Fla. Stat. Ann. sec. 726.105(1)(a)

(West 1988)2; Florida Fruit Canners, Inc. v. Walker, 90 F.2d 753,

     2
      Fla. Stat. Ann. sec. 726.105 (West 1988) provides:

     726.105. Transfers fraudulent as to present and future
     creditors.

     (1)   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:

           (a)   With actual intent to hinder, delay, or
                 defraud any creditor of the debtor; or

           (b)   Without receiving a reasonably equivalent
                                                     (continued...)
                                - 23 -


757 (5th Cir. 1937).    A creditor may show that a transferor


     2
      (...continued)
               value in exchange for the transfer or
               obligation, and the debtor:

                 1.    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

                 2.    Intended to incur, or believed or
                       reasonably should have believed that he
                       would incur, debts beyond his ability to
                       pay as they became due.

     (2)   In determining actual intent under paragraph
           (1)(a), consideration may be given, among other
           factors, to whether:

           (a)   The transfer or obligation was to an insider.
           (b)   The debtor retained possession or control of
                 the property transferred after the transfer.
           (c)   The transfer or obligation was disclosed or
                 concealed.
           (d)   Before the transfer was made or obligation
                 was incurred, the debtor had been sued or
                 threatened with suit.
           (e)   The transfer was of substantially all the
                 debtor's assets.
           (f)   The debtor absconded.
           (g)   The debtor removed or concealed assets.
           (h)   The value of the consideration received by
                 the debtor was reasonably equivalent to the
                 value of the asset transferred or the amount
                 of the obligation incurred.
           (I)   The debtor was insolvent or became insolvent
                 shortly after the transfer was made or the
                 obligation was incurred.
           (j)   The transfer occurred shortly before or
                 shortly after a substantial debt was
                 incurred.
           (k)   The debtor transferred the essential assets
                 of the business to a lienor who transferred
                 the assets to an insider of the debtor.
                               - 24 -


intended to defraud or hinder creditors under Fla. Stat. Ann.

section 726.105 (West 1988), either by direct proof or by using a

nonexclusive list of factors (badges of fraud) listed in the

statute.    Fla. Stat. Ann. sec. 726.105(1) and (2) (West 1988).

     A creditor may also establish transferee liability by

showing that a conveyance is per se fraudulent.     Fla. Stat. Ann.

sec. 726.106 (West 1988).3    There are two ways that a creditor

can prove that a conveyance is per se fraudulent.     First, a

conveyance is per se fraudulent if:     (a) The transferor

transferred assets to the transferee; (b) the transferor had a

preexisting liability at the time of the transfer; (c) the

transferee paid inadequate consideration for the transfer; and

(d) the transferor was insolvent at the time of or due to the


     3
         Fla. Stat. Ann. sec. 726.106 (West 1988) provides:

     726.106.    Transfers fraudulent as to present creditors

          (1) 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 become insolvent as a result of the transfer
     or obligation.

          (2) 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 had reasonable cause to believe that
     the debtor was insolvent.
                               - 25 -


transfer.   Fla. Stat. Ann. sec. 726.106(1) (West 1988).   Second,

a conveyance is also per se fraudulent if:    (a) The creditor's

claim arose before the transfer was made; (b) the transfer was

made to an insider for an antecedent debt; (c) the debtor was

insolvent at that time; and (d) the insider had reasonable cause

to believe that the debtor was insolvent.    Fla. Stat. Ann. sec.

726.106(2) (West 1988).

B.   Whether Mrs. Pert Is Liable as a Transferee of Mr. Riffe's
     Assets

     1.     Contentions of the Parties

     Respondent contends that Mrs. Pert is liable as a transferee

for Mr. Riffe's unpaid tax and additions to tax for 1986, 1987,

1988, and 1989, and contends that the transfer of Mr. Riffe's

assets to Mrs. Pert was both actually and per se fraudulent.

     As discussed next, we conclude that respondent has

established that the conveyances from Mr. Riffe's estate to Mrs.

Pert were per se fraudulent under Florida law.

     2.     Per Se Fraudulent Conveyances Under Florida Law

            a.   Transfer of Assets of Mr. Riffe's Estate to Mrs.
                 Pert

     Petitioners contend that respondent has not shown that the

assets which respondent contends were transferred from Mr.

Riffe's estate to Mrs. Pert belonged solely to Mr. Riffe.     We

disagree.
                              - 26 -


     Mrs. Pert signed the inventory which showed that Mr. Riffe's

estate included assets with a total estimated fair market value

of $469,358.   All of that property less an amount for

administrative costs was transferred to Mrs. Pert ($469,358 -

$96,823 = $372,535).

     A personal representative must file an inventory of property

of the estate.   Fla. Stat. Ann. sec. 733.604(1) (West 1988).4

The personal representative of an estate is required to list only

assets belonging to the deceased in his or her individual

capacity that pass through probate; jointly held properties such

as assets held by the entireties should not be listed.   Florida

Bar v. McKenzie, 581 So. 2d. 53, 54 (Fla. 1991); Hill v. Morris,

85 So. 2d 847, 851 (Fla. 1956).   Kaltenbach had represented

several hundred estates.   His normal practice was to identify the

property in which the decedent had sole ownership and to estimate

the fair market value of the property.   He believed that the

     4
      Fla. Stat. Ann. sec. 733.604(1) (West 1988) provides:

          (1) Within 60 days after issuance of letters, a
     personal representative who is not a curator or a
     successor to another personal representative who has
     previously discharged the duty shall file an inventory
     of property of the estate, listing it with reasonable
     detail and including for each listed item its estimated
     fair market value at the date of the decedent's death.
     Unless otherwise ordered by the court for good cause
     shown, any such inventory or amended or supplementary
     inventory is subject to inspection only by the clerk of
     the court or his representative, the personal
     representative and his attorney, and other interested
     persons.
                                 - 27 -


items listed in the inventory, except for the homestead, belonged

solely to Mr. Riffe.

     Petitioners contend that respondent did not prove that the

$268,000 in cash from the safe deposit boxes which was deposited

in the C&S bank account did not belong jointly to Mrs. Pert and

Mr. Riffe.   Petitioners contend that the Pinellas County

Sheriff's office returned the $132,000 cash seized from safe

deposit box 204 to Mrs. Pert, individually, and not to Mr.

Riffe's estate.   We disagree.    The Sheriff's office required Mrs.

Pert to present letters of administration before releasing the

cash.   The receipt which Mrs. Pert signed states that the

authority to release the cash was the probate of Mr. Riffe's

estate as shown by letters of administration.      We conclude that

the seized cash was released to Mrs. Pert in her capacity as

personal representative of Mr. Riffe's estate.

     Petitioners contend that respondent offered no evidence

showing that the other $136,000 included in the $268,000 was

solely Mr. Riffe's property or that it was Mr. Riffe's and not

Mrs. Pert's property.   We disagree.      Mrs. Pert did not know about

any of the cash in Mr. Riffe’s safe deposit boxes.      Mrs. Pert

told respondent's revenue agent on February 28, 1991, that she

did not know that Mr. Riffe had any cash on hand.      She also told

him that she had no money or sources of funds and that she had to

borrow money from friends and family because she had no signature
                                - 28 -


authority over the business bank accounts.       Mr. Riffe was the

sole lessee of safe deposit box 204 at First Gulf Bank and safe

deposit box 276 at Barnett Bank.    He was the only person whose

name was on the signature cards, and the only person authorized

to have access to those boxes.

     The lease or signature card for Mr. Riffe's safe deposit box

of NCNB is not in the record.    However, Kaltenbach testified that

it was solely in the name of Mr. Riffe and that Mrs. Pert could

not gain access to it without authority from the probate court.

Mrs. Pert did not list the $268,000 as a jointly owned asset

passing outside of probate on the Preliminary Notice and Report.

We conclude that the cash from all three safe deposit boxes

belonged solely to Mr. Riffe.

     Petitioners contend that respondent failed to prove that the

money did not belong to both Mr. Riffe and Mrs. Pert because she

worked hard in the two businesses.       We disagree.   We are

convinced that she worked hard in the businesses, but we think it

is implausible that Mrs. Pert's earnings would be part of a cash

hoard kept by her husband without her knowledge.

     Petitioners point out that Mrs. Pert opened accounts on

April 16, 1991, at C&S in her own name and not in the estate's

name, and contend that this shows that the cash in the C&S

accounts was not solely Mr. Riffe's property.       We disagree.

Kaltenbach testified that he allowed Mrs. Pert to do that because
                               - 29 -


she was the only beneficiary and personal representative of the

estate and she needed funds.   He believed that the claims against

the estate, not including those made by respondent, could be paid

from the Peoples State Bank account.     His testimony and that of

the revenue agent show that the funds initially deposited in the

accounts at C&S were from Mr. Riffe's estate.

     Petitioners suggest that Mrs. Pert owned the contents of the

safe deposit boxes (and the other items in the inventory) with

Mr. Riffe as tenants by the entireties.     We disagree.   There is

no tenancy by the entireties between spouses if a surviving

spouse has no control over a safe deposit box, even if the

surviving spouse had access to it.      Bechtel v. Estate of Bechtel,

330 So. 2d 217 (Fla. Dist. Ct. App. 1976).     Mrs. Pert had neither

access to nor control of the safe deposit boxes.     Also, Mrs. Pert

did not claim that she owned the cash or other property with Mr.

Riffe as tenants by the entireties in the Preliminary Notice and

Report filed with the Florida Department of Revenue.

     b.   Whether Respondent's Claim Arose Before Mr. Riffe's
          Estate Transferred Assets to Mrs. Pert

     To establish liability under Fla. Stat. Ann. section

726.106(1) (West 1988), respondent must prove that respondent's

claim arose before Mr. Riffe's estate transferred assets to Mrs.

Pert.

     Petitioners contend that respondent's claim had not arisen

when the transfers were made because respondent had not yet
                                - 30 -


determined a deficiency in tax or additions to tax, or otherwise

assessed tax.   Respondent issued the notice of deficiency to Mr.

Riffe's estate, including the addition to tax for fraud on

November 23, 1992.    Petitioners contend that the fraud penalty

did not arise before the transfers occurred from March 19, 1991

to October 17, 1992, when the estate closed, because respondent

bears the burden of proving fraud and because respondent had not

yet determined, much less proven, that fraud applies.      We

disagree.

     Mr. Pert's and Mrs. Riffe's filing of incorrect returns in

which they did not report income is the act upon which respondent

based the underlying determination.      The claim arose when they

filed their returns, or at the latest, when the returns for those

years were due.    We have held that the Commissioner becomes a

creditor of a taxpayer for transferee liability purposes at the

close of the taxable period in which the tax arose.      Hagaman v.

Commissioner, 100 T.C. at 185 (included additions to tax for

fraud); O'Sullivan v. Commissioner, T.C. Memo. 1994-17.         Other

courts have held that the Commissioner becomes a creditor of a

taxpayer when the return on which the tax should be reported is

due to be filed.     United States v. Ressler, 433 F. Supp. 459, 463

(S.D. Fla. 1977), affd. 576 F.2d 650 (5th Cir. 1978).      The tax

years at issue are 1986, 1987, 1988, and 1989.      The tax return

for 1989 was due on April 15, 1990.      Mr. Riffe's estate
                                - 31 -


transferred all of its assets to Mrs. Pert after April 15, 1990,

the latest date that the claim arose.    We conclude that

respondent’s claim arose before any of the transfers occurred.5

     We conclude that respondent has proven that the claim arose

before Mr. Riffe's estate transferred its assets to Mrs. Pert.

             c.   Consideration for Transfers From Mr. Riffe's
                  Estate to Mrs. Pert

     To establish liability under Fla. Stat. Ann. section

726.106(1) (West 1988), respondent must show that Mr. Riffe's

estate did not receive property of a reasonably equivalent value

in exchange for the transfers.

     Mrs. Pert did not pay any consideration to Mr. Riffe's

estate for the $399,535 in property that Mr. Riffe's estate

transferred to her.    Petitioners do not contend that she did.    We

conclude that respondent has proven that Mr. Riffe's estate did

not receive any consideration for the assets it transferred to

Mrs. Pert.

          d.      Insolvency or Substantial Indebtedness of Mr.
                  Riffe's Estate

     Petitioners contend that the estate was solvent when Mrs.

Pert deposited the $132,000 in April 1991.

     A debtor is insolvent under Florida law when the value of

his or her debts exceeds the value of his or her assets.    Fla.

     5
      Petitioners erroneously interpret the Florida statute to
require that the claim had been “made” rather than "arose" before
the transfer.
                               - 32 -


Stat. Ann. sec. 726.103(1) (West 1988).    Insolvency can be

measured at the time of or immediately after the transfer.     Fla.

Stat. Ann. sec. 726.106(1) (West 1988).    Each distribution by an

estate is one of a series toward the distribution of the entire

estate.    O'Sullivan v. Commissioner, T.C. Memo. 1994-17 (heirs to

decedent who died owing income taxes received distributions from

estate as transferees under the Cal. Civ. Code sec. 3439.05 (West

1993 Supp.), which is identical to Fla. Stat. Ann. section

726.106(1) (West 1988)); Ginsberg v. Commissioner, T.C. Memo.

1965-36.    The liabilities of an estate include unpaid Federal

taxes, penalties, and interest on the date of the transfer in

computing whether an estate is solvent.    Leach v. Commissioner,

21 T.C. 70, 75 (1953); LeFay v. Commissioner, T.C. Memo. 1982-

420.

       When Mr. Riffe's estate transferred its assets to Mrs. Pert,

it became insolvent because it had no assets and had a debt to

respondent.

            e.   Petitioners' Other Contentions

       Petitioners contend that respondent must prove that the

transferor had fraudulent intent.    We disagree.   A creditor need

not prove that the transferor had fraudulent intent to establish

that a conveyance is per se fraudulent under Fla. Stat. Ann.

section 726.106(1) (West 1988).     Snellgrove v. Fogazzi, 616 So.
                                  - 33 -


2d 527, 529 (Fla. Dist. Ct. App. 1993); In re Smith, 110 Bankr.

597, 599 (M.D. Fla. 1990).

     Petitioners contend that the transfer of assets from Mr.

Riffe's estate to Mrs. Pert is not a fraudulent conveyance under

Florida law because Mr. Riffe and Mrs. Pert were liable for the

same debt.    Petitioners contend that a transfer of assets between

co-debtors does not hinder collection efforts by a creditor.       We

disagree.    Co-debtors should not have the right to decide from

which of them their creditors must seek to collect.      Petitioners

cite no Florida law to support their position.      In a case decided

under New Mexico law, a spouse who filed a joint return with her

husband who later died was held liable as a transferee for the

tax liability of her deceased husband.      United States v.

Floersch, 276 F.2d 714 (10th Cir. 1960).      We agree with that

result.   Also, we note that Mr. Riffe and Mrs. Pert are co-

debtors only to the extent of the unpaid balance of their joint

tax liabilities of $67,672 plus interest.

     Petitioners contend that West Coast Pest Control and West

Coast Florida Pressure Cleaning ceased doing business when Mr.

Riffe died and that its assets were not distributed by Mr.

Riffe's estate.    We disagree.    Mrs. Pert transferred the car

washing business to her father.      Mr. and Mrs. Pert tried to

continue to operate West Coast Pest Control after they were
                                - 34 -


married, and later combined their businesses to form Perticular

Lawn, Inc.

     3.   Conclusion

     We conclude that respondent has shown that the transfers of

the assets in the inventory were per se fraudulent under Fla.

Stat. Ann. section 726.106(1) (West 1988).

     4.      Value of the Property Transferred

     Respondent contends that Mr. Riffe's estate included

$113,600 of property other than cash.     Petitioners contend that

respondent has not established the fair market value of the non-

cash property listed in the inventory that Mrs. Pert filed with

the probate court, and contend that the values given in the

inventory are not evidence of fair market value.     We agree with

respondent.

     Under Florida law, the personal representative of an estate

must file an inventory of the property of the estate, including

the estimated fair market value of each asset when decedent died.

Fla. Stat. Ann. sec. 733.604(1) (West 1988).     Kaltenbach

testified that the values used in the inventory were based on the

best information available at the time without the expense of

appraisals.     We do not believe that the absence of appraisals or

the fact that Mr. Riffe’s estate was larger than $60,000 and

smaller than $600,000 makes the estimate in the inventory

unreliable.
                               - 35 -


     Mr. Riffe's estate included $383,358 in cash.

     We conclude that respondent has established that the value

of assets transferred from Mr. Riffe's estate to Mrs. Pert was

$399,535.

     5.     Conclusion

     We conclude that respondent has established that Mrs. Pert

is liable up to $399,535 as a transferee of Mr. Riffe's assets.

C.   Whether Mr. Pert Is Liable as a Transferee of Mrs. Pert's
     Assets or as a Successor Transferee of Assets From Mr.
     Riffe's Estate

     1.     Contentions of the Parties

     Respondent contends that Mr. Pert is liable as a transferee

of the assets of Mrs. Pert, and as a successor transferee of the

assets of Mr. Riffe's estate, under Fla. Stat. Ann. secs.

726.101(a) (transfer defined) and 726.106 (West 1988) (per se

fraudulent conveyance) and Fla. Stat. Ann. sec. 726.105(1)(a)

(West 1988) (actual or constructive fraud).   Respondent contends

that Mrs. Pert transferred assets which had a total value of

$222,206 from Mr. Riffe's estate to Mr. Pert when Mr. Riffe's tax

debt, additions to tax, and interest were unpaid and before Mrs.

Pert filed a voluntary bankruptcy petition under chapter 7 of the

U.S. Bankruptcy Code.

     Petitioners contend that respondent failed to prove that Mr.

Pert is liable as a transferee or successor transferee.

Petitioners contend that Mrs. Pert spent any money she received
                              - 36 -


from Mr. Riffe's estate, that Mr. Pert's increased financial

resources came from gifts from his parents, and that Mr. Pert

received no financial benefits from Mrs. Pert.

     2.   Background

     The principles used to decide if a transferee is liable are

also used in deciding if a successor transferee (i.e., transferee

of a transferee) is liable.   Bos Lines, Inc. v. Commissioner, 354

F.2d 830, 834-835 (8th Cir. 1965), affg. T.C. Memo. 1965-71; Pert

v. Commissioner, 105 T.C. at 377.   Thus, to show that Mr. Pert is

liable as a successor transferee, respondent must establish that

Mrs. Pert fraudulently conveyed assets from Mr. Riffe's estate to

Mr. Pert under Fla. Stat. Ann. sections 726.105(1)(a) or (b)

(West 1988), or that there was per se fraud under Fla. Stat. Ann.

sec. 726.106 (1) or (2) (West 1988).   As discussed next, we

conclude that respondent has established that there were

conveyances from Mr. Riffe's estate through Mrs. Pert to Mr.

Pert, and that those conveyances were fraudulent under Fla. Stat.

Ann. section 726.105(1)(a) and (2) (West 1988).

     3.   Mrs. Pert's Transfer of Assets From Mr. Riffe's Estate
          to Mr. Pert

     Respondent contends that Mrs. Pert transferred the following

assets from Mr. Riffe's estate to Mr. Pert:   (a) $100,000 in

cash; (b) a $43,072 certificate of deposit; (c) $53,018, which

Mr. Pert used to buy the 610 Sandy Hook Road property; (d) a 1992
                                  - 37 -


Ford Explorer worth $22,112; and (e) the 1987 GMC truck worth

$4,000.

            a.    $100,000 in Cash

     On April 16, 1991, Mrs. Pert deposited $268,000 that she

had received from Mr. Riffe's safe deposit boxes in a C&S

account.    Two days later, she closed that account and opened

ultima and trust accounts.    She deposited $18,000 in the ultima

account and $250,000 in the trust account.       On November 7, 1991,

Mrs. Pert withdrew $199,628 in cash from the trust account and

bought CD 1766 for $100,000 at the Florida Bank of Commerce the

next day.    When CD 1766 matured, Mrs. Pert deposited the $100,000

in two joint accounts with Mr. Pert.       The transfer of funds from

an individual account to a joint account is fraudulent if the

transfer is a fraudulent conveyance.        Advest, Inc. v. Rader, 743

F. Supp. 851, 854 (S.D. Fla. 1990).        Mrs. Pert conveyed $100,000

to Mr. Pert when she deposited the $100,000 into joint accounts.

Thus, Mrs. Pert fraudulently conveyed the entire $100,000 when

she deposited it.     Id.

            b.    $43,072 Certificate of Deposit

     Respondent contends that Mr. Pert bought a $43,072

certificate of deposit (CD 2775) on November 8, 1991, using funds

from Mrs. Pert.    We disagree.

     Mr. Pert testified that he used gifts from his parents to

buy CD 2775.     Mr. Pert could not have used the $59,836 gift that
                               - 38 -


he received from his parents in 1993.   However, he could have

used the $40,000 they gave him in December 1990 or the gift of

real estate worth $46,000 that he sold in July 1991.

     Respondent contends that we should disregard Mr. Pert's

testimony as self-serving and infer that Mrs. Pert gave Mr. Pert

the funds to buy CD 2775.   Mrs. Pert withdrew $199,628 from the

C&S Trust account No. 836150 on November 7, 1991.   She bought a

$100,000 certificate of deposit on November 8, 1991, and Mr. Pert

bought CD 2775 at the same branch of Florida Bank of Commerce

from the same person on the same day.   Thus, it was possible that

Mrs. Pert gave Mr. Pert the funds to buy CD 2775.

     The record shows that there were two possible sources of

funds for CD 2775.   The source of funds alleged by respondent is

closer in time and place, a circumstance on which respondent

relies.   However, Mr. Pert’s testimony on this point was

plausible and unrebutted.   Respondent bears the burden of proof

and failed to carry it here.

     We conclude that respondent has not proven that Mr. Pert

used funds from Mr. Riffe's estate to buy the $43,072 certificate

of deposit on November 8, 1991.

          c.    Cash To Buy the 610 Sandy Hook Road Property

     Mrs. Pert gave Mr. Pert $53,018 which he used to buy the 610

Sandy Hook Road property.   Respondent contends that 610 Sandy

Hook Road was solely Mr. Pert’s property.   We disagree.
                               - 39 -


     Lot 30, College Hill, belonged to Mr. Riffe when he died.

Mrs. Pert received title to it after the probate of Mr. Riffe's

estate.    Mrs. Pert sold Lot 30, College Hill and received

$56,942.    The following day, on April 20, 1993, Mrs. Pert used

the proceeds from the sale of Lot 30, College Hill, to buy a

$53,018 cashier's check payable to Secure Title.

     On April 20, 1993, Mr. Pert used the $53,018 as part of the

$128,000 that he paid to buy the house at 610 Sandy Hook Road.

He initially mistakenly took title in his name, but corrected it

within 30 days to be jointly owned by Mr. and Mrs. Pert.       Thus,

the $53,018 was used to buy Mrs. Pert's half interest in the

property.

            d.   The 1992 Ford Explorer

     Mrs. Pert paid $5,000 from the Peoples State Bank account as

a down payment to buy a Volkswagen.     She made the monthly

payments from the C&S ultima account.     Mr. Pert bought a 1992

Ford Explorer for $22,112.    He received a $12,777 credit because

he traded in Mrs. Pert's Volkswagen.      He also used $9,335 in cash

from the joint account at Citizens Bank of Clearwater, the funds

of which came from Mr. Riffe's estate.     The 1992 Ford Explorer

was titled in the name of Perticular Lawn, Inc., Mr. Pert's

business.
                               - 40 -


          e.   The 1987 GMC Truck

     The 1987 GMC truck was transferred from Mr. Riffe's estate

to Perticular Lawn.6    In the inventory, Mrs. Pert said the

estimated fair market value of the 1987 GMC Truck was $4,000.

          f.   Conclusion

     We conclude that respondent has traced $126,112 of assets

($100,000 cash, $22,112 for the 1992 Ford Explorer, and $4,000

for the 1987 GMC truck) from Mr. Riffe's estate to Mr. Pert.

     4.   Statutory Badges of Fraud Under Fla. Stat. Ann. Section
          726.105(2) (West 1988)

     To establish that a transfer is fraudulent under Fla. Stat.

Ann. section 726.105(1)(a) (West 1988), respondent must prove

that the transferor intended to defraud or delay creditors.

Respondent prevails if respondent shows that several of the

following nonexclusive badges of fraud listed in Fla. Stat. Ann.

section 726.105(2) (West 1988) are present in this case.

Georgetown Manor, Inc. v. Ethan Allen, Inc., 991 F.2d 1533, 1539

(11th Cir. 1993); United States v. Romano, 757 F. Supp. 1331,

1335 (M.D. Fla. 1989), affd. without published opinion 918 F.2d

182 (11th Cir. 1990); Munim v. Azar, 648 So. 2d 145, 152 (Fla.

Dist. Ct. App. 1994).    Those badges are:   (a) The transfer was to

an insider; (b) the debtor kept possession or control of the

property transferred after the transfer; (c) the transfer was


     6
      Petitioners concede that the 1987 GMC truck was transferred
from Mr. Riffe's estate to Mrs. Pert or Perticular Lawn, Inc.
                              - 41 -


disclosed or concealed; (d) the debtor had been threatened with a

suit before the transfer; (e) the transfer was of substantially

all of the debtor's assets; (f) the debtor absconded; (g) the

debtor removed or concealed assets; (h) the value of the

consideration received by the debtor was reasonably equivalent to

the value of the asset transferred; (i) the debtor was or became

insolvent shortly after the transfer; (j) the transfer occurred

shortly before or after a substantial debt was incurred; and (k)

the debtor transferred the essential assets of the business to a

lienor who transferred the assets to an insider of the debtor.

          a.   Whether There Was a Transfer to an Insider

     A spouse of a debtor is an insider.   Fla. Stat. Ann. sec.

726.102(7)(a)(1), (11) (West 1988).    Mr. Pert is an insider for

purposes of Fla. Stat. Ann. sec. 726.105 (West 1988).

          b.   Debtor Kept Possession or Control of Property

     Mrs. Pert kept possession of the property that became

jointly owned and the cash that was deposited in her joint

accounts with Mr. Pert.

          c.   Whether the Transferor Concealed the Transfers

     There were numerous transfers which made it difficult to

trace the funds.   The bank transactions were not concealed, but

the extensive use of cash hampered efforts to reconstruct the

flow of Mr. Riffe's funds.
                               - 42 -


     Petitioners contend that they moved their money from place

to place with no fraudulent intent.     Petitioners contend that, if

they had wanted to conceal the transfers, they would have had

Mrs. Pert withdraw the cash and give it to Mr. Pert.    We disagree

that the existence of another way to conceal transfers means that

a party did not try to conceal transfers.

     Petitioners point out that respondent did not analyze Mr.

Pert’s net worth to show that he benefited from the cash

withdrawals.   The statute requires respondent to prove that

transfers occurred, but it does not require the creditor to

perform a net worth analysis of the transferee.    Fla. Stat. Ann.

secs. 726.102(12), 726.105(1)(a) and (2) (West 1988).

          d.    Anticipated Lawsuit

     A transfer in anticipation of a lawsuit is a badge of fraud.

See sec. 4, par. 6(d), Comment to Uniform Fraudulent Conveyance

Act, p. 655 (West 1985).    Respondent's revenue agent interviewed

Mrs. Pert soon after Mr. Riffe died.    Kaltenbach referred Mrs.

Pert to a tax attorney.    At a conference on June 5, 1991, the

revenue agent gave Mrs. Pert's tax attorney a copy of a detailed

report with his recommended adjustments to tax and additions to

tax for 1986, 1987, 1988, and 1989.     Mrs. Pert did not agree with

the recommendations.   We conclude that Mrs. Pert anticipated that

the IRS would determine that she and Mr. Riffe owed taxes when

she began transferring assets to Mr. Pert.
                                  - 43 -


          e.      Transfer of Substantially All Assets

     Mrs. Pert filed a bankruptcy petition in December 1993.

Petitioners concede that she had no assets at that time.        There

is no persuasive evidence in the record that she did anything

with the assets other than give them to Mr. Pert.       Mr. Pert said

that Mrs. Pert spent the funds, but he also said that he did not

know what she did with them.       We conclude that both Mr. Riffe's

estate and Mrs. Pert transferred substantially all of their

assets.

          f.      Whether the Debtor Absconded

     There is no evidence that Mr. Riffe's estate or Mrs. Pert

absconded.     This badge does not help respondent.

          g.      Concealed Assets

     There is no record of what Mr. and Mrs. Pert did with the

cash they withdrew from banks.       This badge does not help

respondent.

          h.      Consideration

     Mr. Pert paid no consideration for the assets he received

from Mrs. Pert.

          i.      Insolvency

     Mr. Riffe's estate was insolvent when it distributed all of

its assets to Mrs. Pert.       Mrs. Pert was insolvent in December

1993 when she filed her petition in bankruptcy.       Elliott

testified that Mrs. Pert's tax attorney told him in September
                                  - 44 -


1993 that, if respondent was successful with the proposed

assessments of tax and additions to tax, Mrs. Pert would never

have to pay them because she would file for bankruptcy

protection.       We conclude that the transfers left Mr. Riffe's

estate and Mrs. Pert insolvent.

            j.      Whether Mr. Riffe's Estate or Mrs. Pert
                    Transferred Property Shortly Before or After
                    Incurring Substantial Debt

     Mrs. Pert incurred a substantial tax debt to respondent when

she signed the joint returns at issue here, the last of which was

due April 15, 1990.       Elliott interviewed her on February 28,

1991.     She began transferring assets on March 19, 1991, when she

wrote a $5,000 check to herself from Peoples State Bank account.

We conclude that she knew that she and Mr. Riffe’s estate owed

tax and that she transferred the property shortly thereafter.

             k.     Transfer to a Lienor

     There is no evidence that Mrs. Pert transferred assets to a

lienor who transferred them to an insider.       This badge does not

help respondent.

             l.     Conclusion

     We conclude that respondent has shown that Mrs. Pert had

actual intent to hinder, delay, or defraud respondent.

     5.     Value of the Property Transferred to Mr. Pert

     We conclude that Mrs. Pert transferred to Mr. Pert $100,000

in cash, a 1992 Ford Explorer and the 1987 GMC truck.       The total
                                - 45 -


value of the property that Mrs. Pert transferred to Mr. Pert is

$126,112.

D.   Whether Mr. Pert is Liable as a Transferee of Mrs. Pert's
     Assets

     Respondent contends that Mr. Pert is liable as a transferee

of Mrs. Pert's assets for her income tax deficiencies for 1986,

1987, 1988, and 1989, totaling $67,672 plus interest.

     Petitioners contend that respondent failed to show that Mr.

Pert is liable as a transferee of the assets of Mrs. Pert for the

same reasons discussed above at par. C.    In addition to the

arguments in par. C, above, petitioners contend that respondent

failed to show that collection efforts against Mrs. Pert would be

fruitless.    We disagree.   Fla. Stat. Ann. section 726.105 (West

1988) does not require the creditor to prove that collection

efforts would be fruitless.    In any event, we conclude that

collection efforts against Mrs. Pert would have been fruitless

because she had no assets and filed for protection in bankruptcy.

     We conclude that Mr. Pert is liable as a transferee of Mrs.

Pert's assets for her income tax deficiencies for 1986, 1987,

1988, and 1989, and that she transferred assets to Mr. Pert worth

$126,112.    Mrs. Pert's income tax liability for those years is

$67,672 plus interest.

E.   Whether Respondent Properly Credited Mrs. Pert's Payments

     Petitioners contend that the amounts of unpaid tax stated in

the notices of transferee liability are incorrect because
                               - 46 -


respondent did not properly credit Mrs. Pert's payments of

$50,000 that she made on June 27, 1991, and $20,000 that she made

on December 11, 1991.    We disagree.   On July 2, 1991, respondent

credited Mrs. Pert's $50,000 payment by applying $28,976 to 1986

and $21,024 to 1989 ($50,000 total).    On December 20, 1991,

respondent credited Mrs. Pert's $20,000 payment by applying

$15,000 to 1986 and $5,000 to 1988.

F.   Mrs. Pert's Motion To Enter Decision Based on U.S.
     Bankruptcy Court Order

     Mrs. Pert filed a motion to enter decision in her favor

based on the order of the U.S. Bankruptcy Court for the Middle

District of Florida, Tampa Division, that transferee liability is

not a tax, but is a general unsecured claim that is not excepted

from discharge under 11 U.S.C. sections 507 or 523 (1994) of the

Bankruptcy Code.   In re Pert, No. 93-13179-8B7 (M.D. Fla. Sept.

27, 1996) (order granting debtor's motion for summary judgment).

The U.S. Bankruptcy Court concluded that Mrs. Pert's previous

discharge applied to her transferee liability.     Respondent

objected to Mrs. Pert's motion.

     Our conclusion here does not conflict with the U.S.

Bankruptcy Court's Order.    We are not deciding whether Mrs. Pert

was discharged of transferee liability under the bankruptcy laws;

we are deciding whether Mrs. Pert is liable as a transferee and

whether Mr. Pert is liable as a successor transferee under the

Internal Revenue Code.    Neither party has informed us that there
                              - 47 -


is a stay in effect.   Our opinion here does not interfere with

the exercise of the jurisdiction of the bankruptcy court.

     We need not and should not act to implement the bankruptcy

court's order.   We have no jurisdiction to decide whether Mrs.

Pert's liability as a taxpayer or transferee has been discharged

in bankruptcy.   See Neilson v. Commissioner, 94 T.C. 1, 8-9

(1990).

     To reflect concessions and the foregoing,



                                                   An appropriate

                                         Order will be issued and

                                         decisions will be

                                         entered under Rule 155.
