Texas Two-Step Is Listed Transaction That IRS Blows Apart.

The petitioner was into banking and real estate development. He then joined forces with another person, remediated a chemical plant, and began importing ammonia and other chemicals.  The business structure for this venture was a C corporation.  The petitioner ultimately wanted to sell the business, but had large gains trapped inside the C corporation.  The petitioner sold the assets of the business and placed $1 million of the proceeds in his personal bank account.  The corporate stock was sold to an intermediary that was a shell company of the buyer, without any reduction for the BIG tax.  The shell company then sold the stock to a legitimate buyer and transferred the net proceeds of the sale to the petitioner.  The shell company offset the gain on the stock sale with the end result that the tax liability was the petitioner's.  The court noted that the transaction was a listed transaction and that petitioner was fully liable for the tax on sale of the assets and stock.  The petitioner was also found to have violated the state (TX) fraudulent transfer statute.  The court noted that other parties may also be liable for the tax liabilities of the transaction via joint and several liability and that the petitioner could seek contribution from them.  Cullifer v. Comr., T.C. Memo. 2014 T.C. Memo. 208. 

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