                          T.C. Memo. 2005-23



                       UNITED STATES TAX COURT



         CARRIE H. SUCHAR, TRANSFEREE, ET AL.,1 Petitioners v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 17336-02, 17337-02        Filed February 14, 2005.
                 17338-02.



     Edward DeFranceschi, David Klemm, and Jason Bell, for

petitioners.

     Carina J. Campobasso and Louise R. Forbes, for respondent.



               MEMORANDUM FINDINGS OF FACT AND OPINION

     SWIFT, Judge:    By notices dated August 6, 2002, respondent

determined that petitioners Carrie, Tracy, and Deborah Suchar


     1
        Cases of the following petitioners are consolidated
herewith: Deborah R. Suchar, Transferee, docket No. 17337-02;
and Tracy L. Suchar, a.k.a. Tracy L. Sommers, Transferee, docket
No. 17338-02.
                              - 2 -
were liable as transferees relating to their father Richard

Suchar’s (Richard) Federal income tax liabilities for the years

1995 ($23,278) and 1996 ($20,238), plus penalties and interest.

     Based on respondent’s determination as to the value of

assets transferred by Richard to Carrie, Tracy, and Deborah,

respondent determined that the amounts of the respective

transferee liabilities of Carrie, Tracy, and Deborah relating to

Richard’s above Federal income tax liabilities, penalties, and

interest, were as follows:2


              Carrie           Tracy           Deborah

             $51,394          $25,000          $25,000


     Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for the years in issue, and

all Rule references are to the Tax Court Rules of Practice and

Procedure.


                        FINDINGS OF FACT

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

At the time they filed their petitions, Carrie resided in Maine,

and Tracy and Deborah resided in California.




     2
        To the extent the Court’s conclusions herein as to the
value of Richard’s property that was transferred to petitioners
are higher than the value therefor initially determined by
respondent, respondent has pending a motion to increase
petitioners’ transferee liabilities accordingly.
                               - 3 -
     By marriage between Richard and his first wife, Susan Suchar

(Susan), there was born a son, John Suchar (John), and

three daughters, petitioners herein -- Carrie, Tracy, and

Deborah.   Richard and Susan’s marriage ended in divorce in 1982.

     In April of 1985, Richard married Marilou Suchar (Marilou).

That marriage ended in divorce on August 16, 1994, the year in

which Richard retired from the Central Maine Power Company.   By

that marriage, no children were born.

     In 1994, at the time of Richard’s and Marilou’s divorce,

two parcels of real property located in China, Maine, that had

been in Richard’s family for a number of generations were owned

by Richard and Marilou as tenants in common.

     The first parcel consisted of 218 acres of land on which a

number of farm buildings were located (farm acreage).

     The second parcel, adjacent to the first parcel, consisted

of a small home located on approximately 3.5 acres of land

(residence acreage).

     During all or a portion of Richard’s first marriage, Richard

and Susan apparently lived on the residence acreage with John,

Carrie, Tracy, and Deborah.

     Since her divorce from Richard in 1984, Susan has continued

to live on a third parcel of real property located adjacent to

the farm acreage and the residence acreage.
                              - 4 -
     In the early 1990s, in an attempt to reconcile difficulties

in his marriage with Marilou, Richard added Marilou’s name on the

deeds to the farm acreage and the residence acreage.

     Apparently during Richard’s 9-year marriage to Marilou,

Richard and Marilou lived in the home on the residence acreage.

After his divorce from Marilou in 1994, Richard lived alone on

the residence acreage.

     For purposes of the 1994 divorce proceedings between Richard

and Marilou and the property division that occurred relating

thereto, the farm acreage and the residence acreage were valued

by a local realtor at a combined total fair market value of

approximately $200,000.

     In the August 16, 1994, divorce decree involving Richard and

Marilou, based on the above realtor’s valuation of the two

parcels, the divorce court placed a total value on the farm

acreage and the residence acreage of $200,000.   After reduction

for an outstanding $32,000 mortgage on the farm acreage, the

divorce court concluded that the farm acreage and the residence

acreage had a total net value to Richard’s and Marilou’s marital

estate of $167,366.

     Under the 1994 divorce decree, within one year of the

divorce, Richard was given the right or the option to purchase

Marilou’s one-half interest in both the farm acreage and the

residence acreage for $80,000, approximately the net value
                              - 5 -
determined by the divorce court for Marilou’s one-half interest

therein, which would leave Richard as sole owner of both the farm

acreage and the residence acreage.

     Under the divorce decree, in the event Richard did not

exercise his right to purchase Marilou’s interest in the farm

acreage and the residence acreage, both parcels were to be sold

in the local real estate market with the first $84,000 of the

proceeds from any such sale to be paid to Marilou (less any

amounts already paid by Richard to Marilou), and the balance of

the proceeds was to be paid to Richard.

     In the divorce proceeding between Richard and Marilou,

Richard, who represented himself, argued against his own interest

that the farm acreage and the residence acreage had a value

significantly above the value placed thereon by the local realtor

and by the divorce court.

     Subsequent to 1994 and through 1998, real estate values in

the vicinity of China, Maine, generally increased.

     Richard made early withdrawals from his Individual

Retirement Account (IRA) of $98,500 in 1995 and $70,500 in 1996,

which cumulative $169,000 represented the total balance in his

IRA which Richard had built up over the years while working for

the Central Maine Power Company.

     Richard used a portion of the IRA distributions to purchase

tools and farm equipment and a prefabricated building installed
                              - 6 -
on the farm acreage, but Richard also lost $40,000 of the IRA

distributions by investing the $40,000 in speculative commodity

market transactions.

     Between when he retired on August 16, 1994, and September of

1998, Richard occasionally was employed in construction work.

     In 1997, due to Richard’s failure to purchase Marilou’s

interest in the farm acreage and in the residence acreage,

Marilou sought to have the divorce court cite Richard for

contempt, to have Richard incarcerated, and to order the farm

acreage and the residence acreage listed for sale.

     In a legal document dated and filed with the divorce court

on August 5, 1997, Richard’s attorney represented that the only

significant assets Richard owned were his interests in the farm

acreage and in the residence acreage.

     In August of 1997, Richard contacted a realtor about selling

the farm acreage and the residence acreage.   The realtor

recommended subdividing just 54 of the 215 acres in the farm

acreage into four residential lots and selling the four lots for

a total of approximately $265,000.

     By early 1998, under threats from Marilou that she would

seek from the divorce court a contempt order and his

incarceration, Richard was pressured to list the farm acreage and

residence acreage for sale.
                                 - 7 -
     Based on Richard’s agreement to list the parcels, the

divorce court agreed not to incarcerate Richard.    Thereafter, the

farm acreage and the residence acreage were unsuccessfully listed

for sale at a price not disclosed in the record.

     By the spring of 1998, the farm acreage and the residence

acreage had not sold, and Marilou had not received any portion of

the $84,000 specified in the 1994 divorce decree relating to her

interest in the farm acreage and the residence acreage.    Richard

was delinquent in obligations he owed under the divorce decree

(e.g., mortgage payments and real estate taxes due on the farm

acreage and on the residence acreage), and Marilou’s name was

still on the deeds.

     John, who at the time was 24 years old, agreed to purchase

from Richard and Marilou for approximately $45,000 their

interests in the farm acreage.    The $45,000 represented the

payoff of the mortgage on the farm acreage, and the payment of

overdue real estate taxes, plus a $30,000 cash payment to

Marilou.

     John’s offer represented an attempt to keep the farm acreage

in the Suchar family while at the same time providing funds that

could be used to pay Marilou a portion of the value of her one-

half ownership interests in the farm acreage and in the residence

acreage.
                               - 8 -
     Unfortunately, John was unable to obtain financing, and in

April of 1998, John tragically died.   John was buried on the

separate parcel of real estate on which Susan lives adjacent to

the farm acreage and the residence acreage.

     At this point, in order to keep ownership of the farm

acreage and the residence acreage in the Suchar family and also

to provide funds to Marilou, Susan (Richard’s first wife and the

mother of Carrie, Tracy, and Deborah) offered to provide funds

for the purchase from Richard and Marilou of the farm acreage for

a total of approximately $45,000.   Susan effectively took over

John’s earlier offer to purchase the farm acreage and thereby to

provide the funds that were needed to pay off the mortgage and

taxes and to pay Marilou a portion of the value of her interest

in the farm acreage and the residence acreage.

     In April of 1998, respondent’s revenue officer contacted

Richard to inquire regarding unpaid delinquencies in Richard’s

Federal income tax liabilities for 1993 and 1994 and regarding

Richard’s unfiled 1995 and 1996 Federal income tax returns.3

     Respondent’s revenue officer inspected the farm acreage and

the residence acreage and met with Richard in the home located on

the residence acreage.   Respondent’s revenue officer described


     3
        In the course of an earlier audit of Richard regarding
Richard’s failure to file Federal income tax returns for 1993 and
1994, respondent had prepared Federal income tax returns for
Richard for those years.
                               - 9 -
the condition of the residence acreage as of April of 1998, as

follows: “A ranch home reflecting some deferred maintenance,

frankly, a barn, some farm equipment scattered around the barn.”

     Pursuant to the above offer of Susan to provide $45,000 for

the purchase of the farm acreage, on July 13, 1998, a written

purchase and sale agreement relating to the farm acreage was

prepared showing Richard and Marilou as the sellers, and Carrie,

Tracy, and Deborah, as the purchasers.   Susan’s name does not

appear on this document, and the only signature that appears on

this document is Richard’s.   The signature line for Marilou is

blank.   On the signature line for Carrie, Tracy, and Deborah, as

buyers, Carrie’s, Tracy’s and Deborah’s names are printed.   In

July and August of 1998, Tracy and Deborah were not aware of this

document, and in July of 1998 no payment was made under this

document.

     On August 17, 1998, Richard untimely filed his 1995 Federal

income tax return on which he reflected a total Federal income

tax liability of $28,336.   No payment was submitted by Richard to

respondent with the filing of this tax return.

     On September 9, 1998, generally consistent with the terms of

the above July 13, 1998, purchase and sale agreement relating to

the farm acreage, Richard and Marilou executed a warranty deed

transferring all of the farm acreage to Carrie, Tracy, and

Deborah, as tenants in common, with the exception of 20 acres
                               - 10 -
that were carved out and retained by Richard and Marilou.

Hereinafter, references to the “farm acreage” refer to such

parcel of real property without the 20-acre carve out (i.e., to

the remaining 198 acres).

     Susan provided the $45,892 in cash, representing the total

stated consideration due on this transfer to Carrie, Tracy, and

Deborah of Richard’s and of Marilou’s interests in the farm

acreage.

     Of the total $45,892 provided by Susan in connection with

this transfer of ownership of the farm acreage, $12,589 was used

to pay off the existing mortgage and $3,303 was used to pay off

overdue real estate taxes, for both of which Richard was solely

liable under the 1994 divorce decree, and the remaining $30,000

in cash was paid to Marilou.

     Thus, of the total $45,892 provided by Susan, $30,000 was

paid directly to Marilou, and $15,892 accrued to Richard’s

benefit by virtue of its use to pay off the mortgage and real

estate taxes Richard owed under the divorce decree.

     Also on September 9, 1998, Richard executed a quitclaim deed

transferring to Carrie his interests in the residence acreage and

in the 20-acre carve out (hereinafter, references to the

“residence acreage” generally refer to the residence acreage

along with the 20-acre carve out).      Marilou was a signatory and

transferor on the September 9, 1998, quitclaim deed relating to
                              - 11 -
the residence acreage, but she also was shown as a transferee on

the quitclaim deed, along with Carrie, with both Marilou and

Carrie thereafter owning the residence acreage as tenants in

common.   Thus, by this quitclaim deed Marilou effectively

transferred her interest in the residence acreage to herself, and

Richard transferred his one-half interest therein to Carrie.

     In connection with his transfer to Carrie of his interest in

the residence acreage, no consideration was received by Richard.

Susan did not participate in this transfer affecting the

residence acreage, and none of the $45,892 in funds Susan

provided in connection with the transfer of the farm acreage

related to the transfer involving the residence acreage.4




     4
        Two months earlier, on July 17, 1998, without Susan’s,
Carrie’s, Tracy’s, and Deborah’s knowledge, Richard had executed
two quitclaim deeds purporting to transfer to Carrie, Tracy, and
Deborah his one-half interest in the farm acreage and to Carrie
his one-half interest in the residence acreage. Although these
two quitclaim deeds were recorded with the Kennebec County,
Maine, Registry of Deeds, no consideration was paid to Richard
for these quitclaim deeds, and copies of the quitclaim deeds were
not delivered by Richard to Carrie, Tracy, and Deborah. On these
facts, the quitclaim deeds apparently would not have been
effective under Maine law either to transfer Richard’s ownership
interest in the farm acreage to Carrie, Tracy, and Deborah or to
transfer Richard’s interest in the residence acreage to Carrie.

     Respondent asserts that the transferee liability of
Carrie, Tracy, and Deborah at issue herein arises under either
Richard’s July quitclaim deeds or under the September deeds. We
consider Carrie, Tracy, and Deborah’s transferee liability only
under the September deeds, and hereinafter we generally disregard
Richard’s July quitclaim deeds.
                             - 12 -
     Prior to the above September 9, 1998, transfers to his

daughters, Richard’s ownership interests in the farm acreage and

in the residence acreage constituted substantially all of

Richard’s assets.

     On September 9, 1998, Richard’s attorney sent a fax to

Marilou’s attorney explaining that the deed and the transfer of

the residence acreage occurred “for the purpose of getting the

land out of Richard’s name” and that “He has good reasons and

this will provide protection for Marilou’s interest.”

     Also, on September 9, 1998, Richard’s attorney told Marilou

that Richard needed to get the parcels out of Richard’s name

because Richard was in trouble with “the IRS”.

     In a letter dated September 11, 1998, Richard’s attorney

explained that Richard had executed the ineffective July 20,

1998, quitclaim deeds, see supra note 4, “primarily to protect

the title to and alienability of the property”, that, if Carrie,

Tracy, and Deborah were to deed the farm acreage and the

residence acreage back to Richard, “the consequence * * * would

be to give another tenacious creditor control over the property,”

and that “Richard’s intentions may have been antagonistic to that

other creditor, but they were not vis-a-vis Marilou”.

     During 1998, Tracy and Deborah lived in California, and they

apparently were not aware of the various deeds and transfers that
                             - 13 -
occurred involving the farm acreage and the residence acreage,

nor what consideration was associated therewith.

     On September 28, 1998, Richard untimely filed his 1996

Federal income tax return, on which was reflected a total Federal

income tax liability of $20,238.   With this tax return, no

payment was submitted by Richard to respondent.

     Almost all of the income reflected on Richard’s 1995 and

1996 Federal income tax returns was attributable to the taxable

distributions from Richard’s IRA account ($98,500 in 1995 and

$70,500 in 1996).

     On September 28, 1998, Richard prepared and signed and gave

to respondent’s revenue officer a financial statement,

Form 433-A, Collection Information Statement for Individuals,

relating to Richard’s financial assets, on which it was indicated

that Richard was employed part-time as a construction worker for

which Richard earned an average of $1,032 a month, that Richard’s

monthly personal living expenses were $1,060, that he had only

$10.27 in a bank account, that he owned no real property, that

his assets had a total value of only $8,885, and that Richard had

total liabilities of $93,352 (including the remaining $50,000 to

which Marilou was entitled under the divorce decree and not

including any Federal income taxes, penalties, and interest owed

to respondent).
                              - 14 -
     The value or amount of Richard’s limited assets and his

liabilities, as reflected on the above September 28, 1998,

financial statement is summarized below:


                  Assets                        Amount
          Checking Account                     $    10
          5 Shares of Stock in
               Central Maine Power Co.              75
          Cash                                   1,000
          1986 Volkswagen                        1,500
          Tools                                  3,300
          Household Items                        2,000
          Garden Tools                           1,000
                          Total Assets         $ 8,885

                   Liabilities
          Owed to Marilou per
               Divorce Decree                  $52,000
          Equipment Loan                        22,353
          Student Loan                          17,315
          Personal Loan                          1,684
                    Total Liabilities          $93,352


     Richard’s financial statement did not reflect the farm

acreage and the residence acreage, consistent with Richard’s

claim that he had transferred his interests therein to his

daughters.

     Respondent’s revenue officer undertook an investigation to

verify the accuracy of the items reflected on Richard’s financial

statement.   Among other things, the revenue officer contacted the

Maine Department of Motor Vehicles to verify Richard’s ownership

of motor vehicles, and he contacted credit unions to verify the

loans Richard had listed on the financial statement.
                              - 15 -
     On October 5 and on November 9, 1998, respondent assessed

the above Federal income tax liabilities that Richard had

reflected on his late-filed Federal income tax returns for 1995

and 1996 ($28,336 and $20,238, respectively) and penalties

associated therewith, for total taxes and penalties assessed for

both years of $70,724, not including interest.

     On approximately January 20, 1999, respondent’s revenue

officer investigated Richard’s credit standing, met again with

Richard, updated Richard’s financial statement, and reviewed

documents relating to Richard’s and Marilou’s divorce.   On the

updated financial statement, Richard reflected monthly income of

zero, $1,000 in cash assets, and no other savings.

     Throughout 1998 and 1999, and until May of 2000, and in

spite of the above 1998 transfer of the residence acreage to

Carrie and Marilou, Richard continued to live rent free in the

home located on the residence acreage.

     On or about May 10, 2000, Marilou and Carrie sold the

residence acreage to an unrelated third party for a total sales

price of $80,000.   Of the net sales proceeds, Marilou received

approximately $51,803 (relating to the $50,000-plus still due her

under the 1994 divorce decree, which in turn related to her

interests in the two parcels of real property), and Carrie

received approximately $16,894 in cash, plus Carrie received (by

deed from Marilou) Marilou’s one-half interest in the 20-acre
                               - 16 -
carve out, and Carrie thereby became sole owner of the 20-acre

carve out.

     After the September 1998 sale of the farm acreage to Carrie,

Tracy, and Deborah, and through the time of trial herein in 2004,

the farm acreage has continued to be owned by Carrie, Tracy, and

Deborah.    Hay is grown, and cattle and horses belonging to

Carrie, Tracy, and Deborah are grazed thereon.

     After the May 2000 sale of the residence acreage to a third

party and through the time of trial herein, Richard has continued

to live either in a trailer home or in a workshop located on the

20-acre carve out owned by Carrie.      The residence acreage that

was sold in 2000 is still owned by the individuals who purchased

it in 2000.

     On June 23, 2000, in an effort to collect Richard’s unpaid

Federal income tax liabilities for 1995 and 1996, respondent,

among other things, issued payment-due notices to Richard, filed

tax liens against Richard, and mailed to Richard notices of

intent to levy.

     In July 2002, a valuation expert for respondent valued the

farm acreage as of September 9, 1998, at a fair market value of

$176,000.

     As of August 6, 2002, the $23,278 for 1995 and $20,238 for

1996 in Federal income taxes that Richard owed and that had been

assessed against Richard had not been paid, and respondent on
                              - 17 -
that date timely mailed to Carrie, Tracy, and Deborah notices of

transferee liability in the respective amounts indicated below

relating to Richard’s outstanding Federal income tax liabilities,

penalties, and interest, for 1995 and 1996:5


             Petitioner                     Amount

          Carrie H. Suchar                 $51,394
          Tracy L. Suchar                   25,000
          Deborah R. Suchar                 25,000


     In September 2002, at the request of Carrie, Tracy, and

Deborah, a Maine certified general appraiser by the name of

Laurent L’Heureux valued the farm acreage, as of September 9,

1998, at a fair market value of $87,000.

     In December of 2002, Tracy and Deborah filed deeds

transferring their interests in the farm acreage to Carrie.


                              OPINION

     Under section 6901 and applicable State law or equity,

respondent may be allowed to collect from a transferee of assets



     5
        Because Richard’s 1994 and 1995 Federal income tax
returns were filed on Aug. 17 and Sept. 28, 1998, respectively,
the periods of limitations with respect thereto for assessment of
tax deficiencies would have expired on Aug. 17, 2001, and
Sept. 28, 2001, respectively. Accordingly, under sec. 6901(c),
the periods of limitations for assessment of transferee
liability relating to those years would have expired on Aug. 17
and Sept. 28, 2002, respectively, one year after the period of
limitations on assessment expired. Therefore, respondent’s
notices of transferee liability to Carrie, Tracy, and Deborah
were issued timely on Aug. 6, 2002.
                             - 18 -
unpaid Federal taxes owed by a transferor of the assets.

Commissioner v. Stern, 357 U.S. 39, 45 (1958); Bresson v.

Commissioner, 111 T.C. 172 (1998), affd. 213 F.3d 1173 (9th Cir.

2000).

     Section 6901 does not create a tax liability for the

transferee but only provides to respondent a secondary liability

in the transferee (which liability is therefore referred to as a

“transferee liability”) or method by which respondent may collect

from the transferee unpaid taxes owed by the transferor.

Phillips v. Commissioner, 283 U.S. 589, 594 (1931); Mysse v.

Commissioner, 57 T.C. 680, 700-701 (1972).

     Respondent bears the burden of proof with regard to asserted

transferee status under section 6901.   Sec. 6902(a); Rule 142(d).

     Depending on the provisions of the particular State law and

the rules of equity that are involved in a case, factors

generally relevant in considering transferee liability have been

described as follows:


     (1) whether the transferees received property of the
     transferor; (2) whether the transfer was made without
     adequate consideration; (3) whether the transfer was made
     during or after the period for which the transferor’s tax
     liability accrued; (4) whether the transferor was insolvent
     before or because of the transfer of property or whether the
     transfer of property was one of a series of distributions of
     property that resulted in the insolvency of the transferor;
     (5) whether all reasonable efforts to collect from the
     transferor were made and further collection efforts would
     have been futile; and (6) the value of the transferred
     property (which generally determines the limit of a
     transferee’s liability). Gumm v. Commissioner, 93 T.C. 475,
                              - 19 -
     480 (1989), affd without published opinion, 933 F.2d 1014
     (9th Cir. 1991).6


     Here, the applicable State law is that of Maine, where the

properties were located.   Hagaman v. Commissioner, 100 T.C. 180,

186-187 (1993).   Under Maine’s Uniform Fraudulent Transfer Act

(MUFTA), a transferee may be liable where either actual or

constructive fraud was involved in a transfer.   Me. Rev. Stat.

Ann. tit. 14, secs. 3575.1(A) and 3576.1 (West 2003).

     With respect to actual fraud, section 3575.1(A) of MUFTA

provides that a debtor’s transfer will be considered fraudulent

as to a present or a future creditor if the debtor made a

transfer with “actual intent to hinder, delay or defraud any

creditor of the debtor”.

     With respect to constructive fraud, section 3576.1 of MUFTA

provides that a debtor’s transfer will be considered fraudulent

as to a creditor whose claim arose before a transfer was made if

the debtor made the transfer without receiving a reasonably

equivalent value for the transfer and if the debtor was insolvent

at the time of the transfer or became insolvent as a result of

the transfer.




     6
        In Hagaman v. Commissioner, 100 T.C. 180, 183-186 (1993),
State law provisions and situations are noted under which some of
the listed factors relating to transferee liability may not be
applicable.
                              - 20 -
     The facts before us establish that Richard’s transfers of

his ownership interests in both the residence acreage and the

farm acreage are to be treated as constructively fraudulent under

Maine law vis-a-vis Richard’s outstanding 1995 and 1996 Federal

income taxes.

     Richard’s 1995 and 1996 Federal income tax liabilities arose

as of the due date of the tax returns relating thereto, long

before Richard in 1998 made the transfers at issue herein.

Richard made the transfers in September of 1998, after

respondent’s revenue officer in April of 1998 had contacted

Richard and made inquiry as to Richard’s unpaid 1993 and 1994 tax

liabilities and as to Richard’s unfiled Federal income tax

returns for 1995 and 1996.

     In exchange for his one-half interests therein, Richard did

not receive anywhere near the fair market value of the farm

acreage and the residence acreage, and Richard clearly was made

insolvent as a result of the transfers.

     As of September of 1998, the total fair market value of the

farm acreage was $176,000 (as explained infra pp. 22-24), and the

fair market value of Richard’s one-half interest therein was

$88,000.   For Richard’s and Marilou’s September 1998 transfers of

their interests in the farm acreage to Carrie, Tracy, and

Deborah, consideration was received of only $45,892, $30,000 of

which was paid in cash to Marilou for Marilou’s interest in the
                                - 21 -
farm acreage, and the farm acreage thereafter has remained in the

hands of Richard’s daughters.    With respect to his interest in

the farm acreage, from the $45,892 consideration received,

Richard received value or benefit of only $15,892 (relating to

Richard’s relief on the $12,589 mortgage liability and payment of

the $3,303 in overdue real estate taxes).

     The disparate amounts received by Richard and Marilou for

their equal one-half interests in the farm acreage, among other

things, establish that Richard did not receive fair market value

for the transfer of his one-half interest in the farm acreage.

     With regard to the residence acreage (which, as explained

infra p. 24, both parties value at $16,984), the September 1998

warranty deed under which Richard transferred to Carrie his one-

half interest in the residence acreage was made with no

consideration received by Richard and with the obvious purpose of

removing Richard’s name from the property in order to keep the

property within the family and beyond the reach of respondent’s

collection authority.

     As of September of 1998, the fair market value of the 20-

acre carve out was $20,000, and the fair market value of

Richard’s one-half interest therein was $10,000.

     The preponderance of the evidence establishes that Richard’s

ownership interests in the farm acreage and in the residence

acreage constituted Richard’s only significant assets and that
                              - 22 -
the 1998 transfers of Richard’s interests therein rendered

Richard insolvent.   Richard’s September 28, 1998, financial

statements given to respondent showed that after the transfers

Richard had assets of only $8,885 and liabilities of $93,352.

     Respondent made reasonable efforts to collect from Richard

his unpaid Federal income taxes for 1995 and 1996, and it is

established that further collection efforts, apart from the

instant transferee proceedings, would have been futile.

     Petitioners contend that respondent has not established that

Richard’s transfers of his interests in the farm acreage and in

the residence acreage were made to defraud respondent, that

Richard’s transfers to his daughters were made for less than full

and adequate consideration, or that the transfers rendered

Richard insolvent.   Further, petitioners contend that respondent

has not established the value of the real property on the date of

the transfers.

     It is clear that, as of September 9, 1998, Richard’s only

significant assets were his one-half interests in the farm

acreage and in the residence acreage that he transferred to his

daughters.   The financial statement Richard submitted to

respondent reflected a total value for Richard’s other assets of

less than $10,000.

     Respondent’s valuation expert, as of September of 1998,

credibly valued the farm acreage at $176,000, based on a 5-lot
                              - 23 -
subdivision thereof as the highest and best use, and he valued

the 20-acre carve out at $20,000.

     Petitioners’ expert claims that in 1998 a “glut” of land was

available in and around China, Maine, resulting in a 10-year

absorption period to sell the farm acreage.   He therefore claims

that the costs of any subdivision and the likely delay in the

sale of any lots made any subdivision of the farm acreage not

feasible and that the highest and best use of the farm acreage

was as crop land with a September 1998 fair market value of only

$87,000.

     Our conclusion as to the September 9, 1998, fair market

value of the farm acreage, the residence acreage, and the 20-acre

carve out is based on the following additional factors:

     (1)   In the 1994 divorce proceedings, the divorce court

established a total value for the farm acreage and the residence

acreage of approximately $200,000;

     (2)   In August of 1997, the realtor on behalf of Richard and

Marilou proposed a subdivision and development into residential

lots of a portion of the farm acreage and selling the developed

lots off for a total of approximately $265,000;

     (3)   During the years 1994 through 1998, real estate in the

vicinity of the subject properties generally increased in value;

     (4)   In 1998, John’s offer to purchase the farm acreage and

Susan’s purchase thereof, on behalf of Carrie, Tracy, and
                                - 24 -
Deborah, from Richard and Marilou for $45,000, occurred between

related parties and was not based on any fair market valuation

thereof, but rather was based on the amount Marilou was willing

to accept to relinquish her one-half interest in the farm

acreage;

     (5)   As set forth in respondent’s expert’s report, sales of

comparable properties located in the vicinity of the subject

properties support respondent’s expert’s fair market value for

the farm acreage of $176,000;

     (6)   Petitioners’ expert real estate appraisal of the farm

acreage was based on properties not located within the reasonable

vicinity of the subject properties and located in less desirable

areas;

     (7)   Neither party submitted an expert appraisal of the

residence acreage, and the parties appear to accept the $16,984

in cash that Carrie received in connection with the May 2000 sale

of the residence acreage as indicative of the fair market value

of the residence acreage, as of September 9, 1998, and of the

fair market value of Richard’s one-half interest therein that was

transferred to Carrie; and

     (8)   With regard to the fair market value of Richard’s one-

half interest in the 20-acre carve out that he transferred to

Carrie in 1998, respondent’s expert appraised it at $10,000, and

petitioners’ expert did not opine as to its value.
                                - 25 -
     With regard to consideration Richard received in connection

with the September 1998 transfer of his one-half interest in the

farm acreage, Marilou paid off Richard’s liability under the

divorce decree on $15,892 of mortgage debt and real estate taxes,

for which $15,892 of consideration Richard is to receive credit.

     We emphasize that the obligation Richard had under the

divorce decree to Marilou was based on the anticipated sale by

Richard of the entire property or on a transfer to Richard of

Marilou’s one-half ownership interests in the farm acreage and in

the residence acreage.    Since Richard never received Marilou’s

interests and since Marilou herself participated in the transfers

of her interests therein to other individuals, Richard’s

obligations to Marilou under the divorce decree may be seen to

have been extinguished as a result of the transfers at issue in

this case.    But such extinguishment is not properly regarded as

consideration that Richard received for the transfer of his one-

half ownership interests in the farm acreage and in the residence

acreage.     Rather, as stated, to the extent such extinguishment

occurred here, it did so because Richard never received Marilou’s

ownership interests and because Marilou herself transferred her

interests in the properties.

     Petitioners argue that the September 9, 1998, transfers by

Richard and Marilou of the residence acreage to Marilou and

Carrie and of the farm acreage to Carrie, Tracy, and Deborah
                              - 26 -
reflected an effort simply to raise enough money to get Marilou

off their backs, to get Marilou partially paid off amounts due

her under the 1994 divorce decree, to avoid Richard’s ending up

in jail, and to keep the bulk of the family homestead within the

family, and that there was no intent to defraud respondent.

     We are not persuaded.   It is clear that Marilou had no

desire to retain an ownership interest in the farm acreage or in

the residence acreage, and it is clear that Marilou was putting

significant pressure on Richard to sell the properties, including

her interests therein.   That background explains the fact of the

sale of the farm acreage and particularly the sale of Marilou’s

interest therein, but it does not explain the manner by which

Richard’s and Marilou’s interests in the farm acreage were

transferred or the amount of consideration received therefor, nor

does it explain why Richard transferred his interest in the

residence acreage for no consideration.

     The evidence establishes that Richard’s transfers to his

daughters of his one-half interests in the farm acreage, the

residence acreage, and the 20-acre carve out were made to place

the properties beyond the reach of respondent’s collection

authority by removing Richard’s name therefrom, while at the same

time keeping the property within the family.

     Summarized below are our conclusions, as of September of

1998, as to the fair market value of Richard’s one-half interests
                                - 27 -
in the farm acreage, the residence acreage, and the 20-acre carve

out, and the portion of such fair market value which Richard

transferred to each of petitioners, namely, Carrie, Tracy, and

Deborah, for no consideration.


                     Transfer of Richard’s One-Half Interests
                    Fair Market       Value Received By
     Property          Value        Carrie    Tracy     Deborah

Farm Acreage          $72,108*        $24,036     $24,036   $24,036

Residence
     Acreage           16,984            16,984     ---      ---

20-Acre Carve Out      10,000            10,000     ---      ---
 Total Transferee
        Liability                     $51,020     $24,036   $24,036

          (*$88,000 less $15,892 equals $72,108)


     The above amounts establish the transferee liabilities of

Carrie, Tracy, and Deborah relating to Richard’s Federal income

tax liabilities for 1995 and 1996, including penalties.      The

transferee liabilities of Carrie, Tracy, and Deborah accrue

interest from the date of respondent’s notices of transferee

liability to each petitioner.7

                                      Decisions will be entered

                                 under Rule 155.



     7
        Under Maine law, respondent seeks interest relating to
petitioners’ transferee liabilities only from Aug. 6, 2002, the
date of his notices of transferee liability to petitioners. Me.
Rev. Stat. Ann. tit. 14, sec. 1602; sec. 6601(e); Estate of Stein
v. Commissioner, 37 T.C. 945, 959-961 (1962).
