                        T.C. Memo. 1999-385



                      UNITED STATES TAX COURT



             DAVID ALLEN, TRANSFEREE, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent

         ESTATE OF SLOAN ALLEN, DECEASED, DAVID ALLEN,
                 ALLEGED EXECUTOR, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent


     Docket Nos.   24984-97, 24985-97,    Filed November 24, 1999.
                   24986-97, 24987-97.


     Andrew Pick O'Meara III, Louis James Marett, and Audranne

F. Mixon, for petitioners.

     Ronald F. Hood, for respondent.


             MEMORANDUM FINDINGS OF FACT AND OPINION


     JACOBS, Judge:   These cases were consolidated for purposes of

trial, briefing, and opinion.
                                         - 2 -


     Pursuant       to    separate      notices      of    deficiency,    respondent

determined that the Estate of Sloan Allen is liable for Federal

estate and income taxes, plus additions to tax, as follows:

Estate of Sloan Allen

     Estate Tax Liability:

                                                          Additions to Tax
                                           Sec.               Sec.            Sec.
Docket No.    Deficiency               6651(a)(1)         6653(a)(1)(A)   6653(a)(1)(B)
                                                                               1
24986-97      $5,835,634               $1,458,909          $291,782
 1
    50 percent of the interest on the portion of the underpayment
attributable to negligence.


     Income Tax Liability:

                                                      Additions to Tax
                                           Sec.             Sec.             Sec.
Docket No. Year      Deficiency         6651(a)(1)      6653(a)(1)(A)    6653(a)(1)(B)
                                                                               1
24987-97     1987        $278,253       $69,563.25          $13,912.65
 1
    50 percent of the interest on the portion of the underpayment
attributable to negligence.

     Pursuant       to     separate     notices      of     transferee    liability,

respondent determined that David Allen is liable both as the

fiduciary of the Estate of Sloan Allen (sometimes referred to as

Sloan’s estate or the estate) and as a transferee of the assets of

the estate     for       unpaid     Federal   estate      and   income   taxes,    plus

additions to tax, owed by the estate, as follows:
                                   - 3 -


David Allen, Transferee

         Estate Tax Liability:
                                               Additions to Tax
                                      Sec.          Sec.            Sec.
Docket No.      Deficiency        6651(a)(1)    6653(a)(1)(A)   6653(a)(1)(B)
                                                                     1
 24985-97       $5,835,634        $1,458,909     $291,782
 1
     50 percent of the interest on the portion of the underpayment
attributable to negligence.

         Income Tax Liability:
                                               Additions to Tax
                                     Sec.          Sec.            Sec.
Docket No.   Year    Deficiency   6651(a)(1)   6653(a)(1)(A)   6653(a)(1)(B)
                                                                     1
 24984-97     1987    $278,253    $69,563.25    $13,912.65

    50 percent of the interest on the portion of the underpayment
     1

attributable to negligence.

         The issues for decision are:    (1) Whether David Allen is the

executor of the Estate of Sloan Allen pursuant to section 2203, and

if so, whether the notices of deficiency mailed to him in that

capacity with respect to Federal estate and income taxes and

additions to taxes are valid; (2) whether David Allen is liable as

fiduciary of the Estate of Sloan Allen pursuant to 31 U.S.C.

section 3713(b) (1994), for unpaid Federal estate and income taxes,

and additions to tax, owed by the estate; and (3) whether David

Allen is liable as a transferee pursuant to section 6901 for unpaid

Federal estate and income taxes, and additions to tax, owed by the

estate.

         Unless otherwise indicated, all section references are to the

Internal Revenue Code, and all Rule references are to the Tax Court

Rules of Practice and Procedure.
                               - 4 -


                          FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.   The

stipulations of facts and the attached exhibits are incorporated

herein by this reference.

Background

     At the time David Allen (David) filed petitions for each of

the docketed cases involved herein, he resided in Neu Chatel,

Switzerland.   David is the only child of Sloan and Margaret Allen.

     David was born on April 22, 1930.       In 1950, he received a

bachelor of science degree in engineering from Yale University. In

1953, he received a master’s degree in business administration from

Harvard University. He attended Harvard Law School for 3 years but

did not receive a degree.

     David and Sloan Allen (Sloan) lived together at 3722 Dewey

Avenue, Omaha, Nebraska, from 1932 until Sloan's death in 1987.

They walked to and from work together daily and often dressed

alike.

Baum Meyer Co.

     David and Sloan worked at Baum Meyer Co. (Baum), their wholly

owned corporation.   As of the date of Sloan’s death, David was the

president and chairman of the board of directors of Baum; Sloan did

not hold an official position at Baum.

     Before July 7, 1976, Sloan owned 604 shares of Baum stock and

David owned 580 shares.     On July 7, 1976, Sloan gave David 575
                                          - 5 -


shares of Baum stock.        On December 12, 1976, Sloan sold 24 shares

of Baum stock to David for $6,768.                   On January 1, 1977, Sloan

transferred     his   remaining       5    shares    of   Baum    stock   to   David.

Thereafter, David owned all 1,184 outstanding shares of Baum stock.

Margaret's Death

      Margaret Allen (Margaret) died on November 24, 1970.                      Sloan

and   David    were   her   only      heirs.      Sloan     was   the   executor     of

Margaret's estate.

      Margaret's will was probated in the County Court of Douglas

County, Nebraska (county court).                  Her estate was appraised at

$358,151.17.      Sloan inherited $174,463.75, including 2,500 shares

of Standard Oil stock.           David inherited $152,059.20.

      On January 17, 1972, Sloan, in his capacity as executor, filed

a Form 706, U.S. Estate Tax Return, with the Internal Revenue

Service (IRS) for Margaret's estate.                Margaret’s estate was liable

for Federal estate tax of $23,114.58. In addition, Margaret's

estate   was    subject     to    a   Nebraska      State    inheritance       tax   of

$1,420.59, which was paid out of David's share of the estate.

Sloan's Death

      On February 27, 1987, Sloan was admitted to Methodist Hospital

in Omaha, Nebraska.         David informed the hospital that Sloan was

widowed.      Sloan died intestate on March 8, 1987.

      On March 9, 1987, David contacted Terry Kuchera, a local

funeral director at Crosby, Kunold, Burket Funeral Chapels (Funeral
                                  - 6 -


Chapels), to arrange for his father’s funeral.             (Funeral Chapels

had    previously   handled   Margaret's   funeral   and    burial.)   David

provided Mr. Kuchera with information about his father. David told

Mr. Kuchera that his father died a widower.      David paid the funeral

costs.    He instructed Mr. Kuchera not to place a notice of his

father's death in the local newspaper.           Only four individuals

attended Sloan's funeral and burial services:        David, Mr. Kuchera,

another Funeral Chapels employee, and Reverend Jack Fricke.

D.A. Baum Trust

       Sloan was trustee and beneficiary of the D.A. Baum Trust (the

trust) from which he received income quarterly. (In 1985 and 1986,

Sloan received distributions of $19,375 and $20,218, respectively,

from the trust.)     Following his father’s death, David was the sole

trustee and beneficiary of the trust.

       As of March 8, 1987, the corpus of the trust consisted of

5,616 shares of Exxon Corp. (Exxon) stock, valued at $81.23 per

share for a total of $456,500. On March 12, 1987, the trust

received $5,054 in dividend income from the Exxon stock.

       On August 13, 1987, the shares of Exxon stock were split 2 for

1.    On September 18, 1987, the trust surrendered:        (1) 5,616 shares

of Exxon stock (certificate No. M823453); and (2) 5,616 additional

shares of Exxon stock (certificate No. U0327703).           Subsequently, a

certificate for 11,232 shares of Exxon stock (certificate No.
                                   - 7 -


832219) was issued in the names of Sloan and David, Trustees, U-A

12-30-1938, for David's benefit.

Sloan's Exxon and Standard Oil Stock

       On the date of his death, Sloan owned 110,000 shares of Exxon

and    Standard   Oil   stock   (the   110,000    shares    of    stock),    as

represented by 198 stock certificates, having a market value of

$8,937,500. Shortly following Sloan's death, the 110,000 shares of

stock were sold for a total of $9,650,977.92.           Sloan's purported

signature    appeared   on   the   back    of   each   of   the   198    stock

certificates. Several entities were used to accomplish the sale of

the 110,000 shares of stock:       Bank Ehinger & CIE, AG (BECIE) of

Basel, Switzerland; Brown Brothers Harriman & Co. (BBH) of New

York; Depository Trust Co. (DTC) of New York; and Cede & Co.                 On

March 24, 1987, BBH received the 110,000 shares of stock from

BECIE, and on March 25, 1987, BBH deposited the 110,000 shares with

DTC.     These shares were sold in accordance with instructions

received from BECIE contained in a March 19, 1987, letter.                  The

proceeds of the sales, $9,650,977.92, were credited to BECIE's

account at BBH.

Sloan's Morgan Guaranty Trust Co. Checking Account

       On the date of his death, Sloan had a checking account at

Morgan Guaranty Trust Co. of New York (Morgan Guaranty checking

account) with a balance of $357,040.39.            Shortly after Sloan's

death, two deposits were made into that checking account:               (1) On
                                     - 8 -


March 11, 1987, a $99,000 check was deposited, representing accrued

dividends arising from Sloan's ownership of the 110,000 shares of

stock; and (2) on March 12, 1987, a $5,054 check was deposited,

representing a distribution from the trust (arising from dividends

from Exxon Corp.).

     Checks were drawn on the Morgan Guaranty checking account

following Sloan’s death. The following checks were made payable to

Sloan,   contained   his   purported    signature         as   maker,   and   were

purportedly endorsed by Sloan:

     Check No.       Date of Check            Amount              Date Paid

         402          unknown                $15,289.56           4/20/87
         403          unknown                 14,998.61           4/22/87
         404          unknown                 15,241.71           4/22/87
         405          unknown                 15,261.31           4/15/87
         406          unknown                 14,965.41           4/17/87
         409          unknown                 15,425.61           4/23/87
         411          unknown                 15,024.65           4/27/87
         412          unknown                 15,037.42           4/28/87
         413          unknown                 14,905.72           4/30/87
         414          unknown                 15,116.71           4/30/87
         415          4/29/87                 15,337.41           5/5/87
         416          4/30/87                 14,989.42           5/5/87
         418          5/4/87                  14,905.88           5/7/87
         419          5/5/87                  15,334.26           5/7/87
         421          5/7/87                  14,987.21           5/11/87
         422          5/8/97                  15,105.25           5/13/87
         423          5/11/87                 15,243.66           5/13/87
         427          5/14/87                 14,975.25           5/18/87
         428          5/15/87                 14,995.26           5/19/87
         429          5/18/87                 15,275.24           5/20/87
         431          5/19/87                 14,678.89           5/26/87
         434          5/20/87                 12,500.00           5/25/87
         437          5/20/87                  6,990.20           5/26/87
         439          unknown                 33,500.00           4/21/87
         440          unknown                 15,102.02           4/23/87
         441          5/12/87                 15,441.62           5/14/87
         442          5/13/87                 15,221.56           5/15/87
         443          5/6/87                  15,224.78           5/11/87
         444          5/4/87                  15,011.75           5/7/87
         448          unknown                 15,008.42           4/27/87
                                - 9 -

     As of May 31, 1987, the balance in the Morgan Guaranty

checking account was zero.

Sloan's First National Bank of Omaha Account

     On March 8, 1987, Sloan had an account at the First National

Bank of Omaha, with a balance of $5,089.17.   By September 29, 1987,

the balance in this account was zero.

Tax Returns

     On July 7, 1976, Sloan filed a Form 709, U.S. Quarterly Gift

Tax Return, on which he reported giving 575 shares of Baum stock to

David.   On that return, Sloan reported his marital status as

“single”.

     On January 2, 1986, Sloan filed a Form 1040, U.S. Individual

Income Tax Return, for 1985.   His filing status was listed as “head

of household” (with David listed as his qualifying child).       On

January 22, 1987, Sloan filed a Form 1040 for 1986.      His filing

status was listed as “head of household”.

     Fiduciary income tax returns were filed for the trust for 1985

and 1986, reporting $19,375 of dividend income for 1985 and $20,218

of dividend income for 1986.

     Sloan’s estate did not file either a Federal estate or a

fiduciary income tax return.    Nor was a Federal income tax return

for Sloan filed for the period January 1 to March 8, 1987.
                                 - 10 -

IRS Investigation of Sloan Individually

       In May 1991, Revenue Officer Lucille Sutton (Ms. Sutton) began

an   investigation   regarding   Sloan's    failure   to   file   a   1987

individual return.    During the course of this investigation, she

discovered that Sloan and/or his estate had wages and dividend

income in 1987 but no returns reporting such income had been filed.

       On February 12, 1992, Ms. Sutton went to Baum’s office in

order to speak to David about his father.      She was told that David

was out of the office.      She left her business card, requesting

David to contact her.    Because David failed to do so, Ms. Sutton

attempted to reach him by telephone on February 14, 1992.         She was

told that David was in a meeting; again, she left a message

requesting David to return her call. David again failed to contact

her.

       On February 19, 1992, Ms. Sutton again attempted to speak with

David by telephoning him at work.         She was told that David was

attending a business luncheon.     Ms. Sutton left a message with a

Baum employee, again requesting that David telephone her.

       Despite Ms. Sutton’s leaving numerous messages for David at

Baum, David never contacted Ms. Sutton. Consequently, on March 20,

1992, she made another visit to Baum’s office.        There, she spoke

with a Mr. Richardson, a Baum employee, who informed her that:         (1)

David was out of town; (2) Sloan was deceased (although Mr.

Richardson did not know the date of death); and (3) Sloan was
                                  - 11 -

David's father.    At the end of their conversation, Ms. Sutton gave

Mr. Richardson her business card to relay to David.           David failed

to contact her.    Accordingly, on April 1, 1992, she made a third

visit to Baum’s office, in order to serve a summons on David. (The

summons requested all available information relating to Sloan's

income or any estate, trust, or other fiduciary of Sloan for 1987

through 1991.)    When Ms. Sutton arrived at Baum’s offices, she was

informed that David was not there.              She then drove to David's

residence to serve the summons, but the outer gate was padlocked.

Ms.   Sutton   subsequently    returned    to    Baum’s   offices,   and   by

happenstance, met David.      David asked Ms. Sutton to meet him later

that afternoon at his accountant's office to discuss the summons;

they so met.     Ms. Sutton served the summons on David, explaining

that he was to appear at her office on April 13, 1992, with the

requested information.        Ms. Sutton asked David when his father

died; David replied that he did not know the date of Sloan’s death.

Ms.   Sutton further asked David whether his father's estate was

probated; David responded by stating that information could be

obtained by looking at the county court records.           Ms. Sutton told

David that it would be difficult ascertaining information about

Sloan’s estate without knowing Sloan’s date of death.                 David

replied by stating that he did not have much information about his

father.   The meeting then concluded.
                                        - 12 -

      After     examining       the   county     court    records,    Ms.     Sutton

discovered that Sloan's estate was not probated.                  She also secured

a copy of Sloan's death certificate from the Bureau of Vital

Statistics.

      On April 13, 1992, David appeared at Ms. Sutton's office, in

response to the summons.          David gave her the following:            Documents

concerning Sloan's medical and funeral expenses; a copy of an

estimated tax payment made with regard to Sloan's 1987 tax year;

and   some    1987    monthly    bank    statements      from    Sloan's    checking

account.      Missing from these documents were Sloan's April and May

1987 checking account statements, as well as canceled checks drawn

from this account.

      During this meeting, Ms. Sutton asked David whether he was a

trustee or executor of his father's estate.                David replied that he

was unable to answer that question.              He suggested that in order to

receive a response, the IRS should pose this question to Sloan's

wife (“Mrs. Allen”), who lives in Europe.                David stated he did not

know “Mrs. Allen's” first name or address.                       Ms. Sutton then

requested further details regarding this “Mrs. Allen”.                         David

stated that in order for him to disclose details, a deposition

would be required.       The meeting then concluded.

      Later    that    day   (April     13,   1992),     David   returned    to   Ms.

Sutton's office in order to retrieve the documents provided to her

earlier that day.       At this second meeting, she informed David that
                                  - 13 -

she had located a copy of Sloan's death certificate, which stated

that his father was widowed at the time of his death.                David

changed the subject by commenting on the weather that day and

expressing his concern as to how Ms. Sutton would travel home.

       Approximately a week later, Ms. Sutton issued two additional

summonses (both dated April 21, 1992).          The first was issued to

Chicago Trust Co. for documents relating to the shares of stock

Sloan owned at the time of his death.           The second was issued to

Morgan Guaranty for bank statements of Sloan's checking account

from April 1 to May 31, 1987.         On April 29, 1992, the Morgan

Guaranty statements were sent to Ms. Sutton. After examining these

statements, Ms. Sutton issued another summons (dated May 15, 1992)

to Morgan Guaranty requesting all canceled checks from Sloan's

checking account issued from April 1 through May 31, 1987.           Morgan

Guaranty sent her copies of a portion of the canceled checks; all

were   dated   after   Sloan’s   death.    In    accordance   with   Morgan

Guaranty's normal business practice during 1987, the original

canceled checks were returned to Sloan at his home (3722 Dewey

Avenue, Omaha, Nebraska) along with the monthly bank account

statements.

       During the course of her investigation, Ms. Sutton reviewed

Sloan’s 1985 and 1986 income tax returns in which he had claimed

head of household status, with David as his qualifying child.
                               - 14 -

IRS Investigation of Sloan’s Estate’s Tax Liabilities

     Thomas M. McGuire, Jr., an IRS estate and gift tax attorney,

was assigned to examine Sloan's estate.      By letter dated May 31,

1994, Mr. McGuire requested David to appear at his office on June

23, 1994, with specific information set out in the letter.     David

failed to appear.

     Four days later, David telephoned Mr. McGuire to discuss the

May 31, 1994, letter.   David explained that he had injured his back

and was in the eastern part of the United States.       Mr. McGuire

asked David for his current address or telephone number; David

refused.   Mr. McGuire then asked David to reply in writing to his

May 31, 1994, letter.    Again, David refused to do so.    Next, Mr.

McGuire asked David if his father owned publicly traded stocks;

David claimed to be unaware of any such stocks.

     As this telephone conversation continued, David informed Mr.

McGuire that there were 1,184 shares of Baum stock outstanding and

that there was a “Mrs. Allen”, his father’s second wife, who lived

in France and had access to Sloan's financial records, wills,

codicils, and trust instruments.        David stated that he had no

information about “Mrs. Allen”.

     By letter dated July 1, 1994, Mr. McGuire advised David that

because he had not sent the previously requested records, David

would have to appear at his office on July 15, 1994, with the

requested documents.    David failed to appear on that date.
                                - 15 -

     Mr. McGuire issued a summons dated July 28, 1994, to David

requesting the identical items that had been requested in his May

31, 1994, letter.     David was instructed to appear on August 16,

1994, at 9 a.m., in Mr. McGuire's office in response to the

summons.     David neither appeared on August 16 nor telephoned Mr.

McGuire.

     On August 29, 1994, David appeared at Mr. McGuire's office

unannounced, wishing to discuss the information requested in Mr.

McGuire's May 31, 1994, letter.    They had a brief discussion.   The

next day, David returned to Mr. McGuire's office.    David explained

that for years he had lived with his father in the same residence

and worked with his father at Baum since his high school days.     He

then reiterated his former comments regarding the existence of a

“Mrs. Allen”.    He added that children may have resulted from that

marriage but had no further details.     David insisted that “Mrs.

Allen” had all of his father's financial records.    David repeated

that he knew nothing about his father's personal and financial

business.     The August 30, 1994, meeting between Mr. McGuire and

David was their last.

     Mr. McGuire attempted to verify the existence of a “Mrs.

Allen”.     First, he sent a letter to the Nebraska Bureau of Vital

Statistics, inquiring whether Sloan had applied for a marriage

license at any time following Margaret's death.     The response was

negative.     Second, Mr. McGuire contacted the U.S. Department of
                                           - 16 -

State inquiring whether a passport had ever been issued to a “Mrs.

Allen”.    Again, the response was negative.                      Third, Mr. McGuire

reviewed Sloan's individual income tax returns filed before his

death;    no    spouse       was    ever   listed.          Further,     Sloan's   death

certificate stated that Sloan had died a widower. Accordingly, Mr.

McGuire concluded that there was no “Mrs. Allen”.

     Mr. McGuire discovered that although David marked the “no” box

in response to the question of whether he had foreign bank accounts

during 1987 on Schedule B of his 1987 return, David had at least

three    foreign      bank    accounts      during        1987.    (In   his   answer   to

respondent's interrogatory No. 1 (which requested that David list

all domestic and foreign bank accounts, securities accounts, and

other financial accounts in which he had an interest or a signature

or other authority over at any time during 1987), David responded

by listing only two domestic accounts--the Morgan Guaranty checking

account and the Bank of Omaha account.)                      After being confronted

with certified transcripts indicating he had foreign accounts,

David admitted to the fact. (On his individual tax returns for

1988-91, David listed foreign bank accounts in the United Kingdom

and Switzerland but did not report any interest income from these

accounts.)

     On the basis of his investigation, Mr. McGuire concluded that

David     was   the    only        individual       who    could     possibly    possess

information about Sloan's assets.
                                      - 17 -

Creation of the Liechtenstein Corporation

     On August 30, 1994 (the last day David and Mr. McGuire

discussed     these     cases),   David        executed    a   warranty    deed,

transferring the real property located at 1221 Harney Street,

Omaha, Nebraska (the property where the offices of Baum were

located), to the Christiania Corp., AG, of Vaduz, Liechtenstein,

for a stated consideration of $1.         On October 6, 1994, David filed

the warranty     deed    with   the   Douglas     County   Registry   of   Deeds

reflecting that he had sold this real property to the Christiania

Corp.

     On May 29, 1995, through an accountant to whom he had given

his power of attorney, David filed a 1994 Form 709, U.S. Gift and

Generation-Skipping Transfer Tax Return.             Reflected on this form

were two gifts David made to Christiania Corp.: (1) On August 30,

1994, David gave the corporation his residence (including a house,

lot, and garage) at 3722 Dewey Drive, Omaha, Nebraska, and (2) on

September 15, 1994, David gave the corporation his 1,184 shares of

Baum stock (representing 100 percent of Baum's outstanding shares

of stock).

                         ULTIMATE FINDINGS OF FACT

        1.   Sloan died on March 8, 1987, with a gross taxable estate

of $11,606,904.       Following Sloan's death, David took possession of

Sloan's assets. David is the executor of Sloan’s estate within the

purview of section 2203.
                              - 18 -

     2.   David was the fiduciary (personal representative) of

Sloan's estate within the purview of 31 U.S. section 3713(b).

David is responsible for the payment of income and estate taxes, as

well as additions to tax, owed by Sloan's estate.

     3.   After Sloan's death on March 8, 1987, his estate was

insolvent. As personal representative of Sloan's estate, David

transferred to himself all the assets of Sloan’s estate.   David is

liable as a transferee of the assets of Sloan’s estate for the

income and estate taxes, as well as additions to tax, owed by

Sloan's estate.

                             OPINION

     Preliminarily, we must determine whether Sloan's purported

signatures on the stock certificates (representing the 110,000

shares) and checks (hereinafter referred to as stock certificates

and checks) were genuine.

Handwriting Experts

     Each party presented an expert to determine the genuineness of

Sloan's purported signatures on the stock certificates and checks.

The experts agreed that Sloan's purported signatures on the stock

certificates and checks were either traced or simulated;1 thus,




     1
           A “tracing” occurs where an individual creates a
mechanical copy of another's signature by handwriting.
“Simulated” is defined as an effort to copy the handwriting style
or characteristics of another.
                                      - 19 -

both       agreed   that   Sloan's   purported   signatures   on   the   stock

certificates and checks were not genuine.

       Neither expert was able to conclude that it was David who had

forged        Sloan's      signature.2    Respondent's   expert     observed

“indications” that David forged his father's signature on the stock

certificates and checks. Petitioner's expert could not opine as to

who authored the forged Sloan signatures because the documents he

was provided with were photocopies, not originals.

       On the basis of the entire record before us, we conclude that

(1) Sloan's signatures on the stock certificates and checks were

not genuine, and (2) David forged his father's signatures on the

stock certificates and checks.           With these conclusions in mind, we

now address the substantive issues before us.




       2
          Following several conference calls with the Court,
David provided two handwriting exemplars in London, England, on
Jan. 28 and Feb. 27, 1999, overseen by an Internal Revenue
Service representative (but not the expert witnesses herein).
     In examining the London exemplars, respondent's expert
concluded that David was attempting to deliberately disguise his
own natural handwriting. Petitioner's expert admitted that
although David's London exemplars contained the classic signs of
disguise, he could not opine as to whether David had disguised
those exemplars because he did not personally observe David
performing the exemplars. We accept the opinion of respondent's
expert and conclude that David deliberately attempted to disguise
his own handwriting.
     The parties' experts were provided with copies of the
following: The London exemplars; the stock certificates
representing the 110,000 shares, and checks; and known collected
writings, such as other “normal business exemplars”.
                              - 20 -

David Is the Executor of Sloan’s Estate

     We now consider whether David is the executor of Sloan’s

estate pursuant to section 2203.       For estate tax purposes, an

“executor” means “the executor or administrator of the decedent,

or, if there is no executor or administrator appointed, qualified,

and acting within the United States, then any person in actual or

constructive possession of any property of the decedent.”     Sec.

2203. In the instant case, Sloan's estate was not probated; hence,

David can only be deemed the “executor” of Sloan’s estate for tax

purposes if he had actual or constructive possession of property

belonging to Sloan.   For the reasons set forth, we conclude David

had actual possession of Sloan’s property following the date of

Sloan’s death.

     On the date of his death (March 8, 1987), Sloan held over $11

million in assets, including: (1) Funds in two checking accounts;

(2) 110,000 shares of stock (with an $8,937,500 market value); (3)

a beneficial interest in the trust (consisting of 5,616 shares of

stock, with a $456,500 market value); and (4) various other valued

assets.3   There is ample evidence in the record linking David to

actual possession of these assets.




     3
          The parties disagree as to whether Sloan had $1,728,362
cash on hand at the time of death. We accept Mr. McGuire’s
conclusion that Sloan’s ownership of the 110,000 shares of stock
generated approximately $1,728,362 in dividends between 1980 and
1985.
                                  - 21 -

     First, on the date of Sloan's death, the Morgan Guaranty

checking account had a $357,040.39 balance.       Several days later,

David deposited dividend checks therein, increasing the balance to

$461,094. Starting in April 1987, and continuing through May 1987,

David forged Sloan's signature on 30 checks, generally in $15,000

increments, drawn on the Morgan Guaranty checking account made

payable to Sloan.   On May 31, 1987, David had reduced the balance

to zero.

     Second, because we have concluded that David forged his

father’s   signature   on   the    Exxon   and   Standard   Oil   stock

certificates, it follows that he had to have possession of the

stock certificates in order to do so.

     Because we conclude that David was in actual possession of his

father's property, we hold that David is the executor of Sloan’s

estate pursuant to section 2203.

Pending Motions

     Motions filed by petitioner in docket Nos. 24986-97 and 24987-

97 are pending involving (1) whether respondent’s notices of

deficiency to Sloan’s estate are valid, and (2) if those notices

are valid, whether David had authority to file petitions in this

Court contesting the determinations contained in those notices.

Also pending are motions filed by respondent to dismiss the cases

in docket Nos. 24986-97 and 24987-97 on the basis that the estate

failed to properly prosecute.
                               - 22 -

     As stated above, because David came into actual possession of

his father's assets, David is the statutory executor of Sloan’s

estate pursuant to section 2203.        As such, he was the proper

individual to receive the notices of deficiency under section 6212.

Accordingly, we hold that the notices of deficiency giving rise to

docket Nos. 24986-97 and 24987-97 are valid.

     We now turn to whether David had authority to petition the

Court on behalf of Sloan’s estate.      David argues that because no

fiduciary of Sloan’s estate had been appointed, he improperly filed

the petitions in docket Nos. 24986-97 and 24987-97.     We disagree.

As stated supra, David was the statutory executor of Sloan’s estate

pursuant to section 2203.   As such, pursuant to Rule 60,4 David had

authority to contest the notices of deficiency involved in docket

Nos. 24986-97 and 24987-97.




     4
          Rule 60(a) provides in pertinent part:

          Rule 60.   Proper Parties; Capacity

               (a) Petitioner: (1) Deficiency or
          Liability Actions: A case shall be brought
          by and in the name of the person against whom
          the Commissioner determined the deficiency
          (in the case of a notice of deficiency) or
          liability (in the case of a notice of
          liability), or by and with the full
          descriptive name of the fiduciary entitled to
          institute a case on behalf of such person. *
          * *
                                   - 23 -

     We now address respondent's motions to dismiss in docket Nos.

24986-97 and 24987-97 on the basis of Sloan’s estate’s failure to

properly prosecute. This Court, like every court, has the inherent

power, in the exercise of its discretion, to dismiss a case for

want of prosecution. See, e.g., Link v. Wabash R.R. Co., 370 U.S.

626, 629-632 (1962); Harper v. Commissioner, 99 T.C. 533, 540

(1992) (failure to comply with discovery requests and orders or to

prepare for trial).      Rule 123(b) provides in relevant part:

                 (b)   Dismissal:   For   failure   of   a
            petitioner properly to prosecute or to comply
            with these Rules or any order of the Court or
            for other cause which the Court deems
            sufficient, the Court may dismiss a case at
            any time and enter a decision against the
            petitioner. The Court may, for similar
            reasons, decide against any party any issue as
            to which such party has the burden of proof,
            and such decision shall be treated as a
            dismissal * * *.

     Paragraph 4.(b) of the petitions in docket Nos. 24986-97 and

24987-97 states that petitioner does not dispute the assumptions

used by the Commissioner in determining the estate and income tax

deficiencies.    (It   was   not   until    petitioner's   opposition   to

respondent's motion to dismiss for failure to properly prosecute

that petitioner first raised the issue that the two notices of

deficiency were arbitrary in connection with the $1,728,362 cash-

on-hand adjustment.    See supra note 3.)

     Petitioner has the burden of proof in docket Nos. 24986-97 and

24987-97.    Pursuant to Rule 149(b), “Failure to produce evidence,
                                      - 24 -

in support of an issue of fact as to which a party has the burden

of proof and which has not been conceded by such party's adversary,

may be ground for dismissal or for determination of the affected

issue   against      that   party.”   Petitioner         did   not    introduce        any

evidence to support the allegations raised in the petitions.

Petitioner's continued refusal to bring forward any evidence to

support its position in docket Nos. 24986-97 and 24987-97 leads us

to conclude that such evidence does not exist.                       Petitioner has

failed to overcome inferences to be drawn from the proven facts or

the presumptive correctness of respondent's determination.

       In sum, with respect to docket Nos. 24986-97 and 24987-97, we

will    (1)   deny    petitioner’s    motions       to    dismiss         for   lack   of

jurisdiction, and (2) grant respondent’s motions to dismiss for

failure to properly prosecute.

Whether David Is Personally Liable for Taxes and Additions to Tax
Arising From the Estate of Sloan

       We now consider whether David (as the executor and fiduciary

of Sloan’s estate) is personally liable (pursuant to 31 U.S.C.

section 3713(b)) for Federal estate and income taxes, and additions

to tax, owed by the estate.

       Section 6901 provides for assessment, payment, and collection

of a fiduciary’s liability under 31 U.S.C. section 3713(b).                            See

sec.    6901(a)(1)(B).       A   fiduciary     is    defined         as    a    personal

representative, administrator, or any other person acting in a
                                           - 25 -

fiduciary capacity.            See sec. 7701(a)(6).            A claim of the U.S.

Government    must       be    paid    first    when     a    decedent’s       estate    is

insolvent.    See 31 U.S.C. sec. 3713(a)(1)(B).

     Pursuant       to        31    U.S.C.     section       3713(b),      a    personal

representative “paying any part of a debt of the * * * estate

before paying a claim of the Government is liable to the extent of

the payment for unpaid claims of the Government.” Accordingly, the

personal representative of an estate is personally liable for the

unpaid    claims     of       the   United     States    to    the   extent      of     the

distribution, if the Government establishes the following: (1) The

personal representative distributed assets of the estate; (2) the

distribution       rendered         the    estate      insolvent;       and     (3)     the

distribution took place after the personal representative had

notice of the Government's claim.               See 31 U.S.C. sec. 3713(b); see

also, e.g., United States v. Estate of Romani, 523 U.S. 517 (1998);

United States v. Coppola, 85 F.3d 1015, 1020 (2d Cir. 1996)

(executor's    distribution           of   estate   assets      to   family     members,

rendering estate insolvent, before satisfying estate tax debt to

the United States violated 31 U.S.C. sec. 3713(b) and made the

personal representative personally liable for the taxes); United

States v. Estate of Kime, 950 F. Supp. 950, 954, 959 (D. Neb.

1996).5


     5
           Courts have taken an expansive view of the types of
                                                    (continued...)
                               - 26 -

     For this liability to ripen, the personal representative must

have had actual or constructive knowledge of the debt owed the

United States. See New v. Commissioner, 48 T.C. 671, 676-677

(1967); Estate of Johnson v. Commissioner, T.C. Memo. 1999-284.   A

personal representative is deemed to have knowledge of a debt if he

has “actual knowledge of such facts as would put a prudent person

on inquiry as to the existence of the claim”.     United States v.

Vibradamp Corp., 257 F. Supp. 931, 935 (S.D. Cal. 1966).       The

knowing disregard of the debt owed the United States imposes

liability on the fiduciary to the extent of the value of the assets

distributed after knowledge of the debt is obtained.   See Leigh v.

Commissioner, 72 T.C. 1105, 1109-1110 (1979).

     All three elements of 31 U.S.C. section 3713(b) have been

established herein.   David is the statutory executor and fiduciary

of his father’s estate.   He distributed the assets of his father's

estate to himself as sole heir without paying the debts of the

estate at a time he knew the estate owed estate and income taxes




     5
      (...continued)
payments from an estate for which an executor may be held liable
under the insolvency statute, including “a distribution of funds
[from the estate] that is not, strictly speaking, the payment of
a debt.” Want v. Commissioner, 280 F.2d 777, 783 (2d Cir. 1960);
see sec. 20.2002-1, Estate Tax Regs.; see also United States v.
Coppola, 85 F.3d 1015 (2d Cir. 1996). Federal estate and income
tax liabilities constitute a debt due to the United States. See,
e.g., United States v. Moore, 423 U.S. 77 (1975).
                                    - 27 -

and additions to tax.6        And Sloan’s estate became insolvent when

David     distributed   all    of   the   estate’s     assets   to   himself.

Accordingly, David is personally liable in his capacity as the

fiduciary (personal representative) of Sloan’s estate for the

estate and income taxes and additions to tax owed the Government up

to the value of the assets distributed to himself.

     Because the value of the assets distributed to David ($11.6

million) exceeded the debt owed the IRS, David is personally liable

as fiduciary of Sloan’s estate under 31 U.S.C. section 3713(b) for

the entire amount of the debt.

Whether David Is Personally Liable as a Transferee

     Now we turn to whether David is personally liable as a

transferee of the assets of Sloan’s estate pursuant to section

6901.

     The    Commissioner      may   collect   unpaid   income   taxes   of   a

transferor of assets from a transferee of those assets.              See sec.

6901(a)(1), (c)(1); Commissioner v. Stern, 357 U.S. 39, 42 (1958).

Section 6901 does not create or define a substantive liability but

merely provides a remedy for enforcing the existing liability of

the transferor.     See Hagaman v. Commissioner, 100 T.C. 180, 183

(1993).     The Commissioner bears the burden of proving that the


     6
          We have no doubt that David knew there would be a
considerable amount of Federal taxes due from his father's $11.6
million estate. David was highly educated and sophisticated in
business matters.
                               - 28 -

taxpayer is liable as a transferee. See sec. 6902(a); Rule 142(d).

Although section 6901 provides a method by which to collect the

tax, liability of a transferee is a question of State rather than

Federal law, and the law of the State where the transfer took place

normally applies.     See Commissioner v. Stern, supra; Fibel v.

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

     Here, the transfers took place in Nebraska; consequently, we

apply Nebraska law.   Nebraska's Uniform Fraudulent Conveyance Act,

Neb. Rev. Stat. secs. 36-601 to 36-613 (reissue 1988), as in effect

at the time of the transfers, see Schall v. Anderson's Implement,

Inc., 484 N.W.2d 86, 89-90 (Neb. 1992),7 permits a court to void a

debtor's transfer of property if the transfer was made absent fair

consideration and left the debtor insolvent (i.e., without enough

property to pay his debts), or if the transfer was made with an

actual intent to hinder, delay, or defraud a creditor.

     Nebraska Rev. Stat. sec . 36-604 (reissue 1988) provides:

               36-604.    Conveyance    by    insolvent;
          fraudulent. Every conveyance made and every
          obligation incurred by a person who is or will
          be thereby rendered insolvent is fraudulent as
          to creditors without regard to his or her
          actual intent if the conveyance is made or the
          obligation   is   incurred  without   a   fair
          consideration.


     7
          In 1989, the Nebraska legislature enacted the Uniform
Fraudulent Transfer Act (UFTA), Neb. Rev. Stat. secs. 36-701 to
36-712 (Cum. Supp. 1990). The UFTA replaced the 1980 Uniform
Fraudulent Conveyance Act (UFCA), Neb. Rev. Stat. secs. 36-601 to
36-613, which is involved herein.
                                   - 29 -

     Turning to the situation before us, there was no evidence

indicating that David gave any consideration in exchange for his

father's assets.       We conclude that he did not.

     On   the   date    of   Sloan’s    death,    his   estate   was   solvent.8

Thereafter and because David transferred all the assets of the

estate to himself, the estate became insolvent.              Thus, regardless

of David’s intent, the transfer of all of Sloan’s assets to David

is deemed a fraudulent conveyance under Nebraska law.9

     Additionally,       the   record    herein    establishes     that   David

conveyed the assets of Sloan’s estate with an intent to hinder or

defraud the estate's creditors.         Consequently, under Nebraska law,




     8
          Sloan's estate had assets on Mar. 8, 1987, valued at
$11,606,904. The estate tax deficiency due from the estate was
$5,835,634. A Nebraska State estate tax of $1,232,735 was due,
as well as an inheritance tax of $116,342.32. Also due from the
estate was Sloan's income tax liability of $278,253. The record
reveals no other liabilities owed by Sloan or his estate.
Accordingly, on the date of death the estate was solvent.
     9
          Pursuant to Neb. Rev. Stat. secs. 30-201 to 30-244
(reissue 1988), a decedent's property passes to his heirs subject
to the claims of his creditors, and a distributee is liable to
return property received (or the value thereof if he no longer
has it) when a creditor's claim has not been paid. Under
Nebraska law, David inherited his father's entire estate. As
statutory executor, David distributed the estate's assets to
himself. David is a distributee under Nebraska law. As a
distributee, he is liable for claims against the estate by
creditors, and if he does not have the property received as
distributee, he is liable to return the value of the property as
of the date of his disposition of the property, and the income
and gain he received. See Neb. Rev. Stat. secs. 30-24,107 and
30-24,118 (reissue 1988).
                              - 30 -

the conveyances to David constitute fraudulent conveyances.     In

this regard, Nebraska law provides:

                    36-607.   Conveyances made with
               intent to defraud. Every conveyance
               made and every obligation incurred
               with actual intent, as distinguished
               from intent presumed in law, to
               hinder, delay, or defraud either
               present or future creditors, is
               fraudulent as to both present and
               future creditors.

Neb. Rev. Stat. sec. 36-607 (reissue 1988).

     To prove a conveyance of property constitutes a fraudulent

conveyance under Neb. Rev. Stat. sec. 36-607, the Commissioner must

prove with clear and convincing evidence that there was an intent

on David’s part to hinder, delay, or defraud the IRS.          See

Castellano v. Bitkower, 346 N.W.2d 249, 253 (Neb. 1984).        As

discussed infra, we believe the Commissioner has satisfied this

clear and convincing standard.

     Nebraska law recognizes the following as badges of fraud: The

transfer was for less than fair consideration; the transfer was of

the transferor's entire estate; the transfer was made to the

transferor's spouse or other family member; the transfer was made

while there was pending or threatened litigation against the

transferor; the transfer was made secretly or hurriedly; the

transfer was made while the transferor was insolvent or greatly in

debt; the transfer was a departure from the transferor's usual

method of doing business, and the transferor retained possession of
                                   - 31 -

and/or benefits in the transferred property.              See Gifford-Hill &

Co. v. Stoller, 380 N.W.2d 625, 630 (Neb. 1986); First Natl. Bank

v. First Cadco Corp., 203 N.W.2d 770, 778-779 (Neb. 1973); see also

Stanko v. Commissioner, T.C. Memo. 1996-530.

     The tangible evidence adduced by respondent herein indicates

that there was a planned evasion of Federal and State taxes, and

that David masterminded these plans.              David moved in on his

father's fortune soon after his death.          David clearly did not act

in good faith.10 We have set forth in our Findings of Fact many

details as to events occurring following Sloan’s death.             However,

we wish to highlight several of them.

     First, David did not put a notice of his father's death in the

local newspaper; considering all of the circumstances, one could

reasonably infer that he refrained from doing so in order to keep

his father's      death   secret   from   the   Federal   and   State   taxing

authorities. Second, he secretly and hurriedly transferred Sloan's

entire estate to himself as sole heir.          Third, after his father's

death,    David    forged   his    father's     signature    on   the   stock

certificates representing 110,000 shares of stock and quickly sold

them.     Fourth, David depleted his father's checking account by



     10
          See First Natl. Bank v. First Cadco Corp., 203 N.W.2d
770, 779 (Neb. 1973) (“Where there is a conveyance between close
relatives without adequate consideration, the burden is upon the
parties to the transaction to establish that it was done in good
faith.”).
                                    - 32 -

forging his father's name on the checks (all dated after Sloan's

death).   Fifth, in response to the summons from Ms. Sutton, David

produced some 1987 bank statements (which were sent monthly to 3722

Dewey Avenue) regarding the Morgan Guaranty checking account;

noticeably absent were canceled checks or statements for April and

May 1987.      Although    David    possessed       the   bank   statements    and

canceled checks, he chose to hide the significant ones.

     Sixth, David was uncooperative and evasive and made numerous

false statements to Ms. Sutton and Mr. McGuire.                  He deliberately

failed to provide all of the requested documents and information.

He forged his father's signature. Presenting no corroborating

evidence, and contrary to his own admissions at the time of Sloan's

death, David claimed his father was not widowed at death but

married to a “Mrs. Allen” in Europe, who had taken all of his

father's assets and financial records.              David offered no details

regarding this “mystery woman”.           Clearly, David's “story” was a

fabrication; there is no proof or reason to believe that a “Mrs.

Allen” existed.

     Seventh, after the estate came under audit by IRS agents,

David   transferred     his    property   to    a    foreign     corporation   in

Liechtenstein     for     no    consideration        during      Mr.   McGuire's

examination.    David continued his fraudulent conduct by submitting

several   false   answers      to   respondent's          interrogatories,     and

deliberately disguised his natural handwriting while producing the
                                  - 33 -

London   exemplars,   hindering    the   analyses   of   the   handwriting

experts.

     As noted in Gifford-Hill & Co. v. Stoller, supra at 630

(quoting 37 Am. Jur. 2d, Fraudulent Conveyances, sec. 10, at 701):

     “‘[B]adges of fraud’. . . are said to be facts which
     throw suspicion on a transaction, and which call for an
     explanation . . . More simply stated, they are signs or
     marks of fraud.    They do not of themselves or per se
     constitute fraud, but they are facts having a tendency to
     show the existence of fraud, although their value as
     evidence is relative not absolute. They are not usually
     conclusive proof; they are open to explanation. They may
     be almost conclusive, or they may furnish merely a
     reasonable inference of fraud, according to the weight to
     which they may be entitled from their intrinsic character
     and the special circumstances attending the case. Often
     a single one of them may establish and stamp a
     transaction as fraudulent. When, however, several are
     found in the same transaction, strong, clear evidence
     will be required to repel the conclusion of fraudulent
     intent. . .”

     On the basis of the entire record in these cases, we hold that

respondent has produced clear and convincing proof under the

Nebraska fraudulent transfer statute that David made the transfers

with a fraudulent intent, and that David has failed to rebut this

proof by any evidence, let alone “strong, clear evidence”.            Id.;

see also Kayian v. Commissioner, T.C. Memo. 1999-296; King Shipping

Consum, Inc. v. Commissioner, T.C. Memo. 1989-593.

     In sum, respondent presented clear and convincing evidence

that David took actual possession of his father's assets after

March 8, 1987.   David transferred these assets to himself with an

actual intent to delay, defraud, or hinder his father’s creditors;
                                     - 34 -

namely, the IRS.         Consequently, the transfers from Sloan’s estate

to     David,    which    rendered   the   estate   insolvent,    constitute

fraudulent conveyances under Nebraska law.           Consequently, we hold

that David is personally liable as a transferee pursuant to section

6901    for     the   deficiencies   and   additions   to   tax   respondent

determined in docket Nos. 24984-97 and 24985-97.

       In reaching our holdings herein, we have considered each

argument made by the parties, and, to the extent not discussed

above, find those arguments to be irrelevant or without merit.
                        - 35 -

To reflect the foregoing,

                                      An order will be issued

                             denying petitioner's motions to

                             dismiss for lack of jurisdiction

                             in    docket   Nos.   24986-97   and

                             24987-97.



                                    An order of dismissal and

                             decision       will   be    entered

                             granting respondent's motions to

                             dismiss for failure to properly

                             prosecute in docket Nos. 24986-

                             97 and 24987-97.



                                    Decisions will be entered

                             for     respondent     in   docket

                             Nos. 24984-97 and 24985-97.
