T.C. Mem o. 2 01 6- 11 5

UNITED STAT ES TAX COURT
NORMA L. SLONE, T RANSFEREE, ET AL. , Pet it io ne rs v. 1 COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt *

Doc ke t No s. 66 29 -1 0, 6 63 0- 10 , Fi le d J un e 1 3, 2 01 6.

66 31 -1 0, 6 63 2- 10
.
St ep he n EdwardSil ve r, DerekKaczm arek , andJas on M. Si lv er, fo r pe ti ti on ers . Jo hn W ayne Dun can , forres po nd en t.

Cas es of t he fol lo win g p et it io ne rs are co ns ol id at edhe rewi th : Sl on e Fam il y 1 GST Trus t, UA Date d Au gu st6, 1 99 8, Tran sf eree , D. JackRo be rts , Trus te e, do ck etNo. 6 63 0- 10 ; J am es C. Slo ne , Trans fere e, do ck etNo. 6 63 1- 10 ; an d S lo ne Rev oc ab le Trus t, UA Date d S ep te m be r 20 , 19 94 , Trans fere e, Ja m es C. Slo ne an d Norm a L. Slo ne , Trus te es , do ck etNo. 6 63 2- 10
. Thi s o pi ni onsupp le m en ts ou r pr ev io us ly file d o pi ni on Slo ne v. * Co m m is si on er, T.C. Mem o. 2 01 2- 57
.- 2 -

[* 2] SUPPLEMENTAL MEMORANDUM OPINI ON HAINES, Ju dg e: Thes e cas es are b efo re u s o n re m an d fr om th e U.S. Co urt of App eal s fo r th e Nin th Cir cu itinacco rd an ce wi th it s o pi ni on inSlo ne v. Co m m is si on er, 8 10 F.3d59 9 (9 th Cir . 20 15 ), va cat in g a ndrem an di ng T.C. Mem o. 20 12 -5 7 (S lo ne I). At o ur reque st , th e p art ie s fi le d s up pl em en ta l b rie fs inwhi ch th ey were t o a ddres s the is su es rai se d b y th e Co urt o f App eal s. Th e p art ie s h av e ag reedth atth es e cas es m ay be de ci de d o n re m an d o n the ba si s o f th e ev id en ce subm it te d a t the ori gi na l tria l. Un le ss ot he rwis e in di cat ed , all sec ti on refe ren ces are t o t he Int ern al Rev enue Co de ineffec t fo r th e y ear a t i ss ue , andall Ru le refe ren ces are t o t he Tax C ou rt Rul es of P ract ic e an d P ro cedur e. Bac kg ro un d W e in co rp or at e h erei n b y th is refer en ce the fact s tha t we fo un d i n S lo ne I,
se t fo rth un de r th e h ead in g F INDINGS OF FACT in th atop in io n. Th es e fac ts are ba se d upo n t he st ip ul at io ns of f actan d t hi s C ou rt’s c red ib il ity fin di ng s as to each witne ss ap pe ari ng be fo re i t. We su m m ari ze p ert in en t fa ct s an d p orti on s o f ou r op in io n i n S lo ne I fo r th e b en efi t o f th e rea de r. Sl on e Bro ad cas ti ng op erat edsev eral rad io st at io ns inTucs on . In 2 00 1 a nd 20 02 Slo ne Bro ad cas ti ng was aC co rp or at io n wi th a ta x year en di ng Ju ne 30
.- 3 -

[* 3] Sl on e Bro ad cas ti ng ha d two s ha reh ol de rs , th e Sl on e Rev oc ab le Trus t an d t he Sl on e Fam il y

GST Trus t (S lo ne GST Trus t). Bo th tru st s wer e fo rm edpu rs ua ntto th e la ws o f Ariz on a. Ja m es C. Slo ne an d No rm a L. Slo ne were the tru st ees of t he Sl on e Rev oc ab le Trus t an d t he gra nt or s o f th e Sl on e GST Trus t, an irr ev oc ab le tru st . Jo hn Bark le y

was the so le tru st ee o f th e Sl on e GST Trus t fr om it s i nc ep ti on . He is a li cen se d fi du ci ary in th e St at e o f Ariz on a. He hi res acco un ta nt s, l awy ers , st oc kb ro ke rs , andot he r pr of es si on al s t o a idhi m

incarry in g o uthi s dut ie s wh ic h are d efi ne d, i n t he se cas es , by th e d oc um en ts th atest ab li sh edth e Sl on e GST Trus t. He ex erci se s h is au th or ity in de pe nd en tl y

fro m Mr. an d M rs . Slo ne . On J ul y 2, 2 00 1, Sl on e Bro ad cas ti ng so ldit s as se ts to Cit ad el Bro ad cas ti ng Co . (Ci ta de l) f

or$4 5 m il li on , whi chres ul te d i n a n e st im at edco m bi ne d F ed eral
an d S tate in co m e ta x l iabi li ty of ap pr ox im at el y $1 5 m il li on . Mr. Sl on e’s
acco un tant , D. JackRo be rts , a cert ifi edpubl ic acco un ta ntwith o ve r 30 y ears of
ex pe rie nc e, advi se d o n the acco un ti ng asp ect s o f th e tr an sa ct io n, an d To m Ch an dl er, Sl on e Bro ad cas ti ng ’s att orne y , adv is edon th e le ga l as pe ct s o f th e tra ns act io n. Nei th er o f th e advi se rs pro po se d t ax strat eg ie s t o re du ce the Fed eral
an d S tate in co m e ta xe s re su lt in g fr om th e sa le
.- 4 -

[* 4] Afte r th e cl os in g o f th e as se t s al e, Sl on e Bro ad cas ti ng di d n otco nduc t an y bu si ne ss . There were n o p lans to li qu id at e th e co rp or at io n a t an y ti m e, no r were th ere a ny pla ns to m ak e d is tri bu ti on s t o i ts sh areh ol de rs . On Oct ob er 1 5, 2 00 1, Sl on e Bro ad cas ti ng m ad e it s fi rs t es ti m at edFed eral in co m e ta x p aym en t o f $3 ,10 0,0 00 to th e In te rn al Rev enue Serv ic e (IR S) fo r it s t ax y ear e nd ed(TYE) Ju ne 30 , 20 02
. Fo rtr en d In te rn at io na l, LLC (Fo rtr en d) , sen t anun so li ci te d l et te r an d br oc hu re t o M r. Ro be rts on Ju ne 29 , 20 01 . The l et te r de sc rib edFo rtr en d a s a

“pr iv at e in ve st m en t/ m erch an t-b an ki ng gro up ” se ek in g o pp ortu ni ti es to acqui re co rp or at io ns insi tu at io ns wher e th e “ as se ts of t he Targ etCo rp or at io n c anbe pr of it ab ly sol d a nd/o r le as edto on e o r m or e p ur ch as ers /l es se es ”. The l et te r al so st at edth atFo rtr en d was ab le to “ st ru ctur e tr an sa ct io ns th athe lp m an ag e o r res ol ve li ab il it ie s atth e co rp or at e le ve l” . Mr. Ro be rts di d n otrev ie w th e le tt er an d
co m pa ny bro ch ur e unt il aft er the clo si ng of t he ass etsal e. On Au gu st8, 2 00 1, Fo rtr en d s en t M r. Ro be rts a se co ndlet te r ex pr es si ng Fo rtr en d’s co nt in ue d i nt eres t i n p ur ch as in g S lo ne Bro ad cas ti ng ’s st oc k. It de sc rib edFo rtr en d’s re la ti on sh ip with M id Co as t Cr ed itCo rp . (Mi dC oa st ), a
co rp or at io n e ng ag edinth e b us in es s o f co ll ect in g d el in qu en t cr ed itcardde bt acqui redfro m

ba nk s. Aft er re cei vi ng th e se co ndlet te r, Mr. Ro be rts in fo rm edMr.- 5 -

[* 5] Sl on e, in ge ne ral , abo utFo rtr en d a ndMi dC oa stan d t he pro po sa l t o b uy Slo ne Bro ad cas ti ng ’s st oc k. Mr . Slo ne ga ve Mr. Ro be rts pe rm is si on to in ve st ig at e furth er an d t o p ro ceedif the trans act io n l oo ke d v iabl e. On Se pt em be r 7, 2 00 1, Fo rtr en d s en t a t hi rdlet te r to Mr. Ro be rts , att ach in g t he Fo rtr en d/ Mi dC oa st bu si ne ss pl anto ge th er wi th fin an ci al pro jecti on s. Mr. Ro be rts hi redSte ve n P hi ll ip s, a t ax att orne y , as c ou ns el to advi se Mr.
an d M rs . Slo ne an d t he Slo ne Rev oc ab le Trus t o n a ny Fortren d p ro po sa ls . Mr. Ph il li ps was n otin vo lv edin , anddi d n otpro vi de an y leg al advi ce wi th res pe ctto , th e as se t s al e. On Se pt em be r 10 , 20 01 , Mr. Ph il li ps m etwith M r. Slo ne to di sc us s th e p ro po se d t ran sa ct io n. Th is m eet in g was Mr. Sl on e’s on ly con ta ctwith M r. Ph il li ps . Mr. Ro be rts rep res en te d M r. Slo ne inall ot he r co m m un ic at io ns with M r. Ph il li ps . Mr. Ro be rts pro vi de d t he Fo rtr en d/ Mi dC oa stbu si ne ss pl anto Mr. Ph il li ps fo r rev ie w. Mr. Ph il li ps co nt act eda br ok er i n t he ass etreco ve ry bu si ne ss to in qu ire ab ou t M id Co as t’s re pu tati on . The b ro ke r in fo rm edMr. Ph il li ps th at Mi dC oa stpl ay edanact iv e ro le inth e as se t re co ve ry in du st ry an d h ada rep ut at io n as anag gr es si ve bu t l eg it im at e co ll ect or . Mr. Ph il li ps rev ie wedth e p ro jecti on s i n th e Fo rtr en d/ Mi dC oa stbu si ne ss pl anan d c on cl ud edth atth ey were re as on ab le
. The rep ut at io ns of F ortre ndan d M id Co as t t og ethe r with t ho se of t he ir a tt orne y s- 6 -

[* 6] an d a cco un tantadvi se rs were g oo d. Th ere was no reas on forMr. Ro be rts or Mr. Ph il li ps to su sp ectan y im pr op rie ty. Mr. Ro be rts an d M r. Ph il li ps kn ew th atFo rtr en d h ada st rat eg y to reduc e th e in co m e ta x due as ares ul t o f th e as se t s al e. Whe n t he y ask edFo rtr en d wh at act io ns wou ldbe tak ento ach ie ve th e ta x s av in gs , th ey were t ol d tha t Fo rtr en d’s
m etho ds co ul d n otbe di sc lo se d b ecau se th ey were “pr op rie ta ry ”. Howev er, Fo rtr en d re pr es en te d t ha t Be rli ne tt a, In c. (Ber li ne tt a), anen ti ty creat edby Fortren d th atwou ldacqui re the sh ares , hadno t en ga ge d i n a ny tran sa ct io n tha t wo ul d b e de em eda “ li st edtra ns act io n” pu rs ua ntto Not ic e 2 00 1- 51 , 20 01 -2 C.B. 1 90 . Mr. Ph il li ps ne go ti at edanin crea se inth e p ur ch as e p ric e fo r th e st oc k b as edup on what he de sc rib edas a“pr em iu m ” p aym en t re su lt in g fr om th e ta x s av in gs th at Berl in et taan ti ci pa te d. Whenne go ti at io ns co nc lu de d, the pa rti es ag reedto a pu rch as e p ric e o f $3 5,7 53 ,00 0 p lu s B erl in et ta ’s ass um pt io n o f Sl on e Bro ad cas ti ng ’s Fed eral an d S ta te in co m e ta xe s o wedas o f th e cl os in g d at e. As tru st ee o f th e Sl on e GST Trus t, Mr . Bark le y hi redGreg Gada ria n, an ot he r ta x a tt orne y

in de pe nd en t fr om

Mr. Ph il li ps , to advi se th e Sl on e GST Trus t with re sp ectto an y

Fo rtr en d p ro po sa ls . On Nov em be r 21 , 20 01 , Mr. Ph il li ps wro te a m em or an du m

de sc rib in g F ortre nd ’s pl anto off se t the ga in s fr om

th e as se t
sa le by con tri bu ti ng hi gh ba si s/ lo w val ue ass et s t o B erl in et taina se ct io n 3 51- 7 -

[* 7] tra ns act io n andsel li ng th os e as se ts at alo ss be fo re the en d o f 20 01 . The
m em or an du m

als o p ro vi de d aleg al an al y si s o f th e tr an sf eree li ab il ity co ns id erat io ns faci ng Slo ne Bro ad cas ti ng ’s sh areh ol de rs an d c on cl ud edth atth ey wou ldno t b e ex po se d t o s uc h l iabi li ty. Mr. Gad ari anrev ie wedMr. Ph il li ps ’
m em or an du m

an d p erfo rm edhi s o wn re se arch . Mr. Gad ari anag reedwith M r. Ph il li ps ’ co nc lu si on s. Mr . Gadaria n h adno reas on to th in k t ha t the st oc k s al e tra ns act io n was ot he r th ana le gi ti m at e sa le . He th eref or e o ral ly adv is edMr. Bark le y th atth ere wer e n o m at eri al leg al ob st acl es to th e p ro po se d t ran sa ct io n. So on aft er, Mr . Bark le y

ap pr ov edth e tr an sa ct io n o n b eh al f of th e Sl on e GST Trus t. Bo th Mr. Ph il li ps an d M r. Gad ari anwere awar e o f Not ic e 2 00 1- 16 , 20 01 -1 C.B. 7 30 , andbo th co nc lu de d t ha t i t d idno t ap pl y . On Dec em

be r 3, 2 00 1, M r. Ph il li ps in fo rm edMr. Ro be rts th atth ere wer e n o le ga l o bs ta cl es to pro ceed in g. Mr . Rob ert s ad vi se d M r. Slo ne th atbo th Mr. Ph il li ps an d M r. Gad ari anha d a na lyzed the leg al im pl ic at io ns of t he tra ns act io n an d c on cl ud edth atitco ul d p ro ceed
. On Dec em

be r 10 , 20 01 , Slo ne Bro ad cas ti ng en te redin to th e st oc k s al e ag reem en t wi th Berl in et ta . Slo ne Bro ad cas ti ng ha d n o i nv ol ve m en t i n t he fin an ci ng . The s to cksal e ag reem en t re st ric te d t he us e o f fu nd s h el d i n S lo ne Bro ad cas ti ng ’s ban k a cco un t u nt il 10 da y s af te r th e cl os in g d at e.- 8 -

[* 8] At the st oc k s al e cl os in g t he Slo ne Rev oc ab le Trus t an d t he Slo ne GST Trus t re cei ve d $ 30 ,81 9,5 44 an d $ 2,5 50 ,45 6 i n c as h, re sp ect iv el y . Mr. Sl on e an d hi s ch il dr enres ig ne d a s the off ic ers an d d ire ct or s o f Sl on e Bro ad cas ti ng . Slo ne Bro ad cas ti ng di d n otm ak e an y di strib ut io ns to it s s hareh ol de rs be twee n t he cl os in g d at e o f th e as se t s al e an d t he clo si ng date of the st oc k s al e. Afte r th e st oc k
sa le was c lo se d p et it io ne rs ha d n o kno wled ge or s ay inth e o pe rat io n o f Sl on e Bro ad cas ti ng . Two d ay s af

te r th e cl os in g o f th e st oc k s al e, on Decem be r 12 , 20 01 , Slo ne Bro ad cas ti ng m erg edwith B erl in et ta , with S lo ne Bro ad cas ti ng as t he su rv iv in g co rp or at io n. Be cau se th e ri gh t t o u se th e n am e “ Sl on e Bro ad cas ti ng ” was no t p art of th e sa le , onJanua ry

17 , 20 02 , Slo ne Bro ad cas ti ng ch an ge d i ts na m e to Ariz on a Med ia
. The IRS b eg anit s ex am in at io n o f Ariz on a Me di a’s TYE June 30 , 20 02 , in Mar ch20 05 . On Apr il 14 , 20 08 , Arizo naMed iasubm itte d F orm 87 0- AD, Offer to W ai ve Res tri ct io ns on Ass es sm en t an d C ol le ct io n o f Tax Defi ci en cy an d t o Accep t Ov eras se ss m en t, t o t he IRS, ac cep ti ng a de fic ie nc y forit s TYE Ju ne 30 , 20 02 . Arizo naMed iafai le d t o p ay th e as se ss edtax , pen al ty, an d i nt eres t. No
m on ey s wer e ev er co ll ect edfro m Ariz on a Me di a. On Au gu st28 , 20 09 , Arizo na- 9 -

[* 9] Med iawas a dm in is tra ti ve ly dis so lv edforfai lu re t o fi le it s an nu al rep ort wi th th e St at e o f Ariz on a. On Dec em

be r 22 , 20 09 , res po nd en t i ss ue d t ran sf eree li ab il ity

no ti ces to th e Sl on e Rev oc ab le Trus t an d t he Slo ne GST Trus t, d et erm in in g t ha t the tru st s wer e li ab le for$1 6,1 93 ,88 1 a nd$2 ,55 0,8 32 , res pe ct iv el y , pl us in te res t, as tra ns fere es of
as se ts , forth e unp ai d l iabi li ty of Ariz on a Me di a fo r it s TYE Ju ne 30 , 20 02
. Add it io na ll y , res po nd en t i ss ue d s ep arat e tr an sf eree li ab il ity

no ti ces to Mr. an d Mrs . Slo ne in di vi du al ly, de te rm in in g e ach li ab le un de r a tran sf eree li ab il ity

th eo ry fo r $1 6,1 93 ,88 1, p lu s i nt eres t, fo r th e unp ai d l iabi li ty of Ariz on a Me di a. Pet it io ne rs ti m el y

fil edth ei r pe ti ti on s. InSlo ne I we de te rm in edth atth e st oc k s al e was a le gi ti m at e tr an sa ct io n a nd th atth e fo rm

of t he tra ns act io n m

us t b e res pe ct edsu chth atpe ti ti on ers were n ot tra ns fere es un de r se ct io n 6 90 1 fo r Fed eral tax pu rp os es . There fo re, we de te rm in edth atpe ti ti on ers were n otli ab le forth e in co m e ta x l iabi li ty accep te d b y Ariz on a Me di a o n Ap ril 14 , 20 08
. Dis cu ss io n The Co urt o f App eal s re m an de d t he se cas es to us inord er fo r us to m ak e ne ces sa ry fin di ng s t o app ly the tes t s etforth inCo m m is si on er v . Ste rn , 35 7 U.S. 39 (19 58 ). Ste rnrequi res th e sa ti sf act io n o f a two- pr on ge d t es t i n o rd er fo r a t ax- 10 -

[* 10 ] li ab il ity

to be im po se d o n atra ns fere e p ur su an t t o s ect io n 6 90 1. Id . at 4 4- 45 . The fi rs t p ro ng is sat is fie d i f th e p arty is a “ tra ns fere e” u nd er s ect io n 6 90 1 a nd Fed eral tax law. Th e se co ndpro ng is sat is fie d i f th e p arty is “ subs ta nt iv el y

li ab le fo r th e tr an sf

ero r’s unpa idtax es un de r st at e la w”. Sal us Mu nd i Fo un d. v
. Co m m is si on er, 7 76 F.3d10 10 , 10 18 (9t h C ir. 2 01 4) , rev ’g an d re m an di ng T.C. Mem o. 2 01 2- 61 . Bot h p ro ng s m us t b e sa ti sf

ie d i n o rd er fo r li ab il ity

to be im po se d
on a tr an sf

eree . See Co m

m is si on er v . Ste rn , 35 7 U.S. at44 -4 5. Re sp on de ntha s th e b ur de n o f pr ov in g tha t p et it io ne rs are l iabl e as tra ns fere es , bu t h e d oe s n ot ha ve th e b ur de n o f pr ov in g tha t the tax pa y er i s l iabl e fo r th e ta x. Se e se c. 69 02 (a); Ru le 14 2( d)
. On re m an d, the Co urt o f App eal s i ns tru ct edth is Co urt t o app ly the tes ts set
ou t i n S te rn , st at in g: Und er the fir stpro ng of t hi s t es t, the tax co urt s ho ul d app ly the rel ev an t s ub

jecti ve an d o bjec ti ve fact or s t o d et erm in e whe th er the Co m m is si on er erredindi sr eg ard in g t he form of t he tra ns act io n i n or de r to im

po se tax li ab il ity

onth e sh areh ol de rs as “ tra ns fere es ” un de r § 6 90 1. Un de r th e se co ndpro ng of t he Ste rntes t, the tax co urt sh ou ldan al yze wh ethe r th e sh areh ol de rs are l iabl e und er s ta te law fo r Sl oa n B ro ad cas ti ng /Ari zo naMed ia ’s unpa idtax li ab il ity . See Sal us Mu nd i, 7 76 F.3dat 1 01 8, 1 02 0. Th e ta x c ou rt m ay be gi n i ts an al y si s with e ithe r pr on g. Th e Co m m is si on er m ay

ho ldth e sh areh ol de rs li ab le as “ tra ns fere es ” und er § 69 01 on ly if bo th pro ng s o f th e St ern te stare s at is fie d. Se e id
.- 11 -

[* 11 ] Slo ne v. Co m

m is si on er, 8 10 F.3dat 6 08 (fn . ref. o m it te d) . The p ro ng s “ are se pa rat e an d i nd ep en de ntin qu iri es .” Id . at 6 05 (qu ot in g S al us Mund i Fo un d. v
. Co m m is si on er, 7 76 F.3dat 1 01 2)
. As i ns tru ct edby the Co urt o f App eal s, we m ay be gi n o ur

an al y si s wi th ei th er p ro ng . There fo re, we wil l ad dr es s the sec on d p ro ng to de te rm in e whe th er pe ti ti on ers are “ subs tant iv el y li ab le forth e tr an sf

ero r’s unpa idtax es un de r st at e law”. See Sa lu s M un di Fo un d. v . Comm is si on er, 7 76 F.3dat 1 01 8. I. Sta te Law Pro ng W e m us t ap pl y Ariz on a la w bec au se th atis th e St at e whe re the tra ns fer
oc cu rred . Esta te of M il le r v. C omm is si on er, 4 2 T.C. 5 93 , 59 8 (1 96 4) . Arizo na en act edth e Uni fo rm

Frau du le ntTran sf

er Act(UFTA) in19 90 , anditou tl in es whe n atra ns fer i s fr au du le ntfor Sta te law p ur

po se s. Hu ll etv. Co us in , 63 P.3d 10 29 , 10 32 (Ariz . 20 03 ). The UFTA i s co di fie d at Ari z. Rev . Sta t. An n. s ecs . 44
- 10 01 to 10 10 (20 13 ), an d i s “ ba se d upo n t he un ifo rm actpro m ul ga te d b y

th e Nati on al Co nf

eren ce o f Co m

m is si on ers on Uni fo rm

Sta te Laws i n 1 98 4. * * * The UFTA repl acedAriz on a’s Uni fo rm Frau du le ntCo nv ey an ce Act(‘UFCA’ ) * * *. Lik e th e UFCA, th e UFTA’s pu rp os e is to pro te ctcred it or s.” Hu ll et , 63 P.3 d a t 1 03 2.- 12 -

[* 12 ] A. The Fo rm

of t he Sto ckSal e Res po nd en t ar gu es th atth e fo rm of t he st oc k s al e sh ou ldbe di sr eg ard edan d tre at edas ali qu id at in g d is tri bu ti on for pu rp os es of app lying th e UFTA. Pet it io ne rs , ho wev er, arg ue th atth e fo rm of t he st oc k s al e sh ou ldbe res pe ct ed
. Whe re a d eci si on in vo lv es Sta te law, we “ m us t ap pl y Sta te law i n t he m an ne r th at th e h ig he stco urt o f th e St at e h as in di cat edth atitwou ldap pl y th e law.” Swor ds Trus t v . Comm is si on er, 1 42 T.C. 31 7, 3 42 (20 14 ). If th e St at e’s hi gh es t co urt h as no t wei gh edinon th e m at te r, we “ m us t p red ic t h ow the hi gh es t s ta te co urt wo ul d de ci de th e is su e u si ng in te rm ed ia te ap pe ll at e co urt d eci si on s, d eci si on s fr om ot he r juri sd ic ti on s, s ta tu te s, treat is es , andres ta te m en ts as g ui danc e.” Ves ta r Dev . II, LLC v. Gen . Dy

na m ic s C or

p., 2 49 F.3d95 8, 9 60 (9t h C ir. 2 00 1) (qu ot in g Lewi s v . Tel. Em ps . Cred itUni on , 87 F.3d15 37 , 15 45 (9th C ir. 1 99 6) ). Ariz on a h as no t p ro vi de d asp eci fic tes t t o d et erm in e whe n t he do ctrin e o f
subs tanc e o ve r fo rm

wil l b e u se d t o re cas t a t ran sa ct io n fo r pu rp os es of the UFTA. Howev er, unl es s s pe ci fic al ly dis pl acedby its pro vi si on s, the pri nc ip le s o f la w and equi ty sup pl em en t the UFTA. Ariz. Rev . Sta t. An n. s ec. 4 4- 10 10 . Accor di ng ly,
we m us t l oo k t o o th er ca se s tha t h av e ap pl ie d t he subs ta nc e o ve r fo rm do ctrin e in si mil ar s itua ti on s. See Alt erm anTrus t v . Comm is si on er, T.C. Mem o. 2 01 5- 23 1.- 13 -

[* 13 ] Inord er fo r th e st oc k s al e to be reca stas ali qu id at in g d is tri bu ti on , res po nd en t m

us t p ro ve th atpe ti ti on ers ha d a ctua l o r co ns tru ct iv e kno wled ge of t he
en ti re s ch em e. See i d. at*4 8 (“ [I]n o rd er t o ‘ren de r th e in it ia l tran sf eree ’s
ex ch an ge with ade bt orfrau du le nt , th attra ns fere e m us t h av e h adeithe r actua l o r co ns tru ct iv e kno wled ge of the en ti re s ch em e.’” (qu ot in g S tarn es v. Co m m is si on er, T.C. Mem o. 2 01 1- 63 , sl ip op . at 2 4) ). W e fi ndth atres po nd en t d idno t s us ta in hi s bu rd enof p ro of

as t o e ithe r actua l o r co ns tru ct iv e kno wled ge . 1. Actua l Kn owl ed ge Mrs . Slo ne was n otin vo lv edinth e b us in es s an d was si m pl y a si gn at ory

to th e sa le do cum en ts . W e h ol d t ha t s he di d n otha ve actua l kno wled ge . Mr. Ro be rts advi se d M r. Slo ne of F ortre ndan d M id Co as t’s p ro po sa l t o pu rch as e Sl on e Bro ad cas ti ng ’s st oc k, an d M r. Slo ne auth or iz edMr. Ro be rts to in ve st ig at e th e tr an sa ct io n. Mr . Rob ert s h ire d M r. Ph il li ps to advi se Mr. Sl on e o n pr op os al s fr om

Fo rtr en d, an d M r. Slo ne m etwith M r. Ph il li ps to di sc us s the st oc k
sa le on on e o ccas io n. Mr . Slo ne rel ie d o n h is advi se rs ’ ex pe rti se an d h adno in vo lv em en t i n v et ti ng th e le gi ti m acy of th e tr an sa ct io n o r ne go ti at in g i ts term s. W e h ol d t ha t M r. Slo ne di d n otha ve actua l kno wled ge of t he sch em e th at Fo rtr en d/ Berl in ettapl an ne d t o u se to av oi d p ay in g S lo ne Bro ad cas ti ng ’s tax li ab il ity .- 14 -

[* 14 ] Mr. Ro be rts an d M r. Ph il li ps kn ew th atFo rtr en d p lann edto tak e st ep s t o reduc e th e am ou ntof i nc om e ta x due as ares ul t o f th e as se t s al e b utwere st on ewal le d wh enth ey

ask edab ou t the strat eg y

Berl in et tapl an ne d t o u se . They were t ol d t ha t the se m etho ds were “pr op rie ta ry ” an d c ou ldno t b e rev eal ed . W e ho ldth at , li ke Mr. an d M rs . Slo ne , th atMr. Ro be rts an d M r. Ph il li ps di d n otha ve actua l kno wled ge of the sch em e th atFo rtr en d/ Berl in et tapl anne d t o e m pl oy in
or de r to av oi d p aym en t o f Sl on e Bro ad cas ti ng ’s in co m e ta x l iabi li ty. Mr. Ba rk le y

an d M r. Gad ari ansi m il arl y lac ke d a ctua l kno wled ge of Fo rtr en d/ Berl in etta ’s sch em e. Mr. Gad ari anrev ie weda m em or an du m pre pa redby Mr. Ph il li ps , per fo rm edhi s o wn re se arch , andadvi se d M r. Bark le y th atth ere wer e no m at eri al leg al is su es inpro ceed in g wi thth e st oc k s al e. W e h ol d t ha t M r. Gad ari anan d M r. Bark le y ha d n o a ctua l kno wled ge of F ortre nd/B erl in et ta ’s tax
av oi da nc e sc he m e.

2. Co ns tru ct iv e Kno wled ge Co ns tru ct iv e kno wled ge ex is ts when , onth e b as is of t he cir cu m st an ces , th e tra ns fere e sh ou ldhave kn own ab ou t the en ti re s ch em e. Dieb ol d F ou nd ., Inc . v. Co m m is si on er, 7 36 F.3d17 2 (2 d C ir. 2 01 3) , vac at in g a ndrem an di ng Sal us Mu nd i Fo un d. v . Comm is si on er, T.C. Mem o. 2 01 2- 61 ; HBE Leas in g v . Fran k, 4 8 F .3d 62 3, 6 36 (2dCir . 19 95 ). It al so ex is ts insi tu at io ns wher e tr an sf eree s “ were awa re- 15 -

[* 15 ] of c irc um st an ces th atsh ou ldha ve ledth em to in qu ire furth er i nt o t he ci rcu m st an ces of the trans act io n, b ut* * * [t he y ] fai le d t o m ak e su chin qu iry.” Dieb ol d F ou nd ., Inc . v. Co m m is si on er, 7 36 F.3dat 1 87 (qu ot in g HBE Lea si ng , 48 F.3 d a t 6 36 ). As n ot edab ov e, Mrs . Slo ne ha d n o i nv ol ve m en t i n t he st oc k s al e o th er tha n si gn in g d oc um en ts . Mr. Sl on e rel ie d o n M r. Ro be rts an d M r. Ph il li ps to advi se hi m reg ard in g t he tra ns act io n’s p ro pr ie ty. Mr. Sl on e cre di bl y tes ti fie d a t tria l tha t be cau se he lac ke d t he kn owl ed ge to de te rm in e whe th er i t wo ul d b e “ al l ri gh t” to
se ll th e Sl on e Bro ad cas ti ng st oc k, h e h ire d i nd iv idua ls with t he requi si te ex pe rti se to advi se hi m . He hadno own ers hi p i nt eres t an d h adres ig ne d a ll po si ti on s i n t he
co rp or at io n at the ti m e th e st oc k s al e cl os ed . W e h ol d t ha t M r. an d M rs . Slo ne di d
no t h av e co ns tru ct iv e kno wled ge of F ortre nd ’s tax av oi da nc e sc he m e. Mr. Ro be rts an d M r. Ph il li ps were awar e th atFo rtr en d h ada st rat eg y to reduc e th e in co m e ta x t ha t wo ul d b e due as ares ul t o f th e as se t s al e. They m ad e a reas on ab le in qu iry as t o t he act io ns Berl in et tawou ldtak e to ach ie ve th e ta x sa vi ng s an d wer e to ldth atFo rtr en d’s m etho ds were “pr op rie ta ry ” an d c ou ldno t b e di sc lo se d. Bu t Fo rtr en d d idrep res en t tha t Be rli ne tt a h adno t en ga ge d i n a ny tra ns act io ns th atwou ldbe de em eda li st edtra ns act io n p ur su an t t o No ti ce 2 00 1- 51 ,- 16 -

[* 16 ] supr a. Pet it io ne rs ’ advi se rs si m il arl y lac ke d c on st ru ct iv e kno wled ge of Fo rtr en d/ Berl in etta ’s sch em e. Mr. Gad ari an , ano th er i nd ep en de nttax att orne y , was h ire d t o a dv is e th e Sl on e GST Trus t wi thres pe ctto an y Fo rtr en d p ro po sa ls . Mr. Gad ari anco nc lu de d th atth ere was no reas on to th in k t ha t Fo rtr en d was in vo lv edinan y im pr op rie ty. Pet it io ne rs ’ advi se rs ’ du e d il ig en ce co nf irmed th atMi dC oa stwas a le gi ti m at e p lay er i n t he de btreco ve ry bu si ne ss kn ownforit s “ ha rd ba ll ” co ll ect io n ta ct ic s. Mi dC oa stan d F ortre ndwere re pr es en te d b y rep ut ab le law an d a cco un ti ng firm s. Mr. Ph il li ps ’ m em or an du m to Mr. Gad ari anda te d No ve m be r 21 , 20 01 , ex pl ai ns Fo rtr en d’s p lan t o o ffs etth e g ai ns fro m th e as se t s al e b y

co nt rib ut in g h ig h ba si s/ lo w val ue ass et s t o B erl in et taina se ct io n 3 51 tra ns act io n a ndsel li ng th os e as se ts at alo ss be fo re the en d o f 20 01 . This in fo rm at io n was in su ffi ci en t t o g iv e pe ti ti on ers ’ advi se rs kn owl ed ge of F ortre nd ’s sch em e. As we h av e ackno wled ge d in ot he r cas es : “ [T]here are l eg it im at e ta x p la nn in g s tra te gi es in vo lv in g b ui lt -in ga in s an d l os se s an d * * * itwas n otun reas on ab le , inth e ab se nc e o f co nt rad ic to ry in fo rm at io n, fo r th e rep res en ta ti ve s t o b el ie ve th atth e b uyer ha d aleg it im at e ta x pl an ni ng m etho d.” Alt erm anTrus t v . Comm is si on er, at*5 8 (quo ti ng Swor ds Trus t v . Comm is si on er, 1 42 T.C. at 3 49 ).- 17 -

[* 17 ] Pet it io ne rs an d t he ir a dv is ers ha d n o re as on to be li ev e th atFo rtr en d’s st rat eg ie s wer e o th er than l eg it im at e ta x p la nn in g m etho ds . W e h ol d t ha t the form of th e st oc k s al e m

us t b e res pe ct edbe cau se pe ti ti on ers an d t he ir a dv is ers di d n ot ha ve actua l o r co ns tru ct iv e kno wled ge of F ortre nd ’s tax strat eg ie s b efo re o r aft er th e cl os in g o f th e st oc k s al e tr an sa ct io n. B. App li cat io n o f th e UFTA to th e St oc k S al e Now tha t we h av e d et erm in edth atth e fo rm of t he st oc k s al e m

us t b e res pe ct ed , we wil l ap pl y

th e UFTA to th e tr an sa ct io n t o d et erm in e whe th er pe ti ti on ers m ay

be he ldsubs tant iv el y

li ab le forSlo ne Bro ad cas ti ng ’s unpa idtax es un de r Ariz on a la w. Resp on de ntass ert s tha t p et it io ne rs are l iabl e und er the
co ns tru ct iv e fraudpro vi si on s fo un d i n Ari z. Rev . Sta t. Ann. s ecs . 44 -1 00 4( A)(2 )
an d 4 4- 10 05 an d fo r actua l fr au d u nd er Ari z. Rev . Sta t. An n. s ec. 4 4- 10 04 (A)(1 ). W e wil l ad dr es s ea chintu rn . Fo r pu rp os es of t he UFTA, a “ cred it or ” is de fin edas ape rs on who ha s a rig htto pa y

m en t, an d a“ de bt or ” is a pe rs on who is li ab le form ak in g t he pa ym en t. Id . sec . 44 -1 00 1( 2) , (3) , (5) . A tran sf er i s b ro ad ly defi ne d a s “ ev ery m od e, di rect
orin di rect , abs ol ut e o r co nd it io na l, v ol un tary or i nv ol un ta ry , of d is po si ng of o r pa rti ng with a n a ss etor a n i nt eres t i n a n a ss etan d i nc lu de s p aym en t o f m on ey , rel eas e, le as e an d c reat io n o f a l ie n o r ot he r en cu m br an ce.” Id . sec . 44 -1 00 1( 9)
.- 18 -

[* 18 ] 1. Ari z. Rev . Stat. Ann. Se c. 44 -1 00 4( A)(2 ) Ariz . Rev . Sta t. An n. s ec. 4 4- 10 04 (A)(2 ) pr ov id es th ata tr an sf er m ad e b y

a de bt oris frau du le ntas t o acred it or if t he de bt orm ad e th e tr an sf er * * * witho utrece iv in g areas on ab ly equi va le ntva lu e in ex ch an ge forth e tr an sf er o r ob li ga ti on , andth e de bt or eithe r: (a ) W as en ga ge d o r was ab ou t t o e ng ag e in a bu si ne ss ora tr an sa ct io n fo r whi chth e rem ai ni ng ass et s o f th e d eb to r were un reas on ab ly sm al l i n re la ti on to th e b us in es s o r tr an sa ct io n. (b ) In te nd edto in cu r, or

be li ev edor r eas on ab ly sho ul d h av e b el ie ve d tha t he wou ldin cu r, de bt s b ey on d h is ab il ity to pay as t he y be cam e due . Thi s i s tru e reg ard le ss of wh ethe r th e cre di to r’s cl ai m aro se be fo re o r aft er the tra ns fer was m ad e. Id
. Inth es e cas es th e IRS was the cred it oran d S lo ne Bro ad cas ti ng was the de bt or . Whe n p et it io ne rs so ldth ei r Sl on e Bro ad cas ti ng sh ares , th e co ns id erat io n th ey rece iv edwas fr om

Berl in et ta , no t fr om

Slo ne Bro ad cas ti ng . In fa ct , no co ns id erat io n was rece iv edfro m Slo ne Bro ad cas ti ng be cau se th e fo rm of t he st oc k
sa le tra ns act io n m

us t b e res pe ct ed . Becau se no tra ns fer was m ad e b y Slo ne Bro ad cas ti ng --the de bt or --as a res ul t o f th e st oc k s al e, we ho ldth ere was no co ns tru ct iv e fraudpu rs ua ntto Ariz . Rev . Sta t. An n. s ec. 4 4- 10 04 (A)(2 ). See Alt erm anTrus t v . Commis si on er, at*6 5 (“ The IRS i s a c red it orof AC , bu t the AC sh areh ol de rs di d n otrece iv e tr an sf ers fro m AC whe n t he y

so ldth ei r st oc k t o t he Mi dC oa stacqui si ti on ve hi cl es .”).- 19 -

[* 19 ] 2. Ari z. Rev . Stat. Ann. Se c. 44 -1 00 5 The UFTA in cl ud es an ot he r co ns tru ct iv e fraudpro vi si on . A tran sf er b y a de bt oris frau du le ntas t o acred it orwho se cla im aro se be fo re the tra ns fer was
m ad e if th e d eb to r m ad e th e tr an sf er wi th ou t re cei vi ng reas on ab ly equ iv al en t v al ue in ex ch an ge an d was in so lv en t atth atti m e o r be cam e in so lv en t as a res ul t o f th e tra ns fer. Ari z. Rev . Stat. Ann. s ec. 4 4- 10 05
. As n ot edab ov e, th e st oc k s al e res ul te d i n B erl in et ta ’s m ak in g t ran sf ers to pe ti ti on ers , no t Sl on e Bro ad cas ti ng ’s. Becau se th ere wer e n o t ran sf ers m ad e b y Sl on e Bro ad cas ti ng , th e d eb to r, we ho ldth atAriz . Rev . Sta t. Ann. s ec. 4 4- 10 05
can no t b e ap pl ie d t o t he st oc k s al e. See Al te rm anTrus t v . Comm is si on er, at*6 7 (“ AC di d n otm ak e an y

tra ns fers to pe ti ti on ers inth e st oc k s al e to th e Mi dC oa st acqui si ti on ve hi cl es .”).

3. Ari z. Rev . Stat. Ann. Se c. 44 -1 00 4( A)(1 ) The UFTA als o h as anactua l fr au d p ro vi si on . A tran sf er b y a de bt oris frau du le ntas t o acred it or , reg ard le ss of wh ethe r th e cre di to r’s cl ai m aro se be fo re oraft er the tra ns fer was m ad e, if th e d eb to r m ad e th e tr an sf er “ [w]ith actua l i nt en t to hi nd er, d el ay

or d efraudan y

cred it or of t he de bt or .” Ariz . Rev . Sta t. An n. s ec. 44 -1 00 4( A)(1 ). Ariz. R ev . Sta t. An n. s ec. 4 4- 10 04 (B) s et s fo rth th e fo ll owi ng 11 fact or s tha t m ay

be co ns id eredwhen de te rm in in g wh ethe r actua l i nt en t ex is ts :- 20 -

[* 20 ] 1. Th e tr an sf

er o r ob li ga ti on was t o a n i ns id er. 2. Th e d eb to r ret ai ne d p os se ss io n o r co nt ro l o f th e p ro pe rty tra ns ferr edaft er the tra ns fer. 3. Th e tr an sf

er o r ob li ga ti on was d is cl os edor c on ceal ed
. 4. Be fo re the tra ns fer was m ad e o r ob li ga ti on was i nc urred , th e d eb to r ha d b eensu edor t hr eat en edwith s ui t. 5. Th e tr an sf

er was of s ub st an ti al ly all o f th e d eb to r's ass et s. 6. Th e d eb to r ab sc on de d. 7. Th e d eb to r rem ov edor c on ceal edass et s. 8. Th e v al ue of t he co ns id erat io n re cei ve d b y th e d eb to r was reas on ab ly equ iv al en t t o the va lu e o f th e as se t tran sf erre d o r th e am ou ntof t he ob li ga ti on in curred
. 9. Th e d eb to r was in so lv en t o r be cam e in so lv en t s ho rtl y aft er the tra ns fer was m ad e o r th e o bl ig at io n was in cu rred
. 10 . The tran sf

er o ccu rredsh ortl y

be fo re o r sh ortl y

aft er a s ub st an ti al de btwas i nc urred
. 11 . The d eb to r tr an sf

erre d t he ess en ti al ass et s o f th e b us in es s t o a li en orwho tra ns ferr edth e as se ts to anin si de r of th e d eb to r. The re i s n o d is pu te th at5 o f th e 1 1 fa ct or s ar e n otpre se ntinth es e cas es . W e h ol d t ha t the de bt or , Slo ne Bro ad cas ti ng : (1 ) di d n otret ai n p os se ss io n o r co nt ro l o f th e tr an sf

erre d p ro pe rty afterth e st oc k s al e; (2) di d n otco nc eal th e st oc k s al e; (3) ha d n otbe ensu edor t hr eat en edwith s ui t b efo re the st oc k s al e; (4) di d n otab sc on d; an d (5 ) di d n ottra ns fer the ess en ti al ass et s o f th e b us in es s t o a li en orwho tra ns ferr edth e as se ts to on e o f it s i ns id ers . Res po nd en t ar gu es , ho wev er, fac to rs 1, 5 , 7, 8 , 9, an d 1 0 d o app ly to the se cas es . W e wil l ad dr es s each intu rn .- 21 -

[* 21 ] a. Fact or1: Trans fer t o a n In si de r Res po nd en t ar gu es th atSlo ne Bro ad cas ti ng ’s ass et s wer e tr an sf erre d t o in si de rs . This arg um en t fa il s b ecau se we ha ve he ldth atth e fo rm of t he st oc k s al e
m us t b e res pe ct ed . Peti ti on ers so ldth ei r st oc k i n S lo ne Bro ad cas ti ng to Berl in et ta in ex ch an ge for

cas h, an d t he re was no tra ns fer o f Sl on e Bro ad cas ti ng ’s ass et s t o pe ti ti on ers . This fact ordo es no t wei gh infav orof f in di ng actua l fr au d u nd er the UFTA. b. Fa ct or5: Trans fer o f Subs ta nt ia ll y All Ass et s Res po nd en t al le ge s tha t the cas h p et it io ne rs rece iv edinex ch an ge for th ei r sh ares co ns ti tu te d ali qu id at in g d is tri bu ti on of s ub st an ti al ly all o f Sl on e Bro ad cas ti ng ’s ass et s. We di sa gr ee b ecau se th e fo rm of t he st oc k s al e m

us t b e res pe ct ed . Peti ti on ers rece iv edcas h fr om Berl in et tainex ch an ge forth ei r Sl on e Bro ad cas ti ng sh ares . They di d n otrece iv e a tran sf er o f subs ta nt ia ll y

all of S lo ne Bro ad cas ti ng ’s ass et s. Th is fact ordo es no t wei gh infav orof f in di ng actua l fr au d
un de r th e UFTA. c. Fact or7: Debt orRem ov edor C on ceal edAss et s Res po nd en t as se rts th atpe ti ti on ers rem ov edSlo ne Bro ad cas ti ng ’s ass et s be cau se th ey

rece iv ed , insubs tanc e, a li qu id at in g d is tri bu ti on inex ch an ge forth ei r st oc k i n ade fact o l iqui da ti on . Becau se we ha ve he ldth atth e fo rm of the st oc k- 22 -

[* 22 ] sal e m

us t b e res pe ct ed , we di sa gr ee. The tra ns fer a t i ss ue inth es e cas es , th e st oc k s al e, di d n otres ul t i n arem ov al of S lo ne Bro ad cas ti ng ’s ass et s. Pet it io ne rs are n otres po ns ib le for

Berl in et ta ’s act io ns th atoc curredaft er the clo si ng of the st oc k s al e. Thi s fa ct ordo es no t wei gh infav orof f in di ng actua l fr au d u nd er the UFTA. d. Fa ct or8: Valu e o f Co ns id erat io n Deb to r Rec ei ve d

Reas on ab ly E qu iv al en t t o Val ue of As se t Tran sf erre d Res po nd en t al le ge s tha t Sl on e Bro ad cas ti ng di d n otrece iv e co ns id erat io n i n ex ch an ge forth e tr an sf

er o f it s as se ts . Becau se we ha ve he ldth atth e fo rm of t he st oc k s al e m

us t b e res pe ct ed , we di sa gr ee. Pet it io ne rs rece iv edcas h fr om Berl in et tainex ch an ge for th ei r Sl on e Bro ad cas ti ng sh ares . Slo ne Bro ad cas ti ng di d n otsu rren de r any

ass et s o r rec ei ve an y

co ns id erat io n i n c on ne ct io n wi th th e st oc k s al e. Thi s fa ct ordo es no t wei gh infav orof f in di ng actua l fr au d u nd er the UFTA. e. Fact or9: Debt orIns ol ve ntor B ecame Ins ol ve ntSh ortl y

After Tran sf

er Was Ma de Fo r pu rp os es of t he UFTA, “ [a] deb to r is in so lv en t i f th e su m of t he de bt or ’s de bt s i s g reat er tha n a ll of t he de bt or ’s ass et s ata fai r va lu at io n.” Ariz. Re v. St at . Ann . sec . 44 -1 00 2( A). Debt or s tha t ar e n otge ne ral ly pay in g t he ir d eb ts as t he y co m e due are p res um edto be in so lv en t. Id . sec . 44 -1 00 2( B).- 23 -

[* 23 ] Sl on e Bro ad cas ti ng ’s ass et s ex ceed edit s d eb ts at the clo si ng da te of t he st oc k s al e. Slo ne Bro ad cas ti ng pa id$3 .1 m il li on as a n e st im at edpa ym en t t owa rd s it s Fe de ral in co m e ta x l iabi li ty befo re the clo si ng of t he st oc k s al e. Res po nd en t di d n otpro ve th atth e su m of S lo ne Bro ad cas ti ng /Ari zo naMed ia ’s deb ts was gr eat er tha n a ll of S lo ne Bro ad cas ti ng /Ari zo naMed ia ’s ass et s ata fai r va lu at io n. Nordi d h e p ro ve th atSlo ne Bro ad cas ti ng /Ari zo naMed iawas n otpa y in g i ts de bt s as th ey cam e due . Arizo naMed ia ’s Fed eral in co m e ta x l iabi li ty w as indi sp ut e un ti l i t b ecame fix edon Apri l 1 4, 2 00 8, wh enitsubm it te d aFo rm 87 0- AD, Offer to W ai ve Res tri ct io ns on Ass es sm en t an d C ol le ct io n o f Tax Defi ci en cy an d t o Accep t Ov eras se ss m en t, ac cep ti ng a de fic ie nc y forit s TYE Ju ne 30 , 20 02
. Acco rd in gl y , res po nd en t h as no t m ethi s b ur de n o f pr oo f to sh ow tha t atth e ti m e of th e st oc k s al e, orsh ortl y th erea fte r, Slo ne Bro ad cas ti ng /Ari zo naMed iawas in so lv en t. Thi s fa ct ordo es no t wei ghinfav orof f in di ng actua l fr au d u nd er the UFTA. f. Fact or10 : Tran sf er Occu rredSh ortl y

Befo re o r Sh ortl y After Subs ta nt ia l Deb t Was In cu rred Res po nd en t ar gu es th atth e st oc k s al e o ccu rredsh ortl y aft er the sal e o f Sl on e Bro ad cas ti ng ’s ass et s, wh ic h g av e ri se to subs ta nt ia l d eb t-- it s t ax li ab il it ie s. The UFTA defi ne s “ de bt ” as a li ab il ity on a cl ai m , andth e te rm

“ cl ai m ” is bro ad ly- 24 -

[* 24 ] de fin edto m eana ri gh t t o p aym en t, ev enif c on ti ng en t, u nm atur edan d
un se cured . Id. s ec. 4 4- 10 01 (2 ), (4 ). The s al e o f Sl on e Bro ad cas ti ng ’s ass et s t o Ci ta de l o n J ul y

2, 2 00 1, re su lt edinanest im at edco m bi ne d F ed eral an d S tate in co m e ta x l iabi li ty of ap pr ox im at el y $1 5 m il li on . App ro xi m at el y fiv e m on th s la te r, atth e ti m e o f th e st oc k s al e, Sl on e Bro ad cas ti ng ha d ade btfor th e p res um ed ta x due fro m

th e as se t s al e. Thi s fa ct or do es no t p ers ua de us to ho ldth atth ere was actua l fr au d u nd er the UFTA. Ourev al ua ti onof t he fact or s s etforth inth e UFTA lea ds us to co nc lu de th at th ere was no actua l fr au d, an d we s o h ol d. II. Co nc lu si on On the ba si s o f th e ab ov e an al y si s, we h ol d t ha t the Sta te law p ro ng of t he St erntes t h as no t b eensat is fie d. Sati sf act io n o f bo th pro ng s o f th e St erntes t i s ne ces sa ry inord er fo r res po nd en t t o p rev ai l i n t he se cas es . See Sl on e v . Co m m is si on er, 8 10 F.3dat 6 08 (“ The Co m m is si on er m ay

ho ldth e sh areh ol de rs li ab le as ‘tra ns fere es ’ un de r § 6 90 1 o nl y if b ot h p ro ng s o f th e St erntes t ar e sa ti sf ie d.” ). Becaus e we h av e h el d tha t the Sta te law p ro ng of t he Ste rntes t h as no t b eensat is fie d, i t i s n otne ces sa ry forus to an al yze the Fed eral law p ro ng of t he te st .- 25 -

[* 25 ] Inreac hi ng ou r de ci si on , we hav e co ns id eredall arg um en ts , and , to th e ex te ntno t m en ti on edab ov e, we co nc lu de th ey are m oo t, i rrel ev an t, o r witho ut
m eri t. To re fle ctth e fo reg oi ng , Deci si on s wi ll be en te redfor pe ti ti on ers .