CCA 1319012: Fraud can leave no limitation period for transferee assessment

Plain-English summary

Chief Counsel Advice addresses the period for assessing transferee liability when the transferor filed a fraudulent return. The advice states that when IRC § 6501(c)(1) applies and there is no limitation period for assessing the transferor, the one-year period in IRC § 6901(c) is not triggered. That remains true even if the IRS actually assessed the transferor, because section 6901(c) turns on expiration of the assessment limitation period. The message discusses several cited Tax Court and appellate decisions and notes that the flush language may require separate consideration.

Ruling snapshot

• Question: When does the one-year transferee-assessment period begin if the transferor filed a fraudulent return?
• Outcome: Advice given.
• Key authorities: IRC §§ 6501(c)(1) and 6901(c); Commissioner v. Gerard, 78 F.2d 485 (9th Cir. 1935); Field v. Commissioner, 32 T.C. 187 (1959), aff'd, 286 F.2d 960 (6th Cir. 1960)

Full text (IRS public release)

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ID: CCA_2013021414132520 Number: 201319012
Release Date: 5/10/2013
Office: --------------
UILC: 6901.03-00, 6501.05-06

From: --------------------
Sent: Thursday, February 14, 2013 2:14:01 PM
To: ------------------
Cc:
Subject: RE: IRC 6901 Transferee Statute of Limtitations - Fraud on transferor

Hi again, -------. Here is the follow-up on the prelim answer from yesterday.

I think the cases you cited don't get you clearly, 100% where you need to be. In addition to what section
6901(c) provides on its face, you may want to take a look at Commissioner v. Gerard, 78 F.2d 485 (9th
Cir. 1935) (the expiration of the statutory period during which an assessment might have been made
against the trans/or is dispositive, not the date that an assessment was actually made against the
trans/or); Field v. Commissioner, 32 T.C. 187 (Tax Ct 1959)(“The rule is well established that the 1-year
period of assessment against a transferee is not measured from the date at which assessment may have
been made against the transferor, but is computed from the date of the expiration of the period of
limitation on assessment against the transferor.”), aff'd, 286 F.2d 960 (6th Cir. 1960), cert den’d, 366 U.S.
949 (1961); Davis v. Commissioner, T.C. Memo. 1964-244 (Tax Ct 1964)(“In our view the one-year period
of assessment against a transferee is not measured from the date at which assessment actually has been
made against the transferor but is computed from the date on which assessment [m]ight be made against
the transferor, which in the case of a taxpayer who files a fraudulent return is at ‘any time’ under section
276(a) [predecessor to section 6501], supra. In this connection, we note that section 311(b)(1)
[predecessor of section 6901], supra, sets the period of limitations within one year after the expiration of
the period ‘for assessment’ against the transferor, which in the case of a fraudulent taxpayer would mean
at ‘any time’ within the intendment of section 276(a). Moreover, the statutory period ‘for assessment’ or
the time limit in which respondent may make his assessment is not shortened because he has made an
assessment against the transferor at an earlier date. [Citations omitted]”); Morley v. Commissioner, T.C.
Memo. 1963-330 (Tax Ct 1963)( Since there was no period of limitation for assessment against the
taxpayer-transferor [false/fraudulent return], the one-year period provided by section 311(b) of the Internal
Revenue Code of 1939 ( section 6901(c) of the Internal Revenue Code of 1954) for assessment of
transferee liability is inapplicable and there is no period of limitation for assessment of transferee liability
or the liability of the transferee of a transferee herein. … It should also be pointed out, in view of the
assessment made by respondent against the transferor on September 21, 1953, that the period of
limitation for assessment of transferor liability was not terminated by such assessment and the one-year
period for assessment of transferee liability did not begin to run from that date.)

Davis and Morley factually are closest to your situation.

If you have a case where section 6501(c)(1) applies--there is no period of limitations for assessment
against the tp-trans/or, the one year period in section 6901(c) is not triggered. That is true even where
the Service has, in fact, made an assessment against the tp-trans/or because section 6901(c) turns on
the expiration of the period of limitations for assessment against the tp-trans/or. Of course, there is the
flush language, but you have not indicated that's at all implicated.

On your other question, there might be someone who is particularly up on alter ego and/or intermediary
issues, I'll see what I can dig up.