T.C. Memo. 1997-394

UNITED STATES TAX COURT

JAMES E. GRIFFIN AND KATRINA F. GRIFFIN, TRANSFEREES,

 Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 18009-94. Filed August 26, 1997.

Thomas J. Brown and Hubert R. Brown, for petitioners.

Michael A. Pesavento, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

RUWE, Judge: Respondent asserts that petitioners, as

transferees of assets of Rodger L. Fisher, are liable for unpaid

Federal income taxes of Mr. Fisher for the taxable years 1991 and 
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1The notice of transferee liability, issued to petitioners

on July 7, 1994, determined a liability of $84,467. In an

amended answer, respondent increased the amount of transferee

liability asserted against petitioners to $87,516. 

2Unless 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.

1992, in the amount of $87,516, plus interest as provided by

law.1 Respondent determined, and petitioners concede, for the

purposes of this proceeding, that Mr. Fisher's unpaid 1991 and

1992 deficiencies and additions to tax are:

 Addition to Tax

 Year Deficiency Sec. 6663 

 1991 $52,165 $40,865

 1992 30,771 23,078

The issue for decision is whether petitioners are liable as

the transferees of assets of Mr. Fisher under section 6901,2 and,

if so, the amount of such liability.

FINDINGS OF FACT

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

Petitioners resided in Tallahassee, Florida, at the time they

filed their petition. Petitioners were married to each other

throughout the period relevant to this case. Mrs. Griffin and

Mr. Fisher are sister and brother. 
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Mr. Fisher's Tax Liability

Mr. Fisher was employed by the Department of General

Services for the State of Florida from 1985 through April 1992. 

Mr. Fisher's duties in this capacity included overseeing the

contracts between the State of Florida and telephone carriers

such as AT&T and Southern Bell, whereby these carriers would pay

commissions to the State measured by the use of their services at

pay telephones located on State property. 

Sometime prior to June 1991, Mr. Fisher identified certain

pay telephones that were not then covered under any State agency

contract with the carriers. In order to receive the commissions

generated by these telephones, Mr. Fisher created three

fictitious entities and gave them names that sounded like

legitimate State agencies, such as "Florida TransportationMaintenance", "Florida Maintenance and Repair", and "Florida

Rehabilitative Service". When the agency contracts with the

carriers were negotiated in July 1991, Mr. Fisher caused separate

contracts to be entered into between the fictitious entities and

the carriers with respect to these telephones. 

During the 8-month period beginning in August 1991, and

continuing through March 1992, Mr. Fisher diverted approximately

$300,000 in commissions that should have been paid to the State

of Florida. The diverted commissions were paid to the three
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3The Florida Department of Law Enforcement was able to

recover only $30,000 out of the approximately $300,000 diverted

by Mr. Fisher. 

fictitious entities and deposited into five different bank

accounts. 

Mr. Fisher began contemplating his scheme well before the

first diversion. Mr. Fisher began taking action on his plan as

early as April 17, 1991, when he leased P.O. Box 3794 in Leon

County, Florida. This post office box was listed as the mailing

address for several of his fictitious entities and was the

address to which many of the diverted commissions were mailed.

On March 17, 1993, Mr. Fisher was found guilty by a jury in

Leon County, Florida, of grand theft and official misconduct in

connection with the diversion of the telephone commissions. Mr.

Fisher was sentenced to imprisonment for a term of 4 years and

ordered to pay restitution in the amount of $288,312.3 

Mr. Fisher was also indicted on Federal charges based on his

diversion of telephone commissions. In consideration of being

allowed to plead guilty to one count of this Federal indictment,

Mr. Fisher agreed to forfeit to the United States all rights,

title, and interest in a 0.92-acre parcel of land and a 0.25-acre

parcel of land. In order to accomplish this, Mr. Fisher secured

the signatures of petitioners on a quitclaim deed dated May 9,

1994, which describes these two parcels. Mr. Fisher was then
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sentenced to prison for a term of 30 months to run concurrently

with the sentence imposed by the State of Florida.

Mr. Fisher did not report the diverted proceeds on his

Federal income tax returns for 1991 and 1992. Using a bank

deposit analysis, respondent determined that Mr. Fisher failed to

report income from his illegal activities of $174,789 and

$118,401 for 1991 and 1992, respectively. As previously

indicated, petitioners do not contest respondent's determination

of deficiencies and additions to tax against Mr. Fisher.

Transfers of Real Property and Mortgage Payments

Mr. Fisher started planning the diversion of the telephone

commissions prior to June 1991. On June 6, 1991, Mr. Fisher

transferred to petitioners, by warranty deed, his interest in

three contiguous parcels of land located at 6913 Apalachee

Parkway, Tallahassee, Florida. These parcels consisted of a 2-

acre parcel (parcel 1), a 0.92-acre parcel (parcel 2), and a

0.25-acre parcel (parcel 3). On the date of these transfers,

there was only one improvement built on these parcels, which

consisted of a house constructed in 1989 on parcel 1. Mr. Fisher

applied for the construction permit for this house, and upon its

completion he moved into the house and continued to reside

therein until his imprisonment in 1993. The fair market value of
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4The 2-acre improved parcel with the house had a fair market

value of $59,000, and the remaining two parcels had a fair market

value of $10,000 together. 

5Mr. and Mrs. Fisher had approximately $30,000 in equity in

this property at the time of their divorce. 

the three parcels transferred on June 6, 1991, including the

house built in 1989, was $69,000 as of that date.4 

Mr. Fisher and his former wife, Alice A. Fisher, originally

obtained title to parcel 1 sometime in 1984. On November 15,

1984, Mr. and Mrs. Fisher borrowed $10,000 from North Florida

National Bank. This loan was secured by a mortgage on parcel 1. 

Under the terms of this loan, Mr. and Mrs. Fisher promised to pay

$244.38 per month for 5 years. 

Mr. and Mrs. Fisher were divorced in 1985. The Circuit

Court for Leon County, Florida, issued a Final Judgment of

Dissolution of Marriage on April 26, 1985. As part of this

judgment, Mrs. Fisher was awarded the house and property located

at 5741 Donnesbury Way, Tallahassee, Florida, in which Mr. and

Mrs. Fisher were residing prior to the divorce.5 Mr. Fisher was

awarded parcel 1 located at 6913 Apalachee Parkway. 

On June 10, 1988, Mr. Fisher executed a real estate mortgage

on parcel 1 to secure his indebtedness of $10,937.46 to C & S

Family Credit, Inc. On September 14, 1988, Mr. Fisher executed a

mortgage on parcel 1 to secure his indebtedness of $21,875.03 to

C & S Family Credit, Inc. On February 10, 1989, Mr. Fisher
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executed a mortgage on parcel 1 to secure an initial advance of

$35,000 from Government Employees Credit Union of Florida. 

Mr. Fisher obtained title to parcel 2 on January 25, 1990. 

The record is not clear regarding when Mr. Fisher obtained title

to parcel 3. On February 19, 1990, Mr. Fisher executed a

mortgage on parcels 1 and 3 to Real Estate Financing, Inc.

(REFI), to secure a loan in the original amount of $53,877. The

REFI mortgage was the only encumbrance against the three parcels

as of June 6, 1991. The amount of unpaid principal on the REFI

loan as of June 6, 1991, the date the three parcels were

transferred to petitioners, was $51,871. 

Subsequent to the transfer to petitioners on June 6, 1991,

Mr. Fisher continued to reside in the house on parcel 1 and

continued to make payments on the REFI loan. During the 6-month

period following the transfer, Mr. Fisher paid off the

outstanding balance on the REFI loan in its entirety. The

following amounts were paid to REFI by Mr. Fisher:

 Date Amount

 06/17/91 $600.00

 07/16/91 600.00

 07/23/91 202.10

 08/13/91 600.00

 09/10/91 600.00

 09/18/91 109.22

 10/11/91 20,582.27

 10/29/91 678.74

 10/29/91 27,903.53

 11/19/91 433.83

 12/05/91 3,619.88
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6During this time, petitioners were living in the State of

Arizona.

 Total $55,929.57

Petitioners did not pay any consideration for the real

property that Mr. Fisher transferred to them on June 6, 1991, or

for any of the subsequent loan payments made by Mr. Fisher to

REFI. 

Transfers of Cash

Between December 3, 1991, and March 14, 1992, Mr. Fisher

sent six checks to petitioners, which totaled $81,917.67.6 These

checks were drawn from the bank accounts into which Mr. Fisher

had put diverted telephone commissions. Of the $81,917.67 in

checks from Mr. Fisher, two checks in the amounts of $13,620.80

and $13,822.68 were not honored because of insufficient funds in

Mr. Fisher's accounts. Therefore, the total amount deposited by

petitioners into their joint account was $54,474.19. Shortly

after these checks were deposited into petitioners' account, Mr.

Fisher directed Mrs. Griffin to return some of the proceeds to

him and to his designees. The total amount ($40,016.22) returned

by petitioners between December 23, 1991, and March 13, 1992,

was:

 Date Payee Money Order No. Amount

 12/23/91 Rodger Fisher T1908127 $15,000.00

 02/03/92 Elizabeth Bollema T1908442 500.00
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7Petitioners contend that payments to Mr. Fisher, and to

others on his behalf, should be considered in determining their

liability as transferees. In their brief, petitioners contend

that the total amount retransferred to Mr. Fisher and his

designees was $17,500 and refer to the exhibit reflecting the six

checks totaling $21,000.

 02/03/92 Lucious Little T1908443 7,500.00

 02/03/92 Sandra Clary T1908444 7,500.00

 03/13/92 Rodger Fisher T1908860 9,516.22

 Total $40,016.22

Respondent contends that petitioners retained $14,457.97

($54,474.19 less $40,016.22) from the checks received from Mr.

Fisher. 

Subsequent Transfers by Petitioners

Petitioners made the following payments by check or

cashier's checks during 1992:7

 Date Payee Check No. Amount

 08/05/92 Roosevelt Randolph 3517 $3,500

 08/05/92 Thomas Brown 3518 3,500

 08/11/92 Rodger Fisher 3521 2,500

 08/11/92 Ameritrust Co. 570 4,500

 National Association

 10/14/92 Thomas Brown 3622 3,500

 10/14/92 Roosevelt Randolph 3623 3,500

 Total $21,000

OPINION

Section 6901(a) provides a procedure whereby taxes owed by a

transferor may be collected from a transferee. Commissioner v.
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8There are some situations where the existence and extent of

transferee liability is a matter of Federal law. See, e.g., sec.

6324(a)(2) and (b).

Stern, 357 U.S. 39, 42-47 (1958); Hagaman v. Commissioner, 100

T.C. 180, 183 (1993). Section 6901 does not create or define a

transferee's liability. Commissioner v. Stern, supra at 42-43;

Hagaman v. Commissioner, supra. For purposes of this case, the

existence and extent of a transferee's liability, at law or in

equity, is determined by State law.8 Commissioner v. Stern,

supra at 44-45; Hagaman v. Commissioner, supra at 183-185. Thus,

State law determines the elements of liability, and section 6901

provides the remedy or procedure to be employed by the

Commissioner as the means of enforcing that liability. Ginsberg

v. Commissioner, 305 F.2d 664, 667 (2d Cir. 1962), affg. 35 T.C.

1148 (1961). Respondent bears the burden of proving petitioners'

liability as transferees. Sec. 6902(a); Rule 142(d).

Respondent calculated the extent of petitioners' transferee

liability by adding the individual values of the property Mr.

Fisher conveyed to petitioners as follows:

 Value as determined

 Property by respondent 

 Real property located at $17,129

 6913 Apalachee Parkway less

 outstanding mortgage

 Mortgage payments made by 55,930

 Mr. Fisher, subsequent to

 6/6/91, including interest

 Checks 14,457

 Total $87,516
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A. Transfers of Real Property and Mortgage Payments

Florida law is applicable to the transfers of the three

parcels of land located in Tallahassee, Florida. Under Florida's

Uniform Fraudulent Transfer Act (FUFTA), a transfer is fraudulent

as to present and future creditors if the debtor made the

transfer "With actual intent to hinder, delay, or defraud any

creditor of the debtor". Fla. Stat. Ann. sec. 726.105(1)(a)

(West 1988). Fla. Stat. Ann. sec. 726.105(2) (West 1988),

provides: 

(2) In determining actual intent under paragraph

(1)(a), consideration may be given, among other

factors, to whether:

(a) The transfer or obligation was to an insider.

(b) The debtor retained possession or control of

the property transferred after the transfer.

(c) The transfer or obligation was disclosed or

concealed.

(d) Before the transfer was made or obligation

was incurred, the debtor had been sued or threatened

with suit.

(e) The transfer was of substantially all the

debtor's assets.

(f) The debtor absconded.

(g) The debtor removed or concealed assets.

(h) The value of the consideration received by

the debtor was reasonably equivalent to the value of

the asset transferred or the amount of the obligation

incurred.
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9The close relationship of the transferee to the transferor

tends to establish a prima facie case of a fraudulent conveyance

which must be then met by the taxpayer. Money v. Powell, 139 So.

2d 702 (Fla. Dist. Ct. App. 1962).

10Retention of possession of the property after the transfer

creates a prima facie presumption of fraud. Jones v. Wear, 149

So. 345 (Fla. 1933).

(i) The debtor was insolvent or became insolvent

shortly after the transfer was made or the obligation

was incurred.

(j) The transfer occurred shortly before or

shortly after a substantial debt was incurred.

(k) The debtor transferred the essential assets

of the business to a lienor who transferred the assets

to an insider of the debtor.

Several of these listed factors are present here. 

Mr. Fisher transferred his interests in the disputed parcels

of land by warranty deeds on June 6, 1991, to his sister and

brother-in-law, who are "insiders" for the purposes of FUFTA.9

See Fla. Stat. Ann. sec. 726.102(7) (West 1988). Mr. Fisher

retained possession and control of the house that was built in

1989 on one of the parcels. He continued to live there until his

imprisonment in 1993 and continued to make payments on the loan

which encumbered the property.10 Petitioners paid no

consideration in exchange for Mr. Fisher's transfer of the three

parcels. Finally, the transfer of the parcels occurred after Mr.

Fisher took the first step in his diversion scheme and shortly
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11Regardless of when Federal taxes are actually assessed,

taxes are considered as due and owing, and constitute a

liability, no later than the date the tax return for the

particular period is required to be filed. Hagaman v.

Commissioner, 100 T.C. 180, 188 (1993). 

12A resulting trust arises as a matter of law where property

is acquired in the name of one person or entity with

consideration provided by others. Under Florida law, once a

party proves that he paid the purchase price for a piece of

property, a presumption arises that it was the parties' intention

that the individual holding legal title was to hold the property

in trust for the payor. Maliski v. Maliski, 664 So. 2d 341, 342-

343 (Fla. Dist. Ct. App. 1995).

before he received the first illegal diversion of telephone

commissions and incurred the related tax liabilities.11

The above factors support respondent's argument that Mr.

Fisher intended to defraud his creditors. Once respondent

establishes the prima facie case of transferee liability, it is

incumbent upon petitioners to come forth and present evidence in

rebuttal. Nau v. Commissioner, 27 T.C. 999, 1000-1001 (1957),

affd. in part and revd. in part 261 F.2d 362 (6th Cir. 1958). 

Petitioners contend that the three parcels were originally

purchased by Mr. Fisher with petitioners' money and that they

were always the equitable owners of the three parcels. In

essence, petitioners are arguing for a resulting trust.12 The

burden of proving a resulting trust rests with petitioners. 

Powell v. Race, 10 So. 2d 142 (Fla. 1942).

The burden of establishing the existence of a resulting

trust is a heavy one. In Foster v. Thornton, 179 So. 882, 891

(Fla. 1937), the court held that a resulting trust in real estate
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13Mrs. Fisher's name was on the title of parcel 1 for a

short period of time.

may be proved by parol testimony, but such proof must be "full

and clear."

"Evidence to establish a resulting trust must be

so clear, strong, and unequivocal as to remove from the

mind of the Chancellor every reasonable doubt as to the

existence of the trust." [Id. (quoting Geter v.

Simmons, 49 So. 131, 133 (Fla. 1909)).]

"When a resulting trust is sought to be

established by parol evidence, the burden rests upon

the person asserting the existence of the trust to

remove every reasonable doubt as to its existence by

clear, strong, and unequivocal evidence." [Id.

(quoting Brown v. Brown, 143 So. 737, 738 (Fla.

1932)).]

We find that petitioners have not met their burden of producing

such evidence. 

It is undisputed that legal title to the real property was

held by Mr. Fisher at all times prior to the transfer to

petitioners on June 6, 1991.13 However, petitioners claim to

have advanced $4,000 in cash for a downpayment on parcel 1

purchased in 1984, made mortgage payments on a $10,000 loan that

Mr. and Mrs. Fisher made in their own names, and also to have

contributed an undisclosed amount of capital via credit card

purchases of supplies and other materials used in the

construction of the house built on parcel 1 during 1988. These

contentions are not supported by any documentation in the record. 

Petitioners failed to produce any canceled checks, money orders,
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credit card receipts, bank statements, or any other documentation

which would corroborate their argument. 

Petitioners, instead, rely on their own testimony and that

of Mr. Fisher and his former wife, Alice. However, this

testimony is contradicted by other evidence. For example, the

amount of monthly mortgage payments that petitioners claim to

have made to Mr. Fisher do not correspond to the original loan

from North Florida National Bank in 1984. Petitioners claim to

have made monthly payments of $350 for approximately 1-1/2 years,

whereas the North Florida National Bank loan required monthly

payments of $244.38 for 5 years. Additionally, Mr. Fisher

executed several loans secured by mortgages on the property. In

each instance, Mr. Fisher purported to be the true owner. Mr.

Fisher also applied for the construction permit which authorized

the construction of the house on parcel 1 during 1988. Finally,

during Mr. and Mrs. Fisher's divorce proceedings, parcel 1 was

treated as marital property and awarded to Mr. Fisher. 

Mr. Fisher's actions were consistent with true ownership. 

Petitioners failed to present documentation corroborating their

payment for the property. Petitioners have not presented clear,

strong, and unequivocal evidence of a resulting trust. Indeed,

the preponderance of the evidence supports a finding that Mr.

Fisher was the owner of the property prior to June 6, 1991.

The fair market value of the property transferred on the

date of transfer must be determined to find the extent of
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14Petitioners argue that Mr. Smith valued a house built in

1992, rather than the house that existed at the time of the

transfer. We do not find this argument persuasive. In valuing

the real property, Mr. Smith relied on the property appraiser

records for Leon County, Florida, which reflect information

regarding the house built in 1989. 

15Petitioners did not present any evidence regarding the

fair market value of the real property in question.

transferee liability. Gumm v. Commissioner, 93 T.C. 475, 480

(1989), affd. without published opinion 933 F.2d 1014 (9th Cir.

1991); Stokes v. Commissioner, 22 T.C. 415, 428 (1954). 

Respondent presented the report and testimony of Harry J. Smith,

who valued the real property transferred to petitioners at

$69,000, as of June 6, 1991. Mr. Smith's valuation of the

subject property consists of two components: (1) The house built

during 1989 and parcel 1 upon which the house was built, which

were valued together at $59,000;14 and (2) parcels 2 and 3, which

were valued together at $10,000. We find Mr. Smith's valuation

persuasive.15

At the time the real property was transferred to

petitioners, it was encumbered by a mortgage. The balance of the

loan secured by this mortgage was $51,871 on the date of

transfer. For purposes of determining petitioners' transferee

liability, the fair market value of the real property must be

reduced by the outstanding mortgage against the property. Stokes

v. Commissioner, supra. Therefore, we find that the value of the

real estate interest transferred to petitioners on June 6, 1991,

was $17,129 ($69,000 less $51,871).
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16The difference between the balance of the unpaid principal

of the loan as of June 6, 1991, in the amount of $51,871, and the

total amount paid by Mr. Fisher over the 6-month period following

the transfer on June 6, 1991, of $55,929.57, was due to interest

and other charges accruing on the loan. 

During the 6-month period following June 6, 1991, Mr. Fisher

completely paid off the REFI loan secured by the mortgage. The

total amount Mr. Fisher paid during this period was $55,929.57.16

As each payment was made by Mr. Fisher on the loan, the mortgage

lien was correspondingly reduced, and petitioners realized a

proportionate increase in their equity in the property. Under

FUFTA, a transfer is broadly defined as including "every mode,

direct or indirect, absolute or conditional, voluntary or

involuntary, of disposing of or parting with an asset or an

interest in an asset, and includes payment of money, release,

lease, and creation of a lien or other encumbrance." Fla. Stat.

Ann. sec. 726.102(12) (West 1988). Each payment made by Mr.

Fisher on the loan satisfies the broad definition of a "transfer"

under Florida law. Petitioners did not pay any consideration for

the release of this encumbrance. Based upon our reasoning

regarding the transfer of the real property itself, we find that

these transfers were made with the same fraudulent intent. See

supra pp. 11-12. Therefore, we find that petitioners received

transfers with a total value of $55,929.57, by way of Mr.

Fisher's payment of the REFI loan.
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B. Transfers of Cash

In addition to the fraudulent transfer of real property and

the payments Mr. Fisher made on the loan, respondent contends

that the $14,457.97 retained by petitioners in the circular

movement of money for Mr. Fisher also was a fraudulent transfer. 

Petitioners failed to provide any substantive argument as to why

this transfer was not fraudulent. However, in their answering

brief, petitioners, for the first time, contend that respondent's

focus on Florida law regarding their liability for these

transfers may be misplaced.

Petitioners suggest that Arizona law might apply because

they resided in the State of Arizona when the transfers of cash

took place. Arizona, like Florida, adopted the Uniform

Fraudulent Transfer Act, which was effective during the years in

issue. See Ariz. Rev. Stat. Ann. secs. 44-1001 to 44-1010 (West

1994). Petitioners have not demonstrated any difference between

Arizona's version of the Uniform Fraudulent Transfer Act and

Florida's version of the same act. Further, our review of these

two statutes reveals no significant differences in their language

as applicable to the facts of this case. Therefore, our

determination of petitioners' transferee liability regarding the

receipt of cash would be the same under either State's law.

As with the transfers of the real property and the payment

of the loan, there are several factors present in the transfer of
- 19 -

cash which demonstrate fraud for purposes of FUFTA. During the

period from December 3, 1991, through March 14, 1992, Mr. Fisher

transferred $14,457.97 to petitioners for which they paid no

consideration. Fla. Stat. Ann. sec. 726.105(2)(h) (West 1988). 

Petitioners are insiders for purposes of FUFTA. Fla. Stat. Ann.

sec. 726.105(2)(a) (West 1988). In addition, Mr. Fisher created

several fictitious entities in order to carry out and later

conceal the telephone commissions that he diverted from the State

of Florida. Mr. Fisher transferred some of the telephone

commissions to petitioners by checks drawn on the accounts opened

in the names of these fictitious entities. Petitioners

transferred some of these funds back to Mr. Fisher through the

use of money orders payable to Mr. Fisher and to others that he

designated. These actions are indicative of Mr. Fisher's intent

to conceal these assets. Fla. Stat. Ann. sec. 726.105(2)(g)

(West 1988). Finally, the transfers of cash occurred shortly

before Mr. Fisher incurred a substantial tax liability. Fla.

Stat. Ann. sec. 726.105(2)(j) (West 1988). Together, these

factors demonstrate Mr. Fisher's intent to hinder, delay, or

defraud his creditors. Fla. Stat. Ann. sec. 726.105(1)(a) (West

1988).

C. Subsequent Transfers by Petitioners

Petitioners contend that, even if they are held liable as

transferees, the amount of their liability should be reduced by
- 20 -

17We note that whether a reconveyance to the transferor

relieves the transferee of liability is a matter of State law. 

McLellan v. Commissioner, T.C. Memo. 1975-15. The parties have

pointed us to no Florida (or Arizona) cases which would provide

for a contrary result on these facts.

their payment of credit card bills and attorney's fees and by the

value of the two smaller unimproved parcels which they

transferred to the United States in accordance with Mr. Fisher's

plea agreement.

A transferee may avoid liability for a tax deficiency under

a fraudulent transfer statute by reconveying the property to the

transferor under certain conditions. Mendelson v. Commissioner,

52 T.C. 727, 735 (1969); see also Eyler v. Commissioner, 760 F.2d

1129, 1134 (11th Cir. 1985), affg. in part and revg. in part T.C.

Memo. 1983-397. A transferee may avoid liability as a fraudulent

transferee by reconveying or retransferring the property to the

transferor prior to the Commissioner's taking action to collect

from the transferee. Eyler v. Commissioner, supra at 1134. A

transferee who pays the debts of his transferor, however, will

not be relieved of liability to the extent of the payment unless

the debts paid held priority over the tax claimed by the

Commissioner.17 Id. Petitioners bear the burden of refuting

transferee liability once the Commissioner has made a prima facie

showing of such liability. Ginsberg v. Commissioner, 35 T.C.

1148, 1156-1157 (1961), affd. 305 F.2d 664 (2d Cir. 1962).
- 21 -

18Respondent contends that petitioners and Mr. Fisher

conspired to defraud Mr. Fisher's creditors. In Gobins v.

Commissioner, 18 T.C. 1159, 1174 (1952), affd. 217 F.2d 952 (9th

Cir. 1954), we noted that in certain cases it is possible that

retransfers "might be the result of collusion between the parties

and made in such manner that it also would be in fraud of

creditors." Despite the fact that Mr. Fisher and petitioners

were closely related, there is no evidence of collusion on the

part of petitioners with regard to the retransfer of $2,500 on

Aug. 11, 1992.

19Petitioners do not identify the respective relationships

of these payees to Mr. Fisher or the purposes of these payments. 

However, respondent identified the payees, Mr. Randolph and Mr.

Brown, as Mr. Fisher's attorneys. Respondent also identified the

payee, Ameritrust Co. National Association, as a creditor of Mr.

Fisher; however, there is nothing in the record that would

(continued...)

1. Transfers Directly to Mr. Fisher

Except for the $40,016.22 previously allowed by respondent,

the only retransfer of property that petitioners made directly to

Mr. Fisher was the $2,500 check dated August 11, 1992. 

Respondent acted to collect from petitioners when the notice of

transferee liability was issued on July 7, 1994. Because the

$2,500 payment occurred before July 7, 1994, we find that the

amount of transferee liability asserted by respondent should be

reduced to the extent of $2,500.18

2. Transfers to Mr. Fisher's Creditors

Petitioners contend that the remaining transfers of cash to

Ameritrust Co. National Association, Mr. Randolph, and Mr.

Brown,19 and the transfer of the two parcels to the United States
- 22 -

19(...continued)

indicate whether this creditor (or any other creditor) had

priority over respondent.

were made in Mr. Fisher's behalf. However, petitioners do not

offer any proof or make any argument to show that the debts and

fees paid on Mr. Fisher's behalf or that the transfer of the two

parcels of land in accordance with Mr. Fisher's plea agreement

had priority over his indebtedness to respondent. Transferee

liability having been established, it is incumbent upon

petitioners to make such a showing. Gobins v. Commissioner, 18

T.C. 1159, 1174 (1952), affd. 217 F.2d 952 (9th Cir. 1954). 

Accordingly, petitioners' claim that they are relieved of

liability by reason of the expenditures made by them on Mr.

Fisher's behalf is rejected.

To the extent petitioners have raised other issues or

arguments, we have fully examined them and find them to be

without merit. Summarizing our conclusions, then, we hold that

petitioners are liable as transferees for Mr. Fisher's income tax

deficiencies and additions to tax for 1991 and 1992 to the extent

of $85,016 ($87,516, as determined by respondent, less the $2,500

retransferred to Mr. Fisher), plus interest on such amount as

provided below.
- 23 -

D. Liability for Interest

Where the amount transferred to a transferee is less than

the amount of taxes owed by the transferor, State law determines

the extent to which a transferee is liable for interest accrued

prior to the Commissioner's demand for payment. Estate of Stein

v. Commissioner, 37 T.C. 945, 961 (1962). Florida gives

respondent the right to statutory interest on petitioners'

transferee liability. LeBeau v. Commissioner, T.C. Memo. 1992-

359. Under Florida law, prejudgment interest is allowed in cases

involving a liquidated claim. Town of Longboat Key v. Carl E.

Widell & Son, 362 So. 2d 719, 723 (Fla. Dist. Ct. App. 1978). 

Mr. Fisher's unpaid tax deficiency and addition to tax for 1991

was $93,030, which was due and owing no later than April 15,

1992. Because the value of the assets transferred to petitioners

was less than this liability, all of respondent's claim against

petitioners became liquidated no later than April 15, 1992. 

Petitioners' transferee liability includes accrued interest at

the rate prescribed under Fla. Stat. Ann. sec. 55.03 (West 1988)

from April 15, 1992.

Decision will be entered

under Rule 155.