t c memo united_states tax_court thomas l weintraut transferee et al petitioners v commissioner of internal revenue respondent docket nos filed date brett j miller and randal j kaltenmark for petitioners stewart todd hittinger and samuel a naylor for respondent contents findings_of_fact ffi and petitioners ffi petitioners and midcoast cases of the following petitioners are consolidated herewith curtis d fankhauser transferee docket no and cynthia a fankhauser transferee docket no tax returns irs examination with respect to ffi and petitioners opinion petitioners’ motion in limine evaluation of witnesses transferee_liability sec_6901 feldman v commissioner transferee status for purposes of sec_6901 liability under indiana ufta transfers for purposes of the indiana ufta fraudulent transfers under the indiana ufta respondent’s claim for ffi’s unpaid deficiency liability respondent’s claim for ffi’s unpaid penalty liability respondent’s claim for transferee interest conclusion memorandum findings_of_fact and opinion chiechi judge respondent determined that petitioner curtis d fankhauser is liable as a transferee of ffi corp for the unpaid deficiency in federal_income_tax sometimes tax of dollar_figure and the unpaid accuracy-related_penalty under sec_6662 of dollar_figure of that corporation for its taxable_year but only to the extent of the net value of the assets that that corporation transferred to him which respondent determined in the notice of liability was dollar_figure as well as interest thereon as provided by law respondent determined that petitioner cynthia a fankhauser is liable as a transferee of ffi corp for the unpaid deficiency in tax of dollar_figure and the unpaid accuracy-related_penalty under sec_6662 of dollar_figure of that corporation for its taxable_year as well as interest thereon as provided by law as discussed below in the respective answers in these cases respondent conceded that the federal unpaid deficiency in tax of ffi corp for its taxable_year is dollar_figure all section references are to the internal_revenue_code in effect at all relevant times all rule reference are to the tax_court rules_of_practice and procedure see supra note as discussed below in the notice of liability issued to petitioner cynthia a fankhauser respondent did not limit ms fankhauser’s transferee_liability to the extent of the net value of the assets that ffi transferred to her which respon- dent determined in that notice was dollar_figure respondent determined that petitioner thomas l weintraut is liable as a transferee of ffi corp for the unpaid deficiency in tax of dollar_figure and the unpaid accuracy-related_penalty under sec_6662 of dollar_figure of that cor- poration for its taxable_year but only to the extent of the net value of the assets that that corporation transferred to him which respondent determined in the notice of liability was dollar_figure as well as interest thereon as provided by law we must decide whether to sustain respondent’s determinations as modified by respondent in the respective answers in these cases we hold that we shall to the extent stated below findings_of_fact some of the facts have been stipulated and are so found at the time they filed the respective petitions in these cases petitioners resided in indiana ffi and petitioners on date certain individuals who were not related to curtis d fankhauser mr fankhauser thomas l weintraut mr weintraut and cynthia a fankhauser ms fankhauser incorporated ewing foundry inc under the see supra note see supra note laws of the state of indiana on date the articles of incorpo- ration of ewing foundry inc were amended to change its name to farm fans inc on date the articles of incorporation of farm fans inc were amended to change its name to ffi corp ffi at all relevant times ffi was a c_corporation with its principal_place_of_business in indiana we shall refer to the c_corporation that was incorporated as ewing foundry inc on date as ffi even though that corporation operated under different names until date when its name was changed to ffi corp from until ffi was in the business of designing manufacturing and selling equipment used for drying handling and conditioning grain from until date ffi had its offices pincite elmwood avenue indianapolis indiana elmwood property where it also conducted all of its sales operations and its research_and_development operations in date mr weintraut who holds a bachelor’s degree in business and accounting from indiana university and who was licensed as a certified_public_accountant c p a joined ffi as its chief financial officer cfo mr weintraut took tax classes in college and took tax review courses during until at least the time of the trial in these cases mr wein- traut’s license as a c p a was in an inactive status while preparing for his c p a examination before he joined ffi as its cfo mr weintraut had worked as an accountant or as the controller for certain com- panies as an accountant mr weintraut worked on the audit staff where his responsibilities included examining the fairness of company financial statements mr weintraut’s work as an accountant did not include any_tax work sometime after mr weintraut joined ffi as its cfo he became and remained at all relevant times ffi’s executive vice president treasurer and secretary in date mr fankhauser who holds a bachelor’s degree in civil engineering from the university of missouri joined ffi as its president on date mr fankhauser purchased all of the outstanding_stock of ffi richard thrapp mr thrapp who was a partner with the law firm known at the time of trial as ice miller llp ice miller represented him with respect to that purchase after mr fankhauser became the sole stockholder of ffi he remained at all relevant times its presidentdollar_figure mr fankhauser’s education at the university of missouri did not include any classes in accounting or business at the time of the trial herein mr fank- hauser had been using a tax_return_preparer to prepare his tax returns we shall sometimes refer collectively to mr fankhauser and mr wein- traut as ffi’s officers in mr fankhauser gave percent of the outstanding_stock of ffi to his spouse ms fankhauser ms fankhauser who studied art for two years at kansas state university was not at any time involved in the operations or the management of ffi on date mr weintraut purchased percent of the out- standing stock of ffi from mr fankhauser on date mr weintraut purchased an additional two percent of the outstanding_stock of ffi from mr fankhauser from date until date mr fankhauser mr wein- traut and ms fankhauser owned percent percent and percent respec- tively of ffi’s outstanding_stock during the times mr fankhauser mr wein- traut and ms fankhauser owned all the stock of ffi we shall sometimes refer collectively to them as the ffi stockholders at all relevant times until date the members of the board_of directors of ffi were mr fankhauser and mr weintraut during the times mr fankhauser and mr weintraut were members of the board_of directors of ffi we shall sometimes refer collectively to them as the ffi directors during and the sales revenues of ffi declined as a result of a series of dry harvest seasons and deteriorating economic conditions conse- quently ffi restructured its operations by cutting costs through significant staff reductions by ffi’s sales revenues had stabilized in the ffi stockholders decided to sell ffi through the sale of their respective portions of ffi stock or the sale of ffi’s assets on date ffi retained banc one capital markets inc banc one to evaluate the market for the sale of ffi’s stock or ffi’s assets and to solicit and negotiate with pro- spective buyers of that stock or those assets ffi made banc one its exclusive agent for any transaction in which control of ffi through ownership of its stock or its assets would be transferred for consideration to another entity in a stock sale asset sale merger tender or exchange_offer leveraged_buyout joint_venture recapitalization restructuring or other business combination in date banc one contacted numerous potential buyers of ffi’s stock or ffi’s assets in date the gsi group inc gsi a competitor of ffi in the business of manufacturing grain equipment approached ffi and expressed an interest in acquiring some of ffi’s assets from october through date when ffi retained banc one in it was in the business of offering investment banking services and financial advisory services ffi with the assistance of its attorney mr thrapp engaged in negotiations for the sale of certain of its assets to gsi ffi asset sale dollar_figure on date mr fankhauser and mr weintraut as owners of percent of ffi’s outstanding_stock signed an asset sale agreement on behalf of ffi ffi asset sale agreement in that agreement ffi agreed to sell to gsi and gsi agreed to purchase from ffi the following assets all of ffi’s inventory patents trademarks trade names blueprints orders for products that were to be provided to ffi customers on dates after the closing date of the ffi asset sale agreement and customer lists and a significant portion of ffi’s manufacturing equipment in the ffi asset sale agreement gsi agreed to pay to ffi dollar_figure and to assume certain of ffi’s liabilities in return for the assets that ffi agreed to sell to gsi ffi and gsi agreed in the ffi asset sale agreement that the closing date of the ffi asset sale to gsi was to be date on date the ffi stockholders and the ffi directors held respective special meetings at which they approved a plan to liquidate and dis- solve ffi date plan_of_liquidation in the event and only in the event that the ffi asset sale to gsi closed on date as required by the in the mid-1990s mr fankhauser and mr weintraut started retaining mr thrapp to represent ffi in certain matters around date ffi terminated banc one’s services ffi asset sale agreement on date the ffi asset sale closed pursuant to the ffi asset sale agreement consequently on that date the con- dition precedent to the date plan_of_liquidation was satisfied on or before date ffi sold to unrelated third parties for approx- imately dollar_figure certain assets that gsi had not agreed to purchase in the ffi asset sale agreement including certain of ffi’s automobiles and certain of its manufacturing equipment ffi date asset sale ffi anticipated that it would have a significant federal_income_tax liability and a significant state_income_tax liability sometimes collectively federal and state_income_tax liabilities as a result of the ffi asset sale and the ffi date asset sale as of date ffi had made on the dates indicated the following federal estimated income_tax payments for its taxable_year totaling dollar_figure sometimes ffi federal estimated income_tax payments date total_payment dollar_figure big_number big_number big_number in addition to the ffi federal estimated income_tax payments of dollar_figure that ffi had made as of date it had an overpayment credit of dollar_figure for its taxable_year that was attributable to its taxable_year we shall refer to the total ie dollar_figure of the ffi federal estimated income_tax payments of dollar_figure and ffi’s federal overpayment credit for its taxable_year of dollar_figure as the ffi federal income_tax payments on date the ffi stockholders voted to dissolve ffi in accor- dance with the date plan_of_liquidation on date ffi sold for dollar_figure the elmwood property ffi elmwood sale to an unrelated company known as elmwood avenue llc elmwood avenue llc elmwood avenue llc paid dollar_figure million of that dollar_figure purchase_price by executing a promissory note for dollar_figure million elm- wood avenue llc note that was payable to ffi we shall sometimes refer collectively to the ffi asset sale the ffi date asset sale and the ffi elmwood sale as the ffi asset sales on date ffi took certain steps in preparation for its planned liquidation and dissolution including filing articles of dissolution with the secretary of state of indiana indiana secretary of state informing the attorney_general of indiana indiana attorney_general and the department of workforce development of indiana that it was dissolving mailing form it-966 notice of corporate dissolution liquidation or with- drawal form it-966 to the department of revenue of indiana and mailing form_966 corporate dissolution or liquidation form to the internal_revenue_service irs form_966 that ffi completed and mailed to the irs indicated that ffi’s anticipated l ast month day and year of final tax_year was date as of date ffi had made state estimated income_tax pay- ments for its taxable_year totaling dollar_figure ffi state income_tax payments of those payments ffi had paid dollar_figure to the state of indiana and the remaining dollar_figure to certain other states after the ffi asset sales ffi had no operations no employees engaged in operations no income and no operational assets except certain oxidation technology ffi petitioners and midcoast mr thrapp was aware that ffi had agreed to and did sell to unrelated third parties most of its assets including all of its operating_assets except certain oxidation technology and that it not only intended but also had taken formal steps to liquidate and dissolve nonetheless on date he informed the ffi officers ie mr fankhauser and mr weintraut that midcoast credit corp might be interested in purchasing their ffi stock and the ffi stock of ms fankhauser at a so-called premium that is to say midcoast might be in- terested in purchasing all of the ffi stock for an amount that was greater than the liquidation value of ffi ie the value of ffi’s assets after the payment of its liabilities including its federal_income_tax liability and its state income liability for its taxable_year mr thrapp informed the ffi officers that the purchase_price for the stock that midcoast usually paid in deals like the one that it was sug- gesting to ffi and the ffi stockholders was calculated by using a percentage of the total of the acquired company’s federal_income_tax liability and state_income_tax liability which varied from acquisition to acquisition but was within a range that midcoast had established at all relevant times midcoast was a subsidiary of shorewood holding corp shorewood and was part of the consolidated_group of corporations for for convenience we shall sometimes refer to midcoast credit corp and any other company that was related to or that was a designee of midcoast credit corp as midcoast mr thrapp had some familiarity with midcoast because it was a client of ice miller with respect to a transaction that was unrelated to the transactions here- in and that closed in date mr thrapp considered the information that ice miller obtained as a result of that representation to be privileged which shorewood filed consolidated tax returns at those times michael bernstein mr bernstein and honora shapiro ms shapiro each owned percent of the outstanding_stock of shorewood mr thrapp who was not an attorney specializing in federal_income_tax matters and who was not qualified to provide advice with respect to such matters understood and advised the ffi officers that midcoast had a federal_income_tax and state_income_tax deferral strategy tax strategy that it considered to be proprietary and that consequently it would not share any details about that tax strategy with them mr thrapp further understood and informed the ffi stock- holders that midcoast had used its tax strategy as part of an acquisition methodol- ogy in which it acquired for cash certain c corporations with cash and certain federal and state_income_tax liabilities mr thrapp did not know any of the details of midcoast’s acquisition methodology or its tax strategy however ms shapiro died before the trial in these cases for convenience we shall refer to an attorney or any other person who specializes in federal_income_tax matters and who is qualified to provide advice with respect to such matters as a tax professional even if mr thrapp had known through ice miller’s representation of midcoast some or all of the details regarding midcoast’s acquisition meth- odology and its tax strategy he would not have been able to disclose any such details to mr fankhauser mr weintraut and ms fankhauser that was because continued it was mr thrapp’s understanding which he shared with the ffi officers that midcoast used the cash of an acquired c_corporation in order to buy charged- off debt securities that midcoast intended to use in its so-called asset recovery business but he had no understanding of how midcoast used those securities as part of its tax strategy mr weintraut and mr fankhauser made only certain limited inquiries of mr thrapp with respect to midcoast’s overall acquisition methodology including its tax strategy of acquiring c corporations however mr weintraut and mr fankhauser directly or through mr thrapp and ms fankhauser through mr fankhauser knew that midcoast’s pricing in its acquisition methodology was inextricably intertwined with its tax strategy on date the day on which mr thrapp informed the ffi officers about midcoast’s possible interest in purchasing the stock of ffi the ffi officers mr thrapp and ffi’s accountants patrick burns mr burns and victor continued midcoast was a client of ice miller of which mr thrapp was a partner and mr thrapp was subject_to certain ethical constraints with respect to the disclosure of any client information vernick mr vernick of katz sapper miller katz accounting firm an accounting firm held a conference call with certain representatives of mid- coast neither the ffi stockholders nor mr thrapp saw any need to and did not press midcoast’s representatives regarding the details of its acquisition methodol- ogy its tax strategy and its asset recovery business all of which they understood were interrelated nor did the ffi stockholders or mr thrapp see any need to or in fact inquire through their respective contacts whether there were persons who were not employed by midcoast or by ice miller and who might be familiar with midcoast’s acquisition methodology its tax strategy and its asset recovery businessdollar_figure on date mr fankhauser mr weintraut and ms fank- hauser executed an engagement letter engagement letter dated date in which they retained ice miller to represent ffi and them as stockholders of ffi with respect to midcoast’s proposal to purchase the ffi stock the mr burns and mr vernick died before the trial in these cases the record does not establish why mr thrapp and the ffi stockholders did not inquire through their respective contacts whether there were persons who were not employed by midcoast or by ice miller and who might be familiar with midcoast’s acquisition strategy its tax strategy and its asset recovery business engagement letter dated date stated in pertinent part the following with respect to the potential conflict of interest created by ice miller’s representation of midcoast that ice miller had concluded it needed to explain to mr fank-hauser mr weintraut and ms fankhauser midcoast conflict of interest while we have no direct conflict in this particular matter ie we are not representing midcoast its affiliates or other parties in connection with this transaction contemplated transactions involv- ing ffi the ffi stockholders and midcoast we have represented and currently represent midcoast and or its affiliates and other parties in connection with other unrelated matters all confidential information that we have obtained about midcoast its affiliates and other parties as a result of these representations shall remain confi- dential these prior and existing relationships will not prevent ice miller from zealously representing the interests of the sellers mr fankhauser mr weintraut and ms fankhauser in connection with the transaction but these relationships are ones that you deserve to be aware of in connection with retaining us for this transaction as attorneys in indiana we are obligated to bring to your attention rule of the rules of professional conduct applicable to attorneys in indiana rule provides in pertinent part as follows a lawyer shall not represent a client if the repre- a sentation of that client will be directly adverse to another client unless the lawyer reasonably believes the representation will not adversely affect the relationship with the other client and each client consents after consultation b a lawyer shall not represent a client if the repre- sentation of that client may be materially limited by the lawyer’s responsibilities to another client or to a third person or by the lawyer’s own interests unless the lawyer reasonably believes the representation will not be adversely affected and the client consents after consultation based upon the information which has been provided to us we do not believe that our representation of the sellers in connection with the transaction will a adversely affect the relationship with midcoast b be adversely affected by our relationship with mid- coast and or its affiliates or any of the other parties likewise we do not believe our relationship with midcoast would materially limit our ability to represent the sellers and ffi however we do think that it is prudent to request your written acknowledgment of our relationship with midcoast and consent to our representation of the sellers in connection with the transaction in light of these circum- stances your execution of this letter will constitute such a formal consent and waiver of any such actual or potential conflicts of interest on date olga parra ms parra signed as the executive vice president of midcoast a consent and waiver of conflict of interest on behalf of midcoast ms parra also was the general counsel of midcoast also on date mr bernstein sent to mr fankhauser mr weintraut and ms fankhauser on behalf of midcoast a nonbinding letter of the record does not establish whether any of the ffi stockholders executed the engagement letter but we presume that all of them did so intent letter of intent with respect to a proposed acquisition of their ffi stock by midcoast that required ffi to redeem as part of that acquisition per- cent of its stock from its stockholders the letter of intent stated in pertinent part dear shareholder s mr weintraut mr fankhauser ms fank- hauser we have received and reviewed certain material regarding ffi corpo- ration an indiana corporation the company that you have pro- vided to us this letter of intent letter is to set forth the basic terms pursuant to which midcoast credit corp and or its designee the share buyer shall acquire all of the remaining issued and outstanding shares of the company the shares from its sharehold- ers the shareholders pursuant to a stock purchase transaction the proposed share transaction to occur immediately after or simulta- neously with the redemption by the company of approximately seventy five percent of the shares from the shareholders in consideration for i an assignment of receivables relating to a prom- issory note elmwood avenue llc note including accrued interest in the approximate amount of nine hundred twenty nine thousand dollars dollar_figure ii an amount equal to the estimated refund of when referring to the letter of intent the share purchase and redemption agreement discussed below the transactions described in those documents and any other agreement or document associated therewith or related thereto our use of terms such as sale purchase redemption loan and similar terms is for convenience only our use of any such terms is not intended to imply and does not imply that any of those transactions was a sale purchase redemption loan or similar transaction for federal_income_tax purposes as discussed below midcoast designated ffi acquisition a limited_liability_company to serve as the share buyer in the proposed share trans- action discussed in the letter of intent indiana corporate_income_tax payments made by the company for it sec_2001 tax_year in the approximate amount of one hundred fifty thousand dollars dollar_figure iii an assignment of the right to receive a refund of the estimated federal corporate_income_tax payments made by the company for it sec_2001 tax_year in the approximate amount of six hundred thirty six thousand dollars dollar_figure and iv the transfer by the company to the shareholders of certain oxidation technology related assets and other scheduled non-cash assets of the company the redemption price the proposed share redemp- tion this letter is intended to provide a framework for us to utilize as we negotiate the terms and conditions of a definitive share purchase and redemption agreement definitive agreement pursuant to which the proposed share transaction and the proposed share redemption collectively the transaction would be consummated accord- ingly this letter does not constitute a legally binding or enforceable agreement or commitment on the part of the parties to negotiate or proceed with or toward the transaction nor does it purport to set forth a complete statement of the terms and conditions of the transac- tion provided however that in consideration of the time and costs incurred and to be incurred in proceeding towards a possible transac- tion the provisions in numbered paragraph sec_1 and below the binding provisions shall be legally binding upon the execution and acceptance of this letter by those parties the share buyer contemplates that the basic terms and conditions of the proposed share transaction shall be as follows sec_1 share purchase_price the share buyer shall purchase the shares at the closing of the proposed share transaction the share closing for a purchase_price the share purchase_price equal to the amount of the company’s cash as of the share closing less forty nine of the company’s combined state and the letter of intent erroneously stated that the ffi federal income_tax payments totaled dollar_figure the correct total is dollar_figure federal corporate_income_tax liability taking into account any net_operating_loss carryforwards attributable to the company’s business operations and any sale conveyance and or transfer of its assets during it sec_2001 tax_year without taking into account any estimated_tax payment made by the company with respect to such taxes the deferred_tax_liability the share purchase_price shall be reduced by an amount equal to any liabilities remaining as of the share closing liabilities shall include all specifically scheduled liabilities of the company other than the deferred_tax_liability and any liability attributable to rea- sonable and customary professional fees incurred in connection with the proposed share transaction not to exceed twenty thousand dollars dollar_figure which will not be borne by the shareholders if the trans- action does not close the shareholders will be responsible for the payment of their professional fees the parties expressly acknowl- edge that to the extent that the parties fail to reach agreement on the number and amount of the liabilities to be scheduled the transaction will not proceed sec_1 conditions precedent the following shall be conditions precedent to the share closing a b c the share buyer’s completion of due diligence to its satisfaction as provided in sec_1 below by the expiration of the due diligence period as such term is defined in sec_1 below the execution by the share buyer and the shareholders of a definitive agreement with such terms and conditions as shall be satisfactory to the share buyer and the shareholders in their sole discretion by date no adverse changes to the business or financial condition of the company between the date of this letter and the share closing d no breach of warranty representation or covenant contained in the definitive agreement as of the share closing e f consummation of the proposed share redemption immediately prior to or simultaneously with the proposed share closing the occurrence of the share closing by date sec_1 access to information the shareholders shall provide representatives of the share buyer with access to the books records properties and other relevant information of the company the share buyer shall complete its examination of the company at the share buyer’s expense by the share closing the due diligence period the shareholders and their respective agents and represen- tatives shall cooperate with the share buyer and the share buyer and the share buyer’s agents and representatives in their due diligence examination and shall provide the share buyer’s agents and represen- tatives with access to the company’s books records properties employees agents and representatives at such reasonable times and places as the share buyer and the shareholders shall reasonably agree if the share buyer elects not to proceed with the proposed share transaction for any reason it shall so notify the shareholders in writing prior to the expiration of the due diligence period sec_1 definitive share agreement the parties to this letter acknowledge and agree that the shareholders shall be required in the event the shareholders elect to execute a definitive agreement to make certain representations warranties and covenants relative to certain matters in the definitive agreement those matters are as follows a b c d e f each of the shareholder’ if other than natural persons and the company’s valid organization and good standing and the sufficient authority and capacity to execute deliver and perform the share agreement and consummate the proposed share transaction the enforceability and binding effect of the share agreement in accordance with its terms the shareholders’ title to and ownership of the shares free and clear of any liens charges or other encumbrances the due and valid issuance of the shares the capital structure of the company including a representation to the effect that the shares pur- chased by the share buyer constitute one hundred percent of all of the issued and outstand- ing capital stock of the company the lack of any options warrants rights of first refusal preemptive rights or similar rights or obli- gations with respect to the shares and any autho- rized but unissued shares of the company g the absence of any law rule order document or agreement that would prohibit or be in conflict with any of the shareholders’ or the company’s execution of the share agreement or the consum- mation of the proposed share transaction h except as specifically scheduled by the sharehold- ers the absence of any litigation and liabilities including but not limited to any pending or threatened environmental litigation or liabilities relating to any of the company’s assets i j k l the amount of the tax basis in the company’s assets giving rise to the deferred_tax_liability the payment of all taxes of the company other than the deferred_tax_liability filing of all tax returns and related tax issues the accuracy of the company’s financial state- ments and any other warranties representations and cove- nants that is customary and reasonable with re- spect to transactions of the same nature as the proposed share transaction the share buyer shall warrant represent and covenant that it shall cause the company to pay the deferred_tax_liability to the extent that the deferred_tax_liability is due given the company’s post- closing business activities and shall file all federal and state_income_tax returns on a timely basis related thereto sec_1 indemnification in addition subject_to a negotiated cap which the parties believe to be approximately dollar_figure and survival period which the parties believe will be years for all claims other than those claims related to tax_liabilities which will survive for the applicable statute_of_limitations period which will attempt to mirror the liability the shareholders would be exposed to upon the dissolution and winding up of the company the shareholders shall indemnify the company and the share buyer and their respective officers directors shareholders employees or representatives against any loss claim damage or expense including attorneys’ fees and costs which any one or more of them incur as a result of an alleged or actual i act or omission of the company or the shareholders occurring prior to the share closing or ii breach of any warranty representation or covenant given or made by the company or the shareholders with respect to the company or its assets prior to the share closing mr fankhauser mr weintraut and ms fankhauser through mr fank- hauser knew directly or through mr thrapp that the transactions that midcoast had proposed in the letter of intent would result in their receiving a greater amount of assets--a so-called premium--than they would receive if ffi were to liquidate and dissolve and the federal and state_income_tax liabilities that ffi had in- curred as a result of the ffi asset sales were to be paid in full that is why on date the day after midcoast had sent ffi and the ffi stockholders the letter of intent mr weintraut on behalf of ffi and the ffi stockholders signed and accepted the terms of that letter on the same date mr bernstein signed and accepted those terms on behalf of midcoast at no time before or after signing the letter or before the closing of the transactions to which ffi the ffi stockholders and midcoast agreed in the share purchase and redemption agreement discussed below did mr thrapp or kyle hupfer mr hupfer with ice miller or mr burns or mr vernick with the ffi and the ffi stockholders had previously taken formal actions to effect the liquidation and the dissolution of ffi mr hupfer who at all relevant times was an associate with ice miller and who performed certain nontax work for ffi and the ffi stockholders relating to the midcoast proposed transactions was not a tax professional consequently he was not qualified to and did not provide any federal_income_tax advice to mr fankhauser mr weintraut and ms fankhauser or to ffi with respect to the continued katz accounting firm inform ffi and the ffi stockholders about possible tax problems associated with those transactions nor did mr thrapp mr hupfer mr burns or mr vernick recommend to ffi and to the ffi stockholders that they retain a tax professional to provide advice with respect to the transactions that midcoast had proposed in the letter of intent or to which they thereafter agreed in the share purchase and redemption agreement ffi and the ffi stockholders did not retain any_tax professional to provide advice with respect to those transactions even though ffi had retained tax professionals over the years to provide it with tax_advice with respect to certain matters after the various parties accepted the letter of intent mr thrapp was responsible for negotiating in large part the agreement among those parties regarding the transactions that midcoast had proposed in that letter mr wein- continued transactions which midcoast had proposed in the letter of intent or to which they agreed in the share purchase and redemption agreement we shall sometimes refer collectively to mr thrapp and mr hupfer as petitioners’ attorneys the record does not establish that mr burns or mr vernick was a tax professional it was mr thrapp who negotiated with midcoast and was able to obtain its agreement to pay the attorneys’ fees up to a stated limit that mr fankhauser mr weintraut and ms fankhauser were to incur in connection with implement- ing midcoast’s proposed transactions traut however negotiated directly with certain of midcoast’s represent- atives the percentage of ffi’ sec_2001 federal and state_income_tax liabilities that midcoast was to pay to purchase the stock of the ffi stockholders in doing so mr weintraut attempted to have midcoast agree to pay a percentage that was at the high end of the range of percentages to which he understood midcoast had agreed in the past as part of its acquisition methodology the ffi stockholders did not personally undertake any due diligence efforts due diligence on behalf of ffi or themselves with respect to the transactions that midcoast had proposed in the letter of intent instead the ffi stockholders relied on mr thrapp to conduct due diligence with respect to those transactions mr thrapp spent some time performing a limited amount of due diligence on behalf of ffi mr fankhauser mr weintraut and ms fankhauser with re- spect to the transactions that midcoast had proposed in the letter of intent at a time not established by the record mr thrapp reviewed certain promotional materials that midcoast had prepared in which midcoast represented that it had been in business since and had been in the asset recovery business since in those promotional materials midcoast indicated that it acquired corpo- rations for use in connection with its asset recovery business and continued to operate those corporations after it acquired them midcoast also indicated in those promotional materials that it caused the corporations that it acquired to satisfy their respective tax_liabilities as well as other liabilities mr thrapp did not perform due diligence with respect to ffi acquisition the entity that mr bernstein formed and that midcoast designated to serve as the purchaser of the stock of the ffi stockholders discussed in more detail below mr thrapp claimed to have believed that the limited amount of due dili- gence that he performed was adequate taking into account the information and the circumstances with respect to the transactions that midcoast had proposed in the letter of intent and the signatories to that letter about which he had knowledge or an understanding mr thrapp further claimed to have believed that the knowl- edge and the understanding that he had with respect to the transactions that mid- coast had proposed in the letter of intent and the signatories to that letter enabled him to determine and to assess the risks that he concluded those transactions posed to his clients ffi and the ffi stockholders mr thrapp claimed to have held those beliefs even though he did not know any of the details of midcoast’s acquisition methodology its tax strategy or its asset recovery business he was not a tax professional and thus was not qualified to know of or be sensitive to any_tax risks associated with the transactions which midcoast had proposed or to which ffi and the ffi stockholders agreed in the share purchase and redemption agreement and he knew as discussed below that the funds that were to be provided to midcoast in order to effect the acquisition of the ffi stock were to be returned as of the closing of that transaction to the provider of those funds following the execution of the letter of intent midcoast began performing due diligence with respect to ffi in anticipation that the signatories to that letter would agree to undertake the transactions that midcoast had proposed in that letter and that the closing date of those transactions would be date mr weintraut assisted midcoast’s controller carolyn sesco ms sesco and midcoast’s independent accountant scott elkins with respect to that due dili- gence mr weintraut spent several days in providing that assistance on date ffi sent by facsimile to mr hupfer preliminary financial computations ffi’s preliminary financial computations that mr wein- traut had prepared by using ffi’s financial records according to ffi’s prelimi- nary financial computations ffi had for its taxable_year a projected federal_income_tax liability of dollar_figure and a projected state_income_tax liability of dollar_figure the ffi stockholders and the ffi directors entered into a joint consent dated date to revoke ffi’s date plan_of_liquidation on date ffi organized ffw holdings llc ffw under the laws of the state of indiana ffw whose sole member was ffi was a dis- regarded entity for federal tax purposes ffi formed ffw to serve inter alia as a vehicle to transfer to the ffi stockholders certain of ffi’s cash and noncash assets and all of its liabilities except its federal and state income_tax liabilities in exchange for percent of the outstanding_stock of ffi that they owned on date mr weintraut as executive vice president of ffi signed ffw’s operating_agreement around date mr weintraut prepared a balance_sheet for ffi date balance_sheet that reflected its assets and its liabilities as of that date on the assumption that the transactions proposed in the letter of intent were to occur according to the date balance_sheet ffi was to have the following assets and the following federal_income_tax liability and state_income_tax liability for its taxable_year after it distributed membership in- terests in ffw to mr fankhauser mr weintraut and ms fankhauser in ex- change for percent of the ffi stock that they owned cash of dollar_figure the right to a refund of the ffi state income_tax payments of dollar_figure an anticipated federal_income_tax liability anticipated federal_income_tax liability for ffi’s taxable_year of dollar_figure and an anticipated state_income_tax liability anticipated state_income_tax lia- the date balance_sheet did not show as an asset of ffi the balance of dollar_figure in a certain bank account in the name of ffi ffi’s bank account balance of dollar_figure nor did that balance_sheet show as a liability of ffi certain outstanding checks of dollar_figure issued by ffi ffi’s outstanding checks of dollar_figure because ffi’s bank account balance of dollar_figure and ffi’s outstanding checks of dollar_figure were in the same amounts they offset each other and had no effect on the share purchase_price discussed below calculated in the date balance_sheet consequently for conve- nience we shall not refer except infrequently to ffi’s bank account balance of dollar_figure as an asset of ffi or to ffi’s outstanding checks of dollar_figure as a liability of ffi when we discuss the transactions and the events that are relevant to the issues presented here in addition the date balance_sheet did not show as an asset of ffi a receivable of dollar_figure discussed below from the prudential life_insurance co of america prudential which ffi had never claimed which the state of indiana was holding in the name of ffi and of which no one associated with ffi or midcoast was aware at the time midcoast proposed the transactions in the letter of intent and at the time the transactions closed pursuant to the share purchase and redemption agreement of ffi the ffi stockholders and midcoast as a result the receivable from prudential of dollar_figure prudential demutual- ization funds receivable of dollar_figure had no effect on the share purchase_price calculated in the date balance_sheet consequently for conve- nience we shall not refer except infrequently to the prudential demutualization funds receivable of dollar_figure as an asset of ffi when we discuss the transactions and the events that are relevant to the issues presented here bility for ffi’s taxable_year of dollar_figure we shall sometimes refer collectively to the total ie dollar_figure of ffi’s anticipated fed- eral income_tax_liability and anticipated state_income_tax liability that were shown in the date balance_sheet as ffi’s total anticipated tax_liability pursuant to a formula set forth in the date balance_sheet the stock purchase_price for the stock of ffi that midcoast was to purchase from the ffi stockholders was to be determined as shown in certain computations in that balance_sheet by reducing ffi’s total assets ie dollar_figure consisting of cash of dollar_figure and the right to a refund of the ffi state income_tax payments of dollar_figure which ffi would be considered to own upon effecting the redemption transaction that midcoast had proposed in the letter of intent by percent ie by dollar_figure of ffi’s total anticipated tax_liability of as noted mr weintraut made the underlying computations of ffi’s anticipated federal_income_tax liability and its anticipated state_income_tax liability shown in the date balance_sheet those liabilities totaled dollar_figure which is different from the total ie dollar_figure of ffi’s projected federal_income_tax liability of dollar_figure and its projected state_income_tax liability of dollar_figure for its taxable_year that were shown in ffi’s preliminary financial computations that he also prepared the record does not establish the reason for that difference dollar_figure the balance of dollar_figure was to be the purchase_price for the ffi stock that midcoast was to purchase from the ffi stockholders on date prudential entered into a demutualization transac- tion whereby it converted from a mutual_insurance_company to a stock insurance_company ffi was a policyholder at the time of that demutualization transaction and as such was entitled to receive certain shares of prudential stock and a cer- tain amount of prudential’s cash because ffi did not make a claim to prudential for the stock and the cash to which it was entitled as a result of prudential’s demutualization prudential paid dollar_figure to the indiana attorney general’s officedollar_figure on date immediately before the contribution of certain of its assets to ffw ffi had the following assets and liabilities see supra note assets cash elmwood avenue llc note real_estate in thief falls minnesota cash in escrow from ffi asset sale oxidation technology refundable utility deposit interest receivable on elmwood avenue llc note insurance premium refund total liabilities accounts_payable to adp accounts_payable to ronald cook accounts_payable to citizens insurance accounts_payable to ice miller payments due to retirees refunds due dealers gsi warranty claim adjustment accrued property taxes contingent payable to hanover insurance unpaid anticipated federal_income_tax liability unpaid anticipated state_income_tax liability total excess of assets over liabilities amounts dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure amounts dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure the record does not establish the value of the real_estate in thief falls minnesota the record does not establish the value of the oxidation technology ffi had made payments totaling dollar_figure with respect to its anticipated federal ffi had made payments totaling dollar_figure with respect to its anticipated state_income_tax liability of dollar_figure income_tax_liability of dollar_figure on date in preparation for the transactions contemplated in the letter of intent mr bernstein organized under the laws of the state of indiana31 ffi acquisition ffia a limited_liability_company to enter into those transac- tions as midcoast’s designee according to ffia’s operating_agreement mr bernstein was required to contribute dollar_figure in return for his interest as ffia’s sole memberdollar_figure the parties stipulated that ffi acquisition was organized under the laws of the state of indiana as an indiana limited_liability_company in the share purchase and redemption agreement that ffi acquisition ffi mr fankhauser mr weintraut and ms fankhauser executed ffi acquisition represented and warranted in sec_3_2 that purchaser ffi acquisition is duly organized and validly existing under the laws of the state of florida in the preamble of that same agreement ffi acquisition is described as an indiana limited_liability_company midcoast apparently followed virtually the same or a very similar pattern when it agreed to buy at a so-called premium stock of a c_corporation that held cash resulting from the sale of operating_assets and that had federal and state income liabilities attributable to those sales consequently midcoast most likely had a cookie-cutter type agreement that it used in order to effect the purchase of the c_corporation stock in the instant cases and in other cases with virtually identical or very similar fact patterns that would explain but not justify or excuse the inconsistencies between the stipulation of facts in these cases and the preamble of the stock purchase and redemption agreement and sec_3_2 of that agreement the record does not establish that mr bernstein contributed dollar_figure to ffia in return for his interest as its sole member nor does the record establish that ffia had any assets as of the closing of the transactions which midcoast had proposed in the letter of intent or to which ffi the ffi stockholders and ffia agreed in the share purchase and redemption agreement or that it had any assets after that closing other than the stock of ffi on date ffi contributed the following assets and liabilitie sec_33 to ffw assets cash elmwood avenue llc note right to refund of ffi federal income_tax payments real_estate in thief falls minnesota cash in escrow from ffi asset sale oxidation technology refundable utility deposit interest receivable on elmwood avenue llc note insurance premium refund assets total liabilities accounts_payable to adp accounts_payable to ronald cook accounts_payable to citizens insurance accounts_payable to ice miller payments due to retirees refunds due dealers gsi warranty claim adjustment accrued property taxes contingent payable to hanover insurance liability total excess of assets over liabilities amounts dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure amounts dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure the record does not establish the value of the real_estate in thief falls minnesota that ffi contributed to ffw to ffw the record does not establish the value of the oxidation technology that ffi contributed the assets and the liabilities shown assume that the transactions proposed in the letter of intent were to occur on date stephen j shapiro mr shapiro executed a certificate on behalf of ffia which included resolutions of mr bernstein dated date those resolutions provided that ffia as the designee of midcoast was to enter into the share purchase and redemption agreement with ffi and the ffi stockholders on date ffia ffi and the ffi stockholders entered into a share purchase and redemption agreement spra the terms of which were sim- ilar but not identical to the terms that midcoast had proposed in the letter of in- tent mr bernstein signed the spra on behalf of ffia mr weintraut signed it on behalf of ffi and mr fankhauser mr weintraut and ms fankhauser signed it as the ffi stockholders the only reason that ffi and the ffi stockholders accepted midcoast’s letter of intent and thereafter decided to and did enter into the spra with mid- coast and the related agreements discussed below was that those stockholders wanted to and midcoast agreed that they would receive a substantially greater amount--a so-called premium--from the transactions which midcoast proposed to them or to which they agreed in the spra than they would receive from the liquidation of ffi after ffi’s total anticipated tax_liability of dollar_figure which was attributable to the ffi asset sales was paid posttax liquidation value when they accepted midcoast’s letter of intent and thereafter entered into the spra with midcoast and the related agreements discussed below mr fankhauser mr weintraut and ms fankhauser knew as did mr thrapp that the only reason that the ffi stockholders would be able to receive such a premium was that that total anticipated tax_liability would not be paid in other words mr fankhauser mr weintraut and ms fankhauser knew as did mr thrapp that if and only if ffi’s total anticipated tax_liability was not paid would the ffi stockholders receive the so-called premium the respective amounts of the federal_income_tax liability and the state_income_tax liability of ffi for its taxable_year that were attributable to the ffi asset sales were estimated to be dollar_figure and dollar_figure respectively as discussed below under the spra the stockholders of ffi were to retain as of the closing of the transactions under the spra through their respective ownership interests in ffw that ffi was to distribute to them in the so- called redemption transaction under the spra the right to a refund of the ffi federal income_tax payments of dollar_figure ffi as ffia’s designee was to retain as of the closing of the transactions under the spra the right to a refund of the ffi state income_tax payments of dollar_figure because of those antici- pated refunds of those respective income_tax payments mr fankhauser mr weintraut and ms fankhauser knew that none of ffi’s total anticipated tax_liability of dollar_figure would be paid thereby enabling them to receive a substantially greater amount a so-called premium from the transactions midcoast proposed to them than they would receive from the liquidation of ffi after ffi’s total anticipated tax_liability of dollar_figure was paid in full immediately before the closing of the spra on date ffi had the following assets and liabilitie sec_35 assets membership interest in ffw cash right to refund of ffi state income_tax payments asset total liabilities liabilities held by ffw anticipated federal income_tax_liability anticipated state_income_tax liability liabilities total excess of assets over liabilities value dollar_figure dollar_figure dollar_figure dollar_figure value dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure ffw held the right to a refund of the ffi federal income_tax payments totaling dollar_figure the spra provided in pertinent part this share purchase and redemption agreement agree- ment is made and entered into on date by and among ffi acquisition llc an indiana limited_liability_company purchaser ffi corporation formerly farm fans inc an indiana corporation the company and curtis d fankhauser cynthia a fankhauser and thomas l weintraut the shareholders of the company each a seller and collectively the sellers the assets and the liabilities shown assume that the transactions to which the parties to the spra agreed were to occur whereas the sellers own all of the issued and outstanding common shares of the company the common shares whereas the company has previously sold substantially_all of the assets of the company pursuant to those certain documents instruments and agreements dated primarily as of date and date by and between the company and the gsi group inc the asset purchaser and elmwood avenue llc and its predecessors and assigns the real_estate purchaser all of the documents instruments and agreements entered into by the parties in connection with these transactions are listed on schedule and are hereinafter collectively referred to as the asset purchase agree- ments and whereas the company contributed cash and certain non- cash assets to ffw holdings llc a newly formed indiana limited_liability_company newco llc and ffw holdings llc as- sumed only certain specific liabilities of the company the assumed_liabilities pursuant to a contribution agreement dated date the contribution agreement in exchange for all of the membership interests of newco llc and now therefore in consideration of the premises and the mutual promises herein made and in further consideration of the re- presentations warranties and covenants contained herein the parties agree as follows article i purchase and sale of shares sec_1 sale and purchase of shares a at the closing which is deemed effective pincite p m on date subject_to the terms and conditions of this agreement the company shall purchase the redemption shares from sellers and the sellers shall sell assign and deliver the redemption shares to the company free and clear of all liens claims encumbrances security inter- ests and similar interests of any kind or nature whatsoever the redemption b at the closing subject_to the terms and conditions of this agreement the purchaser shall purchase the purchase shares from sellers and the sellers shall sell assign and deliver the purchase shares to the purchaser free and clear of all liens claims encumbrances security interests and other inter- ests of any kind or nature whatsoever the number of shares being purchased by the company and the number of shares being purchased by the purchaser shall be as set forth on schedule sec_1 purchase_price the aggregate purchase_price for the shares the purchase_price shall be equal to the sum of the redemption value plus the purchase payment and shall be paid_by the company with respect to its purchase of the redemption shares and by the purchaser with respect to its purchase of the purchase shares as follows a at the closing the company shall deliver to sellers all of the membership interests of newco llc the redemption payment or the redemption value the assets and liabilities of newco llc at that time shall consist solely of those listed on schedule a b at the closing the purchaser shall deliver to the sellers in cash via wire transfer of immediately available funds an amount equal to dollar_figure in proportion to their ownership interests of the company the purchase payment sec_1 closing the purchase and sale of the shares pursuant to this agreement the closing shall take place at the offices of ice miller one american square indianapolis indiana pincite a m on date or at such other time and place as the sellers and the purchaser mutually agree which date is desig- nated the closing date for purposes of this agreement the closing shall be deemed effective as of p m on the closing date the effective time article ii representations and warranties of the sellers as an inducement to enter into this agreement the sellers hereby jointly and severally represent and warrant to the purchaser as follows sec_2 retained assets immediately following the closing hereunder the company’s assets will consist only of i cash in an amount not less than dollar_figure ii dollar_figure which shall be in the bank account with fifth third bank to satisfy the amount of the purchase payment in the spra was the amount of the stock purchase_price shown in the date balance_sheet as discussed below although the ffi stockholders were deemed to have been paid for their respective stockholdings in ffi in cash via wire transfer of immediately available funds their respective portions of the so-called purchase payment for those holdings were placed into an escrow account and were not in fact distributed to them by wire transfer until date the day after the closing outstanding checks the bank account and iii a right to receive a refund of dollar_figure from the state of indiana and dollar_figure from other states for income taxes which were prepaid in the state tax_refund which shall be free and clear of all liens claims and encumbrances of any nature whatsoever sec_2 tax and other returns and reports all federal state local and foreign tax returns reports statements and other similar filings required to be filed by the company or any subsidiary including without limitation the federal and state_income_tax returns for the company’s and each subsidiary’s fiscal_year ended date collectively the tax returns with respect to any federal state local or foreign taxes assessments interest penal- ties deficiencies fees and other governmental charges or imposition including without limitation all income_tax unemployment com- pensation social_security payroll sales and use excise privilege property ad valorem franchise license school and any other tax or similar governmental charge or imposition under the laws of the united_states or any state or municipal or political_subdivision there- of or any foreign_country or political_subdivision thereof the taxes have been filed with the appropriate governmental agencies in all jurisdictions in which such tax returns are required to be filed and all such tax returns properly reflect the liabilities of the com- pany and each subsidiary for taxes for the periods property or events covered thereby all taxes accrued since the end of the last tax period or from the date which tax returns were last filed includ- ing without limitation those arising from the operations of the company or any subsidiary up to the closing have been accurately and properly determined and are set forth on schedule dollar_figure hereof current taxes all taxes including without limitation the the assets described in section dollar_figure of the spra are the assets that were shown in the date balance_sheet except for ffi’s bank account balance of dollar_figure and ffi’s outstanding checks of dollar_figure see supra note current taxes and those taxes which are called for by the tax re- turns have been or will be paid on or before the closing date other than the deferred_tax_liability the company and each subsidiary has made all deposits required_by_law to be made with respect to employees’ withholding and other employment_taxes including without limitation the portion of such deposits relating to taxes imposed upon it neither the company nor any subsidiary has received any notice of assessment or proposed assessment in connec- tion with any_tax returns and there are not pending any_tax exami- nations of or tax claims asserted against the company or any subsid- iary or any of their assets or properties neither the company nor any subsidiary has extended or waived the application of any statute_of_limitations of any jurisdiction regarding the assessment or collection of any taxes there are no tax_liens other than any lien for current taxes not yet due and payable set forth on schedule dollar_figure hereof on any of the assets or properties of the company or any subsidiary there is no basis for any additional_assessment of any taxes the company has not filed any returns or other documents with the irs indicating that the company would be dissolved or was dissolved or that it would discontinuing business operations except that the com- pany has filed a form_966 with the internal_revenue_service article iii representations and warranties of the purchaser the purchaser represents and warrants to each of the sellers as follows sec_3_1 authorization of purchaser when executed and delivered by the purchaser this agreement will constitute the valid and legally binding obligation of the purchaser enforceable against the purchaser in accordance with its terms sec_3_2 corporate status of purchaser purchaser is duly organized and validly existing under the laws of the state of florida purchaser has all requisite legal and corporate power and authority to own lease and operate its properties and assets and to carry on its business as now conducted and as proposed to be con- ducted and has all requisite legal and corporate power and authority to enter into and execute this agreement and the documents and instruments related hereto sec_3_3 consents purchaser is not required to obtain any permit consent approval order or authorization from and is not required to make any registration qualification designation declara- tion or filing with any federal or state governmental authority or third party in connection with the execution delivery or performance of this agreement or the consummation of the transaction contemplated hereby sec_3_4 authorization all actions on the part of purchaser necessary for the authorization execution delivery and performance of this agreement and the consummation of the transac- tions contemplated hereby and thereby has been taken prior to the closing this agreement has been duly executed and delivered by purchaser and constitutes a legal valid and binding obligation of purchaser enforceable against purchaser in accordance with its terms and conditions sec_3_5 noncontravention the execution delivery and performance of this agreement by purchaser does not and will not in any material respect violate conflict with or result in the breach of any term condition or provision of or require the consent of any other person under a any existing law ordinance or governmental rule_or_regulation to which purchaser is subject b any judgment order writ injunction decree or award of any court arbitrator or governmental or regulatory official body or authority which is appli- cable to purchaser c the charter documents of purchaser or any securities issued by purchaser or d any mortgage indenture agree- ment contract commitment lease plan authorization or other instrument document or understanding oral or written to which purchaser is a party by which purchaser may have rights or by which any of the assets of purchaser may be bound or affected or give any party with rights thereunder the right to terminate modify accelerate or otherwise change the existing rights or obligations purchaser there- under sec_3_6 disclosure purchaser has not omitted to state to the sellers any material fact relating to purchaser which is necessary in order to make the representations or warranties of purchaser con- tained in this article iii not misleading or which if disclosed would reasonably affect in any material respect the decision of a person considering a sale of the shares article iv conditions of purchaser’s obligations to close the obligations of the purchaser under this agreement are subject_to the fulfillment at or before the closing of each of the following conditions sec_4 financial condition and redemption immediately prior to the closing the company shall possess assets consisting solely of i the right to receive the state tax_refund ii cash in an amount not less than dollar_figure iii dollar_figure which shall be in the bank account and iv the membership interests of newco llc and the company shall be subject_to no liabilities except its obligations under the contribution agreement the re- demption by the company of the redemption shares shall have been closed to the satisfaction of the purchaser article vi covenants to the extent applicable sellers purchaser and the company further covenant and agree as follows section full access following the closing to the extent necessary the sellers will permit representatives of the pur- chaser to have full access at all reasonable times to the books records including tax records contracts and documents of or pertaining to the company any subsidiary or the shares to the extent the pur- chaser takes possession at closing of any of the books_or_records of the company or any subsidiary the purchaser shall provide the sellers to the extent necessary access at all reasonable times to such books_and_records sellers will use their reasonable best efforts to permit purchaser or its representatives to have access to the books_and_records of the company that were transferred to the asset pur- chaser and the real_estate purchaser upon request section survival of representations and warranties and indemnification obligations the parties agree that the representations and a warranties of the sellers under this agreement or in any certificate schedule statement document or installment furnished hereunder and the indemnification obligations of the sellers under this agreement as more particularly set forth in article ix hereof shall survive for a period of two years after the closing date except that the representations warranties and obligations and related indemnification obligations for breach or nonperfor- mance thereof with respect to taxes and tax returns shall survive subject only to the applicable statute_of_limitations periods if any and except that the sellers’ obligation to indemnify defend and hold harmless the purchaser any subsidiary and the company under this agreement with respect to claims against the company arising under the asset purchase agreements shall sur- vive for as long as the company has any obligation to i indemnify defend or hold harmless or is otherwise determined to be liable to any party under any of the asset purchase agreements arising under such agree- ment or ii preform any covenant or obligation under any asset purchase agreement additionally the two year survival period shall not apply to liabilities arising out of newco llc’s failure to satisfy the liabili- ties it specifically assumes under the contribution agreement the parties agree that the representations and b warranties of the purchaser under this agreement or in any certificate schedule statement document or instru- ment furnished hereunder and the indemnification obli- gations of the purchaser under this agreement as more particularly set forth in article ix hereof shall survive for a period of two years after the closing date section taxes and tax filings the sellers agree at their sole cost and expense to prepare or cause to be prepared all tax returns other that the state and federal_income_tax for the fiscal_year ending date the sellers tax returns that are due to be filed after the closing date and that relate to any and all re- quired taxable activities of the company or any subsidiary through and including the closing date and shall file all returns and pay all taxes in connection therewith on or before the tenth business_day before their due_date sellers will submit to the company copies of all such seller s tax returns in addition to the preparation of the th sellers’ tax returns sellers shall also prepare and submit to the company all forms w2 and for the company’s employees’ and independent contractors during the period of sellers’ ownership of the company the company shall assist the sellers in this process if required the sellers agree to assist the company upon its request in the preparation and filing of all future tax returns and in the application_for and procuring of all tax refunds and agree to pro- vide all documents required by the company in order to verify or substantiate the information in any_tax return or application_for a tax_refund the purchaser shall cause the company to prepare and file the state and federal_income_tax returns for the fiscal_year ending date the company shall report on its federal and state_income_tax returns all gains attributable to the receipt of the proceeds from the asset purchaser and real_estate purchaser pursu- ant to the allocation required by the asset purchase agreements and shall pay the applicable tax authorities the deferred_tax_liability if any resulting from such gain in light of the other post-closing activi- ties of the company the sellers and newco llc jointly and severally i agree to repay to the company an amount equal to the difference between dollar_figure and the actual amount of the state tax_refund actually received by the company if any and ii provided that the company files its request for the state tax_refund on or before date shall repay an amount equal to the full amount of the state tax_refund to the company if it is not received within one hundred twenty days of the filing of the application_for refund provided that neither sellers nor newco llc shall have any liability to pay such a deficiency or refund if y it results from an act or omission of the company after the closing or z the company fails to completely satisfy the deferred_tax_liability if any resulting from such gain in light of the other post-closing activities of the com- pany additionally if the company has not received the state tax_refund within ninety days of filing the application_for refund the company shall notify the sellers and shall allow the sellers to pursue the state tax_refund on its behalf and shall give sellers all commercially reasonable assistance in its efforts to collect such refund article vii events at closing section simultaneous occurrence of events at closing all of the events which are to occur at the closing under this agreement including but not limited to the delivery of the share certificates and the payment of the purchase_price and all other related exchanges shall be deemed to have occurred simultaneously section documents to be delivered by the sellers at the closing the sellers shall deliver to the purchasers and or the company as applicable a b c the certificates for the shares with a stock power duly executed in blank for each certificate the certificate of the sellers specified in sec_4 the resignations of the sellers and the other offi- cers employees agents and directors of the com- pany specified in section d any business records requested by the purchaser under section e any documents or certificates necessary to convey control_over each and every checking savings and other operations accounts of the company to the purchaser including without limitation signature cards f the articles of incorporation and by-laws of the company certified by the secretary of the com- pany and g a release in form satisfactory to the purchaser in its sole discretion of all claims liabilities obliga- tions loss damage or responsibility that any of the sellers or newco llc may have against the com- pany including without limitation any claims liabilities or obligations for indemnification con- tribution or otherwise but specifically excluding any claims liabilities or obligations arising out of this agreement or the transactions described here- in and any rights the sellers have to enforce the terms conditions or obligations of the asset pur- chase agreements against the asset purchaser and the real_estate purchaser section documents to be delivered by the purchaser at the closing the purchaser shall deliver to the sellers a b c the purchase payment owed to each seller or their nominee the certificate of the executive officer of pur- chaser as specified in sec_5 certified resolutions of the purchaser authorizing the transactions contemplated by this agreement d an incumbency certificate identifying the execu- tive officers of purchaser e the articles of organization and operating_agreement of purchaser certified by the secretary of purchaser within sixty days of the closing f the stock pledge agreement executed by pur- chaser and g the guaranty executed by midcoast credit corp section documents to be delivered by the company at the closing the company shall deliver to the purchasers and the sellers a b c d e the redemption payment to sellers certified resolutions of the company authorizing the transactions contemplated by this agreement and an incumbency certificate identifying the execu- tive officers of the company the professional fees of the sellers up to dollar_figure and a certificate of existence from the indiana secre- tary of state article ix indemnifications sec_9_2 indemnification obligation of the purchaser after the closing the purchaser will reimburse indemnify defend and hold harmless sellers and their heirs legal representatives suc- cessors or assigns an indemnified seller party against and in re- spect of any and all indemnified claims incurred or suffered by any indemnified seller party as to which a claim notice is given in accordance with sec_9_3 within the applicable time period spec- ified in section and that results from relates to or arises out of i any misrepresentation breach of warranty or nonfulfillment of any agreement or covenant on the part of the purchaser under this agree- ment ii any misrepresentation in or omission from any certificate schedule written_statement document or instrument furnished to the sellers by purchaser pursuant hereto iii a liability or obligation first arising subsequent to the closing out of purchaser’s operation of the company or conduct of the company’s business from and after the closing and iv any costs and expenses including reasonable attorney s’ fees and expenses_incurred in connection with the en- forcement of this indemnification article x miscellaneous section expenses except for the dollar_figure in profes- sional fees of the sellers the professional fees whether or not the transactions contemplated by this agreement are consummated the sellers for themselves and the company shall pay the sellers’ and the company’s fees and expenses_incurred in connection with the negotiation preparation and the consummation of all transactions contemplated by this agreement including without limitation all attorneys’ accountants’ and financing fees and the purchases like- wise shall pay its own fees and expenses in the event that the trans- action contemplated by this agreement does not close for any reason even as a result of a breach the seller shall not be entitled to have the professional fees paid_by purchaser section agreement is entire contract this agree- ment and the other documents delivered pursuant hereto including without limitation the schedules and exhibits attached hereto constitute the entire contract between the parties hereto relating to the subject matter hereof and no party shall be liable or bound to the other in any manner by any warranties representations or covenants except as specifically set forth herein and therein the terms and conditions of this agreement shall inure to the benefit of and be binding upon the respective heirs legal representatives successors and assigns of the parties here to nothing in this agreement ex- pressed or implied is intended to confer upon any party other than the parties here to and their respective heirs legal representatives successors and assigns any rights remedies obligations or liabilities under or by reason of this agreement except as expressly provided herein mr thrapp who principally negotiated the terms in the spra of the covenants the representations the warranties and the indemnification obligations of ffia in the event of any breaches of any of those covenants representations and warranties believed that those obligations of ffia were adequate for the transactions to which ffia ffi and the ffi stockholders agreed in the spra he held that belief even though ffia was organized a few days before the closing of the transactions in the spra and even though it had no assets at that time or after that closing except for the stock of ffi on date ffia ffi the ffi stockholders and leagre chandler millard llp leagre entered into an escrow agreement spra escrow agreement in which leagre was designated as escrow agent for the other parties to that agreement and was to establish and maintain an escrow account leagre escrow account under the terms of that agreement an unnamed investor agreed to provide certain funds as a loan to ffia shapiro funds that ffia was to use to acquire the stock of ffi that ffia had agreed to purchase in the spra all the funds to be deposited under the terms of that escrow agreement were to be deposited into the leagre escrow account the spra escrow agree- ment provided in pertinent part this escrow agreement the agreement is made and en- th tered into this day of date by and between ffi corpo- ration an indiana corporation ffi corporation ffi acquisition llc an indiana limited_liability_company ffi acquisition curtis d fankhauser cynthia a fankhauser and thomas l weintraut all of which sic are indiana residents and shareholders of ffi corpora- tion collectively the shareholders and leagre chandler millard llp as escrow agent the escrow agent witnesseth whereas the shareholders and ffi corporation have entered into a certain share purchase and redemption agreement spra with ffi acquisition llc an indiana limited_liability_company ffi acquisition dated date the share purchase agreement whereby ffi acquisition will purchase all of the outstanding common shares of ffi corporation from the shareholders which are outstanding after the redemption as defined in the share purchase agreement the shares in consideration of approxi- mately dollar_figure as adjusted pursuant to the share purchase agreement the share purchase_price whereas a certain investor related to ffi acquisition the investor ms shapiro has agreed to loan monies to ffi acquisi- tion to be used to fund the share purchase_price the investor funds and the escrow agent has agreed to act as escrow agent with respect to the investor funds in accordance with the terms and conditions of that certain escrow agreement attached hereto as exhibit a the investor escrow agreement and whereas ffi corporation has agreed to deposit certain monies into escrow with the escrow agent to satisfy the terms and conditions of the investor escrow agreement and to facilitate the closing under the share purchase agreement now therefore in consideration of the foregoing the mutual covenants of the parties set forth herein and the mutual bene- fits to be derived herefrom the parties intending to be legally bound hereby agree as follows delivery of investor funds into escrow the investor shall cause the investor funds to be delivered by wire transfer into the escrow agent’s trust account the escrow account only after ffi corporation deposits the remaining cash of ffi corporation into the escrow account which is estimated to be dollar_figure the ffi funds and the escrow agent agrees to hold and disburse the inves- tor funds and the ffi funds in accordance with the terms and condi- tions of this agreement and the investor escrow agreement delivery of shareholder funds at the closing as defined in the share purchase agreement the escrow agent shall deliver that portion of the investor funds to the shareholders in the denominations set forth on the closing statement attached hereto as exhibit b the closing statement cash reconciliation and dis- bursement schedule of escrow funds by leagre required to satisfy the share purchase_price in accordance with the terms and conditions of the share purchase agreement provided all of the shareholder’s conditions precedent set forth in the share purchase agreement have been satisfied and the transaction has not been otherwise terminated repayment of investor funds at the closing the escrow agent shall pay an amount equal to the investor funds to the investor and shall pay the balance in the escrow account to ffi acquisition or its designee delivery upon failure to close at anytime prior to the execution of the closing statement by all of the sellers ffi corpora- tion may instruct the escrow agent to return the ffi funds to ffi corporation or its designee and upon receipt of such instructions the escrow agent shall cause the ffi funds to be disbursed in accordance with the instructions on date ffia midcoast ms shapiro and leagre entered into an escrow agreement shapiro escrow agreement according to the terms of the shapiro escrow agreement to which the spra escrow agreement referred and which was an attachment to the spra escrow agreement ms shapiro agreed to provide dollar_figure as a loan to ffia ie shapiro funds according to the terms of the shapiro escrow agreement ffia was to use the shapiro funds to acquire the stock of ffi that ffia had agreed to purchase in the spra all of the funds to be deposited under the terms of the shapiro escrow agreement were to be deposited into the same leagre escrow account into which all of the funds to be deposited under the terms of the spra escrow agreement were to be deposited the shapiro escrow agreement provided in pertinent part this escrow agreement the agreement is made and en- tered into this 20th day of december by and between ffi acquisition llc an indiana limited_liability_company ffi acqui- sition midcoast credit corp a new york corporation mcc midcoast acquisition corp a florida corporation mac honora shapiro a california resident and a shareholder of midcoast credit corp shapiro and leagre chandler millard llp as escrow agent and counsel to ffi acquisition mcc and mac the escrow agent and matthew dollinger floyd grossman and jessica m seidman all as attorney-in-fact for honora shapiro collectively the dollinger firm witnesseth whereas the shareholders of ffi corporation a n indiana corporation ffi and ffi acquisition have entered into a share purchase agreement dated as of date share purchase agreement whereby ffi acquisition intends to purchase all of the issued and outstanding capital stock of ffi the shares from curtis d fankhauser cynthia a fankhauser and thomas l weintraut the ffi shareholders in consideration of the payment of the approxi- mate sum of dollar_figure as adjusted pursuant to the share purchase agreement the share purchase_price whereas shapiro has agreed to loan five hundred fifty thousand and dollar_figure0 dollars to ffi acquisition mcc and mac to be used to fund the share purchase_price as re- quired to be paid pursuant to the terms and conditions of the share purchase agreement the shapiro funds and leagre chandler millard llp has agreed to act as settlement agent for the transaction and as escrow agent with respect to the shapiro funds in accordance with the terms and conditions of this agreement now therefore in consideration of the foregoing the mutual covenants of the parties set forth herein and the mutual benefits to be derived here from the parties intending to be legally bound hereby agree as follows delivery of shapiro funds into escrow shapiro shall cause the shapiro funds to be delivered by wire transfer to the es- crow agent’s trust account the escrow account and the escrow agent agrees to hold and disburse the shapiro funds in accordance with the terms and conditions of this agreement the escrow ac- count is maintained in the name of leagre chandler millard-- trust account with hunting national bank n illinois street suite indianapolis indiana aba no with an account number of appointment of attorney-in-fact shapiro hereby appoints and designates mathew dollinger and or floyd g gross- man and or jessica m seidman all residents of the state of new york dollinger firm as her true and lawful attorney-in-fact to i execute and deliver in shapiro’s name any and all documents notices and or instruments including without limitation checks and or drafts for the payment and or distribution of the shapiro funds as contemplated by this agreement and the share purchase agree- ment and ii do and preform all acts on her behalf which are neces- sary to effect the transaction contemplated by this agreement and the share purchase agreement all with the same force and effect as though shapiro was personally present and shapiro also hereby ratifies and confirms that dollinger firm shall do by virtue hereof the power_of_attorney granted hereunder shall become effective when this agreement is signed by shapiro and shall continue in effect for thirty days from the date of the execution of this agreement delivery of shapiro funds at the closing as defined in the share purchase agreement the dollinger firm in their discre- tion shall authorize and direct the escrow agent in writing to deliver the shapiro funds to ffi acquisition mcc and mac for delivery to the ffi shareholders in accordance with the terms and conditions of the share purchase agreement provided i all of the conditions precedent set forth in the share purchase agreement have been satisfied to the satisfaction of the dollinger firm ii the trans- action settlement statement has been executed and delivered into escrow by the parties and iii the escrow agent has possession in escrow of sufficient funds from ffi or other sources and authority in escrow to immediately initiate a wire transfer of the sum of dollar_figure to the account of shapiro the escrow agent shall issue to the dollinger firm written notice via facsimile certifying and attesting that i the transaction settlement statement has been executed and delivered by all parties and ii the escrow agent has in its possession good funds in the amount of at least dollar_figure which have been provided by ffi into the escrow account and that upon written notice via facsimile from the dollinger firm the escrow agent will proceed to disburse moneys to the parties of the share purchase agreement in accordance with the settlement statement and simultaneously initiate a wire transfer of the sum of dollar_figure from the escrow account to the shapiro account as defined below simultaneously with the foregoing written notice escrow agent shall provide the dollinger firm with a copy of the fully executed settle- ment statement upon receipt of written authorization from the dollinger firm to release the shapiro funds escrow agent hereby agrees to deliver the shapiro funds and the ffi funds held in escrow agent’s account in accordance with the terms of this agreement repayment of shapiro funds in connection with the closing of the transaction contemplated by the share purchase agree- ment ffi and or the ffi shareholders shall be directed to pay the entire cash assets of ffi into the escrow account and the escrow agent agrees to hold and disburse an amount equal to the shapiro funds in accordance with terms and conditions of this agreement after the cash assets of ffi have been declared to be good funds in the escrow account the dollinger firm shall pursuant to paragraph above authorize the escrow agent in writing to forward by wire transfer an amount equal to the shapiro funds without interest to the follow- ing hsbc bank one old country road carle place new york ba no for further credit to honora shapiro in account no the shapiro account simultaneously with initiation of the wire transfer from the escrow account and or the payment of the purchase_price to the ffi shareholders the escrow agent shall enter an order with the financial_institution where the escrow account is maintained to deliver the sum of dollar_figure to the shapiro account on date ffia ffi and the ffi stockholders signed a document titled cash reconciliation and disbursement schedule of escrow funds by leagre cash reconciliation agreement which also was an attachment to the spra escrow agreement the cash reconciliation agreement set forth directions to leagre the escrow agent regarding the manner in which it was to disburse the respective funds that were to be deposited into the leagre escrow account pursuant to the spra escrow agreement and the shapiro escrow agree- ment the cash reconciliation agreement showed that ffi ms shapiro and mid- coast were to make the following deposits into the leagre escrow account depositor ffi ms shapiro midcoast total amount dollar_figure dollar_figure dollar_figure dollar_figure the cash reconciliation agreement instructed the escrow agent leagre to make the following disbursements from the leagre escrow account to the following persons distributee ms shapiro mr fankhauser mr weintraut ms fankhauser ice miller ffi total amount dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure on date mr shapiro on behalf of midcoast and mr fank- hauser on behalf of ffw signed the guarantee spra guarantee that section g of the spra required the spra guarantee provided in pertinent part for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged and in connection with the consummation of the transactions contemplated in i that certain share purchase and redemption agreement by and among ffi acquisition llc an indiana limited_liability_company purchaser ffi corporation an indiana corporation ffi and curtis d fankhauser cynthia a fankhauser and thomas weintraut collectively the sellers the share agreement and ii that certain assignment by ffi to ffw holdings llc an indiana limited_liability_company holdings immediately prior to and as part of the transactions contemplated by the share agreement of ffi’s right to receive a refund of the estimated federal corporate_income_tax pay- ments made by ffi for it sec_2001 tax_year the tax_refund in the approximate amount of dollar_figure the assignment the under- signed midcoast credit corp a florida corporation the guaran- tor guarantees the payment of the tax_refund by ffi to holdings within five business days of the receipt by ffi of the tax_refund as required by the terms of the assignment notwithstanding any other provision of this guaranty to the contrary the guarantor shall have no liability under this guaranty unless and until payment of the tax_refund is received by ffi in no event shall ffi’s liability ex- ceed the amount actually received by ffi with respect to such tax_refund this guaranty shall continue and be in full force and effect until the tax_refund is fully paid to holdings guarantor under- stands and acknowledges that the sellers were induced to enter into the share agreement in reliance upon this guaranty in the event the payment of the tax_refund by ffi to holdings is held to constitute a preference under any bankruptcy law or if for any other reason holdings is required to refund such payment or pay the amount thereof to any other party or if for any reason holdings is required to pay repay or refund to ffi or to any other party any value received by holdings from any source in payment of or on account of the tax_refund such payment by ffi or value received by holdings shall not constitute a release of guarantor from any liability under this guaranty but guarantor shall continue to be liable to the same extent as if such payment had not been made or such value received and guarantor agrees to pay such amount to holdings upon demand and this guaranty shall continue to be effective or shall be reinstated as the case may be to the extent of any such payment or value as agreed to and shown in the cash reconciliation agreement on date ffi ms shapiro and midcoast made the following deposits into the leagre escrow account pursuant to paragraph of the spra escrow agreement ms shapiro made her deposit into the leagre escrow account only after ffi had made its deposit into that account depositor ffi ms shapiro midcoast total amount dollar_figure dollar_figure dollar_figure dollar_figure before the closing of the transactions spr transactions to which the parties to the spra agreed mr thrapp one of petitioners’ attorneys concluded that as of that closing the leagre escrow account contained the funds needed to effect the closing of those transactions which included the dollar_figure that he and as discussed below mr fankhauser mr weintraut and ms fankhauser knew ms shapiro was to deposit into the leagre escrow account on the day of the closing mr thrapp reached that conclusion even though he and as discussed below mr fankhauser mr weintraut and ms fankhauser knew that that dollar_figure was to be returned to ms shapiro as of that closing mr thrapp also knew and he advised ffi mr fankhauser mr weintraut and ms fankhauser that if ffi were not solvent as of the closing of the transactions to which they and ffia midcoast’s designee had agreed in the spra and or if ffi’s funds as because the closing of the transactions under the spra was to be effective as of p m on date the dollar_figure was in fact returned to ms shapiro by wire transfer on the day after the closing which mr thrapp and as discussed below mr fankhauser mr weintraut and ms fankhauser knew opposed to so-called new money were used in order to effect the acquisition by ffia of the stock of ffi from the ffi stockholders those stockholders would be subject_to possible claims under the laws of the state of indiana by the creditors of ffi that was because those stockholders who were so-called insiders would have received the assets of ffi each of the ffi stockholders each of whom had signed the spra the spra escrow agreement to which the shapiro escrow agreement was attached and the cash reconciliation agreement which also was attached to the spra escrow agreement knew as did mr thrapp that the so-called loan of dollar_figure that ms shapiro had deposited into the leagre escrow account on date before the closing of the transactions under the spra but only after ffi had made its required_deposit into that leagre escrow account was not evidenced by a promissory note or other written document and did not bear interest the ffi stockholders as well as mr thrapp also knew that that purported loan by ms shapiro was to be deemed repaid as of the closing of the transactions under the spra which was deemed to occur simultaneously pursuant to that agreementdollar_figure mr fankhauser mr weintraut and ms fankhauser also knew as did mr thrapp that although they were deemed to receive as of the closing of the trans- actions their respective proportionate portions of the purchase_price for the transfer of their ffi stock to ffia the wire transfers to their respective bank continued moreover each of them knew as did mr thrapp that pursuant to the spra and the related agreements ie the spra escrow agreement the shapiro escrow agreement and the cash reconciliation agreement ffi was to deposit dollar_figure into the leagre escrow account as of the closing of the transactions under the spra pincite p m on date and that ffi as ffia’s designee was to receive only dollar_figure from that escrow account as of the closing of those transactions each of mr fankhauser mr weintraut and ms fankhauser also knew as did mr thrapp that the difference between the amount that ffi was to deposit into the leagre escrow account ie dollar_figure and the amount that ffi as ffia’s designee was to receive from that escrow account ie dollar_figure was equal to dollar_figure each of the ffi stockholders knew as did mr thrapp that that difference was equal to the amount of the purchase_price that they were to receive for their ffi stock under the spra from according to the terms of that agreement ffia continued accounts of those proportionate portions were not to occur until the day after the closing of those transactions as was true of the respective wire transfers to mr fankhauser mr wein- traut ms fankhauser and ms shapiro ffi received a wire transfer on the day after the closing in addition each of mr fankhauser mr weintraut and ms fankhauser understood as did mr thrapp that midcoast through ffia was purporting to purchase ffi stock from them in order to acquire ffi so that midcoast would be able to use ffi’s cash in order to buy charged-off debt securities that midcoast intended to use in its so-called asset recovery business however each of the ffi stockholders knew as did mr thrapp that midcoast through ffia agreed in the spra to pay them dollar_figure in cash for their ffi stock and that as of the closing of the spr transactions ffi ffia’s designee was to receive only dollar_figure ie cash of dollar_figure and the right to a refund of the ffi state income_tax payments of dollar_figure in other words each of mr fankhauser mr weintraut and ms fankhauser knew as did mr thrapp that midcoast through ffia agreed in the spra to pay dollar_figure in cash in return for only dollar_figure which midcoast purportedly would use in the asset recovery business that it was to operate in ffi moreover each of mr fankhauser mr weintraut and ms fankhauser knew as did mr thrapp or should have known as mr thrapp should have known that ms shapiro’s so-called loan of dollar_figure to ffia was not needed or used in order to effect the purchase of the ffi stock under the spra and that that so-called loan was mere window dressing designed to make it appear that ffia not ffi was providing the funds to be paid to them for the transfer of their ffi stock to ffia in other words each of the ffi stockholders knew as did mr thrapp or should have known as mr thrapp should have known that ms sha- piro’s so-called loan of dollar_figure to ffia was devoid of any economic substance-- a sham that was designed and intended to make it appear as though ffia not ffi was providing the funds to be paid to the ffi stockholders for the transfer of their ffi stock to ffia moreover each of mr fankhauser mr weintraut and ms fankhauser knew as did mr thrapp or should have known as mr thrapp should have known that the source of the funds that they were to receive for the transfer of their ffi stock to ffia was ffi not ffia that is to say each of the ffi stockholders as well as mr thrapp knew or should have known that ffi not ffia was to and did pay each of those stockholders each such stockholder’s proportionate portion of the so-called purchase_price ie dollar_figure that each was to and did receive under the spra as of the closing of the transactions under the spra on date ffi had no operations no employees engaged in operations no income no operational assets and no liabilities except ffi’s total anticipated tax_liability of dollar_figuredollar_figure on date in accordance with the terms of the spra the followings transactions to which the parties agreed in the spra closed effective as of p m on that date ffi distributed all of its membership interests in ffw to mr fankhauser mr weintraut and ms fankhauser and received from them percent of the outstanding_stock of ffi spr redemption transaction and mr fankhauser mr weintraut and ms fankhauser transferred to ffia the remaining percent of the outstanding_stock of ffi that they owned and received dollar_figure spr sale transaction as required by section of the spra the spr transactions were deemed to occur simultaneously on date mr fankhauser and mr weintraut resigned as officers directors and employees of ffi as required by the spra after their resignations mr weintraut and mr fankhauser had no further involvement in any see supra note upon ffi’s distribution to mr fankhauser mr weintraut and ms fank- hauser of all of the membership interests in ffw they owned percent per- cent and percent respectively of ffw’s membership interests the respective portions of the dollar_figure that mr fankhauser mr weintraut and ms fankhauser received are set forth below operations or any management of ffi nonetheless as discussed below mr weintraut at mr thrapp’s request prepared and sent to midcoast on date completed appropriate irs forms requesting a refund of the ffi federal income_tax payments at all relevant times after the closing of the transactions under the spra on date each of the following individuals was a director and or an officer of ffi name mr bernstein ms sesco ms parra mr shapiro position director and president treasurer and assistant secretary secretary director and executive vice president on date leagre as the escrow agent of the spra escrow agreement and the shapiro escrow agreement and pursuant to the cash reconcilia- tion agreement made the following distributions from the leagre escrow account to the persons indicated ms fankhauser was not at any time involved in the operations or the management of ffi distributee ms shapiro mr fankhauser mr weintraut ms fankhauser ice miller ffi total amount dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure the funds distributed to ffi were wired into a new account in ffi’s name at suntrust bank ffi’s suntrust bank account that ffia and mr bernstein controlled on date mr bernstein on behalf of midcoast and ffia and in his individual capacity signed an agreement between those two entities and himself that agreement provided in pertinent part notwithstanding the ownership of ffi acquisition llc midcoast credit corp is the financial beneficiary of the ffi corpora- tion transaction and ownership of ffi corporation midcoast credit corp shall receive all of the economic benefits of the limited_liability entity mr fankhauser mr weintraut and ms fankhauser were not aware of the above-described agreement until respondent gave them a copy of it in anticipation of the trial in these cases on date after the spr transactions closed simultaneously pincite p m ffi did not have any business operations and did not commence any asset recovery business operations or any asset receivable collection business operations at no time after the closing of the spr transactions did ffi have any business operations including any asset recovery business operations or any asset receivable collection business operations on date after the spr transactions closed simultaneously pincite p m ffi had assets totaling dollar_figure which consisted of cash of dollar_figure and the right to a refund of dollar_figure of state income_tax pay- ments and an anticipated federal and state income_tax_liability and an anticipated state_income_tax liability totaling dollar_figure or a negative net asset value of dollar_figuredollar_figure on date ffia and willow holdings llc willow hold- ings agreed to form ffi financial llc ffi financial and did so on date willow holdings’ sole member was willow investment_trust whose trustee was walter e schmidt mr schmidt see supra note regarding ffi’s bank account balance of dollar_figure ffi’s outstanding checks of dollar_figure and the prudential demutualization funds receivable of dollar_figure on date mr bernstein had dollar_figure wired from ffi’s suntrust bank account to a midcoast account at the bank of new york on a date not established by the record between december and ffi financial and ffi entered into an agreement under which ffi financial agreed to and did contribute u s treasury bills t-bills to ffi which willow holdings had contributed to it which had a value of dollar_figure and which willow holdings had represented to ffi financial had a tax basis of dollar_figure we shall refer to the transactions to which ffi financial and ffi agreed concerning the t-bills as the t-bill transaction midcoast ffi financial and ffi received from manatt phelps phillips llp manatt a federal_income_tax opinion letter dated date manatt opinion letter regarding the t-bill transaction for which midcoast paid manatt dollar_figure the manatt opinion letter was based on certain representations that ffi financial ffi and willow holdings were to provide in a letter represen- tations letter to be sent to manatt discussed below the opinion letter stated in pertinent part in accordance with your request we provide the following analysis and opinions relating to certain federal_income_tax conse- quences of the transaction the contribution whereby ffi finan- cial llc a delaware limited_liability_company parent contrib- uted eight treasury bills in the amount of dollar_figure and having a stated tax basis of dollar_figure as of the date of contribution the assets to ffi corporation an indiana corporation subsidiary at the time of the contribution parent owned all of the issued and outstanding shares of subsidiary subsidiary did not issue any shares of its stock to parent as a result of the contribution because according to parent issuance of such shares in exchange for the assets would have been meaningless due to the existing ownership by parent of of subsidiary for purposes of our opinion we have examined the following documents letter regarding ownership allocation for ffi financial llc dated date certificate of formation of ffi financial llc filed with the secretary of state of delaware dated date limited_liability_company agreement of ffi financial llc dated as of date unanimous written consent of the sole member of willow holdings llc a delaware limited_liability_company concerning ffi financial llc dated date unanimous written consent of the sole member of ffi acquisition llc a delaware limited_liability_company concerning ffi financial llc dated date unanimous written consent of the members of ffi financial llc authorizing the contribution dated date unanimous written consent of the directors of ffi corporation authorizing the contribution dated date contribution and assumption_agreement by and between ffi financial llc and ffi corporation dated date our understanding of the facts related to this opinion letter is derived in part from our review of copies of the documents listed above we have assumed without independent investigation that a such copies constitute true accurate and complete copies of the originals of such documents b such documents reflect the valid and binding obligations of the respective parties thereto and are enforce- able in accordance with their terms c such documents reflect the entire agreement among the respective parties thereto with respect to the subject matters thereof and d the transactions that are the subject of such documents were carried out in accordance with the terms of such documents if there were are or will be material trans- actions in connection with the contribution that are not described in the documents listed above or in your representation letter to us referred to below or are not carried out as described therein our opinions could be adversely affected we have also relied for purposes of this letter on facts set forth in a representation letter from parent and subsidiary to us of even date herewith among the representations in that letter is the repre- sentation that for federal_income_tax purposes parent’s tax basis for the treasury bills that parent contributed to subsidiary was dollar_figure immediately before the contribution we have assumed without independent investigation the accuracy and completeness of all such representations if such representations at any time are not true correct and complete our opinions could be adversely affected the internal_revenue_service takes the position that genuine non-tax business purposes must be present in the case of an asset contribution in order for a transaction to meet the requirements of sec_351 of the internal_revenue_code_of_1986 as amended the code both parent and subsidiary have represented that they have substantial non-tax business reasons for engaging in the contribution and that they entered into the contribution principally with a view towards making an economic profit apart from tax consequences according to parent and subsidiary their non-tax business purposes were as follows the contributed assets will strengthen the balance_sheet of subsidiary in preparation for subsidiary entering into a new line_of_business subsidiary also will use pre-contribution assets in its new business the new business is that subsidiary will purchase portfolios of credit card receivables and collect those receivables subsidiary’s anticipated cumulative internal_rate_of_return from realization of the receivables assuming reinvestment of the proceeds of receivables collection according to a pro forma cash_flow state- ment prepared by midcoast credit corp for subsidiary on a dis- counted present_value basis using a discount factor i sec_312 over years subsidiary will also enter into a collection and man- agement agreement with midcoast credit corp in pursuance of this business any change or inaccuracy in the facts set forth in the docu- ments specified above or in the above-referenced representations letter could adversely affect our opinions we have undertaken no obligation to monitor subsequent developments after the contribution or to analyze them as they may affect the opinions set forth in this letter in rendering these opinions we have examined such available documents laws regulations and other legal matters as we have considered necessary or appropriate for purposes of the opinions expressed herein we have not made any independent investigation in rendering these opinions other than as described herein we have not been requested to make any such independent investigation our opinions are based upon the code as of the date hereof the legislative_history of the code currently applicable regulations promulgated thereunder including proposed_regulations published administrative positions of the internal_revenue_service in revenue rulings and revenue procedures and judicial decisions such legal authorities are all subject_to change either prospectively or retroac- tively no assurance can be provided as to the effect of any such change upon our opinions we have undertaken no obligation to update this letter the opinions set forth herein have no binding effect on the internal_revenue_service or the courts no assurance can be given that if contested a court would agree with the opinions set forth herein the opinions set forth herein represent rather our best legal judgment as to the likely outcome of the issues addressed herein if such issues were litigated and all appeals exhausted in the case of transactions such as the contribution many federal state and local income and other tax consequences arise we have been asked only to address the issues specifically set forth below no opinion is expressed regarding any other issue this letter is being issued solely for the benefit of ffi corpora- tion and for the benefit of ffi financial llc as the sole shareholder of subsidiary as of the date of the contribution it may not be relied upon by any other person without our prior written consent subject_to the foregoing it is our opinion that more_likely_than_not a b c the contribution satisfied the requirements of sec_351 of the code the tax basis for the assets transferred from parent to sub- sidiary in the contribution was a carryover tax basis in accordance with sec_362 of the code based on the representations made to us in the above- referenced representations letter from parent and subsidiary the carryover tax basis for subsidiary was dollar_figure for the treasury bills parent contributed to subsidiary the representations letter dated date which as of date mr schmidt had signed on behalf of willow holdings but which mr bernstein had not signed on behalf of ffi financial and ffi stated in pertinent part ffi financial llc a delaware limited_liability_company parent and ffi corporation an indiana corporation subsid- iary have requested your opinion regarding certain federal_income_tax consequences of a transaction the contribution whereby parent transferred eight treasury bills in the amount of dollar_figure having a stated_value of dollar_figure and having a stated tax basis of dollar_figure as of the date of the contribution the assets to sub- sidiary the undersigned officer of parent and the undersigned officer of subsidiary have full power and authority to commit parent and subsidiary respectively to the representations contained in this letter willow holdings llc a delaware limited_liability_company and a member of parent willow holdings also represents herein par- ent’s tax basis for the assets immediately prior to the contribution the officer of willow holdings signing below has full power and authority to make such representation parent and subsidiary under- stand that the conclusions in your opinion letter are dependent in part on the accuracy of this representations letter and that your opinion could be adversely affected if this representations letter is not true complete and correct parent and subsidiary have seen a draft of your tax opinion letter prior to issuance of this representations letter that draft opinion letter makes specific reference to certain listed documents parent and subsidiary understand that your opinion letter could be adversely affected if there were material transactions in connection with the contribution that are not described in those listed documents or in this representations letter or were not carried out as described therein and herein the record does not establish whether mr bernstein ever signed the representations letter parent and subsidiary have asked you to address solely the federal_income_tax consequences of the contribution that are specifi- cally set forth in your draft tax opinion letter referred to above parent and subsidiary are aware that the contribution may involve many other tax issues and consequences under the internal_revenue_code_of_1986 as amended the code and other tax statutes however parent and subsidiary have not asked you to consider or render an opinion regarding such other tax issues for purposes of your tax opinion parent subsidiary and willow holdings as appropriate represent to you after due investi- gation as follows all factual statements in your draft tax opinion letter concerning the contribution are true correct and complete parent and subsidiary took all proper actions to transfer from parent to subsidiary beneficial_ownership of the assets parent did not retain any beneficial_ownership in the assets it transferred to subsidiary both parent and subsidiary had substantial non-tax business reasons for engaging in the contribution both parent and subsidiary entered into the contribution principally with a view toward making an economic profit apart from tax consequences the contribution will strengthen the balance_sheet of subsidiary in prepa- ration for subsidiary entering into a new line_of_business subsidiary also will use pre-contribution assets in its new business the new business is that subsidiary will purchase portfolios of credit card receivables and collect those receivables subsidiary’s anticipated cumulative internal_rate_of_return from realization of the receivables assuming reinvestment of the proceeds of receivables collection according to a pro forma cash_flow statement prepared by midcoast credit corp for subsidiary on a discounted_present_value basis using a discount factor i sec_312 over years subsidiary will also enter into a collection and management agreement with midcoast credit corp in pursuance of this business parent and subsidiary have treated and will treat the contribution in a manner that is consistent with its form at the time of the contribution and thereafter parent owned of the issued and outstanding shares of subsidiary due to its ownership of all of the subsidiary stock issuance of more sub- sidiary shares to parent in connection with the contribution would have been meaningless for this reason subsidiary did not issue shares to parent as a result of the contribution the members of parent formed parent and made their contributions of assets to parent principally for substantial business purposes these reasons included strengthening the capitalization of parent so that parent could act as a holding_company for subsidiary and have the flexibility to engage in future business opportunities in a holding_company structure no stock_or_securities were or will be issued by subsid- iary for services rendered to or for the benefit of subsidiary in con- nection with the contribution no stock_or_securities were or will be issued by subsidiary for indebtedness of subsidiary that is not evi- denced by a security or for interest on indebtedness of subsidiary which accrued on or after the beginning of the holding_period of parent for the debt parent neither accumulated receivables nor made any extraordinary payment of payables in anticipation of the contribution subsidiary has report and will reported items which but for the con- tribution would have resulted in income_or_deduction to parent in a period subsequent to the contribution and such items have and will constitute income or deductions to subsidiary when received or paid_by subsidiary the contribution was not the result of solicitation by a promoter broker or investment house subsidiary did not take the assets subject_to any debt and did not assume any debt of parent in connection with the contri- bution there was no indebtedness between subsidiary and parent and there was no indebtedness created in favor of parent as a result of the contribution the contribution occurred under a plan agreed upon before the contribution in which the rights of the parties were de- fined there was no plan or intention on the part of subsidiary to redeem or otherwise reacquire any subsidiary stock held by parent taking into account any issuance of additional shares of subsidiary stock any issuance of stock for services the exercise of any subsidiary stock_rights warrants or subscriptions any public offering of subsidiary stock and the sale exchange transfer by gift or other_disposition of any of the stock of subsidiary held by parent parent was the sole shareholder and in control of subsidiary within the meaning of sec_368 of the code at the time of the contri- bution at the time of the contribution parent was not under a bind- ing obligation and had no plan or intention to dispose_of any portion of its stock in subsidiary following the contribution subsidiary and parent each paid their own expenses increased in connection with the contribution at the time of the contribution subsidiary was not an investment_company within the meaning sec_351 of the code willow holdings a member of parent represents that for federal_income_tax purposes parent’s tax basis for the treasury bills that parent contributed to subsidiary was dollar_figure immedi- ately before the contribution you may rely on the accuracy of the representations herein for purposes of your tax opinion letter without further inquiry or independent investigation parent and subsidiary hereby consent to your reference to this representations letter in your tax opinion letter the undersigned have undertaken such investigation as the undersigned deemed necessary to ensure the accuracy of the foregoing representations on a date not established by the record between december and mr thrapp asked mr weintraut to prepare form_4466 corporation application_for_quick_refund of overpayment of estimated_tax form on date mr weintraut mailed to midcoast a completed but unsigned form_4466 corporation application_for form_4466 for ffi ffi’s form that form showed total_tax from form_1120 of zero and an o verpayment of estimated_tax of dollar_figure on date ffi’s form_4466 which mr bernstein had signed on behalf of ffi was mailed to the irs at a time not established by the record ms sesco sent a note to mr weintraut informing him that ffi’s form_4466 had been sent to the irs on date the u s department of the treasury issued a check for dollar_figure to ffi with respect to its taxable_year which ffi endorsed to ffw mr weintraut did not sign ffi’s form_4466 on behalf of ffi because following his resignation on date he was no longer an officer or a director of ffi on date form_966 that ms sesco had signed on behalf of ffi was mailed to the irs in that form ffi indicated that it no longer intended to liquidate as it had indicated in form_966 that it had submitted to the irs on date in date ffi received from the state of indiana three checks total- ing dollar_figure that constituted refunds by that state of certain retail_sales_tax retail_sales_tax refunds ffi estimated the respective federal and state_income_tax liabilities on those refunds deducted percent of those estimated total liabilities from the dollar_figure of retail_sales_tax refunds that it had received and sent the balance ie dollar_figure to ffwdollar_figure tax returns mr weintraut timely filed form_1040 u s individual_income_tax_return form_1040 for his taxable_year mr fankhauser and ms fankhauser filed jointly form_1040 for their taxable_year in those respective forms mr no one associated with ffi or with midcoast was aware of the retail_sales_tax refunds totaling dollar_figure at the time midcoast proposed the transactions in the letter of intent and at the time of the closing of the transactions under the spra as a result those refunds had no effect on the share purchase_price calculated in the date balance_sheet discussed above conse- quently for convenience we shall not refer except infrequently to the state retail_sales_tax refunds as an asset of ffi when we discuss the transactions and the events that are relevant to the issues presented here weintraut and mr fankhauser and ms fankhauser reported the gain that each had realized on date as a result of the spr transactions under the spra mr weintraut and mr fankhauser and ms fankhauser timely paid their respective federal income taxes on those respective gains on date the irs granted ffi an extension of time until date within which to file form_1120 u s_corporation income_tax return form_1120 for its taxable_year tax_return on date respondent received ffi’ sec_2001 tax_return in schedule d capital_gains_and_losses schedule d attached to ffi’ sec_2001 tax_return ffi reported a s ale price of dollar_figure c ost or other basis of dollar_figure and long-term_capital_loss of dollar_figure with respect to a sale of securities on date in the schedule d ffi reported a s ale price of dollar_figure c ost or other basis of dollar_figure and long-term_capital_loss of dollar_figure with respect to a sale of t-bills on decem- ber we shall refer collectively to the long-term_capital_losses totaling dollar_figure that ffi claimed in the schedule d as the claimed schedule d losses in form_4797 sales of business property attached to it sec_2001 tax_return ffi reported a net gain dollar_figure gain from the sale of business property from a sales or exchanges of property used in a trade_or_business and in- voluntary conversions from other than casualty or theft ffi reduced the gain from the sale of business property by the claimed schedule d losses of dollar_figure as a result ffi reported a net_long-term_capital_loss in the schedule d of dollar_figure of the portion of that capital_loss that was used to offset the dollar_figure of gain from the sale of business property all except dollar_figure ie dollar_figure was attributable to the t-bill transactions t-bill claimed loss ffi also claimed in it sec_2001 tax_return deductions of dollar_figure for legal and professional expenses dollar_figure for a management fee and dollar_figure for a rent expense after taking into account those three claimed deductions and certain other deductions in it sec_2001 return ffi reported in it sec_2001 tax_return t axable income of dollar_figure t otal tax of dollar_figure and tax due of dollar_figure ffi did not pay any part of the tax shown due in it sec_2001 tax_return when it filed that return ffi filed form_1138 extension of time for payment of taxes by a corporation expecting a net_operating_loss_carryback dated date in which it indicated that it expected a net_operating_loss for its taxable_year that would exceed the amount of its taxable_income for its taxable_year on date the irs received ffi’s form_1120 for its taxable_year tax_return in it sec_2002 tax_return ffi reported negative t ax- able income and a net_operating_loss of dollar_figure nol of the nol of dollar_figure ffi carried back dollar_figure to its taxable_year and dollar_figure to its taxable_year on date the irs received ffi’s form_1120 for its taxable_year tax_return in its tax_return ffi reported negative t ax- able income and a net_operating_loss of dollar_figure nol ffi carried back all of the nol of dollar_figure to its taxable_year irs examination with respect to ffi and petitioners around date respondent began an examination of ffi’s taxable_year around date respondent began an examination of ffi’s taxable_year from which dollar_figure of its claimed nol of dollar_figure had been carried back to its taxable_year around date respondent be- gan an examination of ffi’s taxable_year from which all of its claimed nol of dollar_figure had been carried back to its taxable_year ffi was repre- sented by counsel throughout the irs’ examination of its taxable_year sec_2001 sec_2002 and and the resolution of that examination discussed below during the period that started in and ended in mr bernstein who was then president of ffi executed on behalf of ffi several forms 872-i consent to extend the time to assess tax as well as tax attributable to items of a partnership in which ffi consented to the extension to various dates of the period of assessment of ffi’s federal_income_tax for its taxable_year sec_2001 the last of those forms that mr bernstein executed around the end of date ex- tended the time for assessment of that tax to date around date respondent assigned the same revenue_agent who was examining ffi’s taxable_year sec_2001 and sec_2002 to begin a transferee_liability examination with respect to mr fankhauser mr weintraut and ms fankhauser as the stockholders of ffi before the closing of the transactions under the spra on date since the irs’ examination of ffi’s taxable_year sec_2001 and sec_2002 was still ongoing and respondent had not yet initiated an examination of ffi’s taxable_year from which ffi had carried a loss back to its taxable_year that transferee_liability examination remained inactive until the irs had completed its examination of ffi’s taxable_year sec_2001 sec_2002 and and had undertaken collection efforts relating to the respective tax_liabilities for those years with which as discussed below ffi agreed on date the irs opened a collection file with respect to any un- paid federal tax_liabilities of ffi and assigned the matter to one of its revenue officers on date mr bernstein executed on behalf of ffi form_906 closing_agreement ffi closing_agreement in which ffi and respondent agreed to certain adjustments to ffi’s federal_income_tax for certain of its taxable years including its taxable_year sec_2001 sec_2002 and pursuant to the ffi closing_agreement ffi consented to respondent’s allowance for its taxable_year of a t-bill loss of dollar_figure which was only percent of the total t-bill claimed loss of dollar_figure disallowance for its taxable_year of a rent expenses of dollar_figure b professional expenses of dollar_figure c management fee expenses of dollar_figure and d legal and professional expenses of dollar_figure disallowance for its taxable_year of the nol of dollar_figure and disallowance for its taxable_year of the nol of dollar_figure in the ffi closing_agreement ffi also consented to the imposition of an accuracy-related_penalty under sec_6662 for its taxable_year that was to be calculated by multiplying one-half of the percent imposed by that section or percent by the amount of the underpayment for that taxable_year that was attributable to respondent’s dis- allowance of ffi’s claimed deductions of professional fee expenses of dollar_figure management fee expenses of dollar_figure and dollar_figure of the nol of dollar_figure dollar_figure of which ffi had carried back to its taxable_year as a result ffi agreed in the ffi closing_agreement to an accuracy-related_penalty under sec_6662 of dollar_figure in addition ffi consented in the ffi closing_agreement to an accuracy-related_penalty under sec_6662 and h for its taxable_year that was to be calculated by multiplying one-half of the percent imposed by sec_6662 or percent by the amount of the under- payment for that taxable_year that was attributable to respondent’s disallowance of percent ie dollar_figure of the total claimed t-bill loss of dollar_figure as a result ffi agreed in the ffi closing_agreement to an accuracy-related_penalty under sec_6662 and h of dollar_figure on date mr bernstein executed on behalf of ffi form_4549 income_tax examination changes form_4549 in which ffi consented to the assessment for inter alia its taxable_year of a deficiency in tax of dollar_figure the parties stipulated that it was on date that mr bernstein executed on behalf of ffi form_4549 that stipulation is clearly contrary to the facts that we have found are established by the record and we shall disregard it see 93_tc_181 the record establishes and we have found from our review of form_4549 which mr bern- stein executed and which is part of the record that he signed that form on date and an accuracy-related_penalty under sec_6662 totaling dollar_figure collectively ffi’s unpaid tax_liability on date mr bernstein completed on behalf of ffi form 433-b collection information statement for businesses form 433-b form 433-b is a statement that the irs requests a taxpayer that operates a business to complete and that shows the business’s income expenses assets liabilities and certain other financial informationdollar_figure as part of the revenue officer’s attempt to collect ffi’s unpaid tax_liability he performed certain searches for any assets belonging to ffi but he did not find any such assets on date respondent filed a notice_of_federal_tax_lien in marion county indiana with respect to ffi’s unpaid tax_liability and interest there- on as provided by law on date respondent sent eight levies to certain banks and other companies that might have held accounts in ffi’s name or that might have owed ffi money those eight levies pertained inter alia to any assets of ffi that mr form 433-b that ffi submitted to the irs is not part of the record and nothing in the record establishes the information that was set forth in that form the u s postal service returned to respondent a ninth levy that respon- continued bernstein had shown in ffi’s form 433-b respondent recovered no funds as a result of the eight levies on date the revenue_officer searched respondent’s database for any income that had been reported as having been paid to ffi the revenue_officer found no such income reported for any year after on date the revenue_officer prepared and on the next day his manager signed form_53 report of currently not collectible taxes form with respect to what that form described as cur rently not collectible assessed balance totaling dollar_figure for ffi’s taxable years assessment of dollar_figure assessment of dollar_figure and assessment of dollar_figure form_53 showed that certain searches and sources had been checked on date in order to determine whether ffi had any assets or income on date the revenue_officer prepared a memorandum known as a collectibility determination report we shall sometimes refer to the irs’ collectibility determination report as the cdr in the cdr the revenue_officer discussed the assessments totaling dollar_figure that the irs had made against ffi for its taxable years assessment of dollar_figure assessment of continued dent had sent because the addressee was no longer at the address that respondent had used and respondent was unable to find a better address dollar_figure and assessment of dollar_figure in the cdr the revenue_officer stated in pertinent part the assessed tax_liabilities of ffi have been deemed to be currently not collectible in addition to this finding ffi was also deemed to be insolvent the revenue_officer indicated in the cdr that on date certain searches relating to whether ffi owned motor vehicles aircraft watercraft or real_property had been performed on the accurint database which had information from public sources those searches disclosed that ffi owned none of those items except the elmwood avenue property however a subsequent review by the revenue_officer of accurint property assessment and property deeds records revealed that that property had been sold on date the cdr indicated that certain additional searches had been made to determine whether ffi owned any assets or had any income but those searches disclosed no such assets or income the revenue_officer concluded the cdr with the following statement all reasonable efforts and all required actions have been taken to determine that the taxes cannot be collected from ffi the revenue_officer did not search the state of indiana’s web site for unclaimed property or funds belonging to ffi the irs did not attempt to collect ffi’s unpaid tax_liability from any of the following individuals who was an officer and or director of ffi after the closing of the spra on date mr bernstein ms shapiro or her estate mr shapiro or ms parra the revenue_agent whom respondent assigned to conduct the transferee_liability examination with respect to mr fankhauser mr weintraut and ms fankhauser found no evidence that ffi was active in the asset recovery business after date in after the irs had undertaken its collection efforts with respect to ffi’s unpaid tax_liability and concluded that that liability was currently not collectible the irs reactivated its transferee_liability examination with respect to mr fankhauser mr weintraut and ms fankhauser it was at that time that mr fankhauser first learned that ffi’s tax_liability for its taxable_year had not been paid and was informed by the irs that it was seeking to collect that unpaid liability from inter alia him as a transferee of ffi on date during a so-called fast track appeals_office conference mr fankhauser advised the appeals_office representative at that conference that ms fankhauser had recently discovered that the state of indiana was holding in excess of dollar_figure of unclaimed funds in the name of ffi those unclaimed funds consisted of the prudential demutualization funds of dollar_figure that ffi had never claimed thereafter respondent levied on those funds on date respondent timely issued respective notices of liability to mr fankhauser mr weintraut and ms fankhauser with respect to ffi’s total liability for its taxable_year of dollar_figure ffi’ sec_2001 tax_liability ffi’s total liability consisted of a deficiency in tax of dollar_figure and an accuracy-related_penalty under sec_6662 totaling dollar_figure as well as in- terest thereon as provided by law respondent denied in the respective answers in these cases that the remain- ing unpaid tax_deficiency of ffi that is set forth in the notice of liability as the amount of dollar_figure is correct in the answers respondent alleged that that remaining unpaid tax_deficiency is actually dollar_figure plus sec_6662 penalty in the amount of dollar_figure plus applicable_interest respondent’s concession in the respective answers in these cases reflects that respondent collected from the state of indiana the prudential demutualization funds of dollar_figure to which ffi had been entitled in order to arrive at what respondent alleges in the answers is the remaining unpaid tax_deficiency of ffi respondent reduced the deficiency in tax of dollar_figure for taxable_year to which mr bernstein had consented on behalf of ffi in form_4549 by the prudential demu- tualization funds of dollar_figure to which ffi had been entitled we shall refer to ffi’s revised unpaid deficiency in tax of dollar_figure and ffi’s unpaid accuracy-related_penalty of dollar_figure as ffi’s unpaid deficiency liability and ffi’s unpaid penalty liability respectively on date the office of the indiana secretary of state admin- istratively dissolved ffia on date that office administratively dissolved ffi opinion petitioners’ motion in limine petitioners filed a motion in limine petitioners’ motion to exclude the purported expert report and the purported expert testimony set forth in the report purported expert report of scott hakala mr hakala after voir dire we found mr hakala qualified as an expert in financial economics and financial analysis we took petitioners’ motion under advisement and admitted conditionally into the record mr hakala’s purported expert report and his other testimony at trial pending our ruling on petitioners’ motion in the purported expert report mr hakala stated in pertinent part the purpose of this report is to assist the court in assessing whether the purported stock sale by the shareholders of ffi mr weintraut mr fankhauser and ms fankhauser to ffi acquisition llc is in substance a distribution of cash by ffi to its shareholders my report is being prepared in this regard for use as my direct testi- mony in us tax_court no other use is implied or intended i have been requested by you respondent as part of our assignment to address four questions did the shareholders officers use appropriate due dili- gence in investigating the potential purchaser prior to entering into the transaction no given the structure of the sale purchase and redemption agreement it was highly likely if not obvious that the cash paid to the selling shareholders of ffi at closing would come from the cash in the company and the remainder of the consideration would be paid in the form of receipt of an assignment of the prepaid federal income taxes of ffi in this is confirmed in the closing documents particularly in exhibit b ffi acquisition l l c ffi corporation-- cash reconciliation disbursement schedule of escrow funds by leagre chandler millard l l p it is customary for a seller to preform due diligence to ascertain the source and uses of funds of the purchaser prior to a sale of mate- rial assets or the company determine the purchaser’s reputation and financial resources and to obtain certain assurances and guarantees from the purchaser that the seller will not face potential future contin- gent liabilities in connection with the sale this is done both to i ensure that the purchaser has the financial capabilities and reputa- tion to close the transaction and honor any outstanding guarantees and ii to ensure the solvency of the company for sufficient time to avoid a risk to the seller of payments and assets received by the seller being regarded as preferential payments in the event of a finding of insolvency at or near the date of the transaction this is especially important in potential asset-stripping acquisitions such as this case where it is likely or possible that the buyer will use or distribute some of the existing assets of the company acquired and thus potentially render the company insolvent at the time of the acquisition a seller would want to be assured that sufficient resources would be retained within ffi or set_aside th r ough guarantees or pledges of collateral to pay any future potential notice_of_deficiency amounts or taxes in dis- pute that might arise as a result of federal or state tax audits absent such assurances there would be a risk that the payments to the selling shareholders of ffi would be regarded as preference payments in the event of a determination of corporate insolvency if ffi were found to have been insolvent or rendered insolvent the seller could be re- quired to return to the corporate estate a portion of or all of the cash and assets received as part of the transaction in order to satisfy the claims of creditors with greater priority i found no evidence of due diligence by the shareholders and officers of ffi with respect to midcoast credit or the principals and affiliates of midcoast credit in any of the materials produced to date by contrast some evidence of such due diligence was observed in materials produced by ice miller llp and in certain other materials with respect to the sale of certain assets and business operations by ffi to the gsi group inc effective date furthermore in their recorded interviews on date it was clear that no effort was made by the shareholders of ffi to perform any such due diligence on the purchaser of ffi i similarly found no evidence of significant due diligence in the materials produced by counsel ice miller llp for the shareholders and officers of ffi and ffi relating to this transaction the closing presented evidence that the cash portion of the purchase_price of dollar_figure was paid from the cash balances of ffi additionally no identified plan or transaction was available to demonstrate the ability of ffi to avoid federal and state income taxes as of date thus the use of cash within ffi to pay the shareholders of ffi raised a number of issues regard- ing the ongoing credit-worthiness and solvency of ffi in the future these issues would ordinarily be affirmatively addressed in this type of transaction was it commercially reasonable for the shareholders of ffi to believe that after the company had significant capital_gains from the liquidation of its assets the in- come tax_liability on that gain could be avoided by the sale of the company stock to another person or entity no i assume in this opinion certain understandings as to the limited ability of a corporation with taxable_income and capital_gains to offset prior taxable_income and capital_gains with subsequent losses and thus to recover prior prepaid and paid taxes that understanding is obtained by research and prior experience with these issue in the relevant time period i offer no opinions as an expert on these issues was the stock sale commercially reasonable--did it have a legitimate business_purpose no i assume in this opinion certain understandings with respect to the limited ability of a corporation to offset prior capital_gains with subsequent losses and recover prior prepaid and paid taxes as set forth in my answer to question i offer no opinions as an expert on these issues did the terms of the share purchase and redemption agreement result in the corporation’s ffi’s in- solvency yes a post-closing estimated balance_sheet for ffi is summarized in exhibit b-3 the closing documents show a net cash balance for ffi of dollar_figure with the assignment of the prepaid federal corporate income taxes to the prior shareholders of ffi the only other asset of ffi was dollar_figure in prepaid state corporate income taxes as of december and ffi’s estimated total federal corporate income taxes for fiscal were dollar_figure and ffi’s estimated state corporate income taxes for fiscal were dollar_figure that represents a total estimated liability of approxi- mately dollar_figure for ffi’s corporate income taxes in net of cash and prior state_income_tax deposits the shareholders’ equity of ffi was approximately negative dollar_figure as of date thus ffi fails the balance_sheet test for solvency additionally with no credible_evidence of successful operations and ability to avoid most of the federal and state corporate income taxes by legitimate and undisputed means the business fails the cash_flow test and capital adequacy tests in support of petitioners’ motion petitioners argue that the purported expert report of mr hakala consists of legal conclusions contains advocacy and is unreliable rule of the federal rules of evidence which governs the admissibility of expert testimony provides a witness who is qualified as an expert by knowledge skill experi- ence training or education may testify in the form of an opinion or otherwise if a the expert’s scientific technical or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue b the testimony is based on sufficient facts or data and c the testimony is the product of reliable principles and methods d the expert has reliably applied the principles and methods to the facts of the case testimony of a proffered expert that expresses a legal conclusion does not assist the trier of fact and is not admissible 109_tc_133 aff’d 165_f3d_822 11th cir 109_tc_21 an expert who is merely an advocate of a party’s position does not assist the trier of fact in understanding the evidence or in determining a fact in issue 118_tc_181 105_tc_16 aff’d 98_f3d_194 5th cir the determination of whether proffered expert testimony is helpful to the trier of fact is a matter within our sound discretion see 92_tc_101 in support of their first argument that the purported expert report of mr hakala consists of legal conclusions petitioners contend that mr hakala’s respective answers quoted above to the four questions in the purported expert report that respondent asked him to address are conclusions that are all the product of legal analysis in determining whether we agree with that contention of petitioners we consider mr hakala’s respective answers to those four questions we turn to mr hakala’s answer quoted above to the first question in the purported expert report the question of whether the due diligence efforts of mr fankhauser mr weintraut and ms fankhauser and their attorneys with respect to the spr transactions were adequate is a question of fact that we shall consider in determining what mr fankhauser mr weintraut and ms fankhauser knew or should have known with respect to those transactions we do not believe that mr hakala’s view regarding the adequacy of those due diligence efforts or his com- parison of those efforts with what is customary for a seller in similar transac- tions is the result or the product of legal analysis we reject petitioners’ argu- ment that mr hakala’s answer to the first question consists of legal conclusions and is the product of legal analysis we turn next to mr hakala’s respective answers quoted above to the second question and the third question in the purported expert report mr hakala’s answer to the second question regarding whether it was commercially we have considered and also reject each of petitioners’ two remaining arguments that mr hakala’s answer to the first question in the purported expert report should be excluded from the record because those answers represent advocacy and are unreliable reasonable for mr fankhauser mr weintraut and ms fankhauser to believe that midcoast would be able to defer ffi’ sec_2001 anticipated tax_liability and his answer to the third question regarding whether there was a legitimate business_purpose for the purported sale of their stock in the spr transactions both depended on certain understandings that he had mr hakala described those understandings in the purported expert report as understandings as to the limited ability of a corporation with taxable_income and capital_gains to offset prior taxable_income and capital_gains with subsequent losses and thus recover prior prepaid and paid taxes according to mr hakala t hat understanding is obtained by research and prior experience with these issues in the relevant time period i offer no opinions as an expert on these issues we agree with petition- ers that mr hakala’s respective answers to the second question and the third ques- tion should be excluded because those answers depended on legal conclusions that in turn depended on legal analysisdollar_figure we consider finally mr hakala’s answer quoted above to the fourth ques- tion in the purported expert report the question of whether the terms of the since we agree with petitioners’ first argument as to why we should exclude from the record mr hakala’s respective answers to the second question and the third question in the purported expert report we did not consider their remaining two arguments as to why those respective answers should be excluded spra resulted in ffi’s insolvency required mr hakala to compare ffi’s assets and liabilities after the closing of the spr transactions with its assets and liabilities before the closing of those transactions in making that comparison mr hakala treated the repayment of the shaprio funds and the payment of the pur- chase price to mr fankhauser mr weintraut and ms fankhauser as occurring simultaneously mr hakala’s treatment of those events as occurring simultane- ously did not assume as petitioners argue that the spr transaction will be collapsed which is a legal conclusion both the spra and the spra escrow agreement required that the repayment of the shaprio funds and the payment of the purchase_price to mr fankhauser mr weintraut and ms fankhauser occur simultaneously and they did we reject petitioners’ argument that mr hakala’s answer to the fourth question consists of legal conclusions and is the product of legal analysis we shall grant petitioners’ motion in that mr hakala’s respective answers to the second question and the third question and any materials in the purported expert report of mr hakala or any testimony of mr hakala at the trial in these we have considered and also reject each of petitioners’ two remaining arguments that mr hakala’s answer to the fourth question in the purported expert report should be excluded from the record because that answer represents advocacy and is unreliable cases relating to those answers are deemed stricken from the record we shall deny petitioners’ motion in that mr hakala’s respective answers to the first question and the fourth question and any materials in the purported expert report of mr hakala or any testimony of mr hakala at the trial in these cases relating to those answers are unconditionally admitted into the recorddollar_figure evaluation of witnesses at trial petitioners and respondent called as witnesses mr weintraut mr fankhauser mr thrapp and mr hupfer respondent called two additional wit- nesses mr hakala whose purported expert report and purported expert testimony we addressed above and richard wolf mr wolf the revenue_agent who con- ducted the examination of ffi’s taxable_year sec_2001 sec_2002 and and who conducted the transferee_liability examination with respect to each of mr fank- hauser mr weintraut and ms fankhauser we found the respective testimonies of mr weintraut mr fankhauser and mr thrapp to be in certain material re- spects contrary to common sense and or incredible we shall not rely on any such portions of their respective testimonies see eg tokarski v commissioner although we have ruled on petitioners’ motion we note that in reaching our findings and holdings herein we did not rely on any portion of the purported expert report and testimony of mr hakala that we unconditionally admitted into the record 87_tc_74 generally we found the respective testimonies of mr hupfer and mr wolf to be credible but not material to our resolution of the issues presented sec_6901 transferee_liability respondent bears the burden of establishing that each of mr fankhauser mr weintraut and ms fankhauser is liable under sec_6901 as a transferee of property of ffi for ffi’s unpaid deficiency liability and ffi’s unpaid penalty liability to the extent of the net asset value of the assets ie fair_market_value derived by reducing value of assets of ffi by its liabilities that each re- ceived from ffi as well as interest thereon as provided by law see sec_6902 see also rule d petitioners bear the burden of establishing that respondent erred in con- cluding that ffi is liable for the federal_income_tax and the accuracy-related_penalty under sec_6662 for its taxable_year to which ffi consented in form_4549 see rule a d although petitioners claimed in their respective petitions that those conclusions are erroneous they stipulated in the stipulation of facts that they do not take a position with respect to them and they do not dispute them on brief we conclude that petitioners have abandoned the allegations in their respective petitions that respondent erred in concluding that ffi is liable for the federal_income_tax and the accuracy-related_penalty under sec_6662 for its taxable_year to which ffi consented in form_4549 sec_6901 provides in pertinent part sec_6901 transferred assets a method of collection --the amounts of the following liabilities shall except as hereinafter in this section provided be assessed paid and collected in the same manner and subject_to the same provisions and limitations as in the case of the taxes with respect to which the liabilities were incurred income estate_and_gift_taxes -- a transferees --the liability at law or in equity of a transferee of property-- i of a taxpayer in the case of a tax imposed by subtitle a relating to income taxes h definition of transferee --as used in this section the term transferee includes donee heir legatee devisee and distributee the supreme court of the united_states held in 357_us_39 that sec_6901 does not create or define a substantive liability that section merely provides a procedure by which the government may collect from a transferee of property unpaid taxes owed by the transferor of the property the existence and the extent of a transferee’s liability are determined under applicable state law see id pincite 100_tc_180 feldman v commissioner before considering the transferee_liability issues that are presented here we shall summarize 779_f3d_448 7th cir aff’g tcmemo_2011_297 wl an opinion of the u s court_of_appeals for the seventh circuit_court of appeals the court in which appeal in these cases would normally lie in feldman the court_of_appeals held that the taxpayers involved there were liable under sec_6901 for a certain federal_income_tax liability of a c_corporation woodside ranch resort inc woodside in reaching that holding the court_of_appeals first held that for purposes of sec_6901 the taxpayers involved there were transferees of property of woodside the stock of which they had owned before they engaged in a pur- ported sale of that stock to one of the companies owned or controlled by midcoast acquisition corp and or midcoast credit corp see feldman v commissioner because the court_of_appeals issued feldman after the parties had filed their respective briefs in the instant cases we allowed them to file supplemental briefs in order to address that opinion unless otherwise indicated our references to feldman are to the court_of_appeals opinion in 779_f3d_448 7th cir aff’g tcmemo_2011_297 wl certain courts including this court that have considered transferee lia- bility under sec_6901 have first addressed whether the taxpayer was liable under continued f 3d pincite the court_of_appeals next turned to the applicable law of the state of wisconsin and held that for purposes of that applicable state law those taxpayers were transferees of property of woodside see id pincite and that those taxpayers were liable under that applicable law for woodside’s unpaid federal_income_tax liability in question see id pincite in reaching its first holding that the taxpayers in feldman were transferees of property of woodside for purposes of sec_6901 the court_of_appeals con- cluded that under the well-established federal tax law doctrines known as the substance_over_form_doctrine federal substance_over_form_doctrine and the eco- nomic substance doctrine federal economic_substance_doctrine the purported sale by those taxpayers to midcoast of their stock in woodside should be recast or continued applicable state law for certain unpaid taxes see eg 680_f3d_417 4th cir aff’g tcmemo_2011_63 in that case the court held that the taxpayers were not liable under applicable state law as a result it was irrelevant whether the taxpayers were transferees for purposes of sec_6901 the applicable law of the state of wisconsin in feldman v commissioner f 3d pincite regarding transferee_liability was the uniform fraudulent trans- fer act ufta in effect in wisconsin wisconsin ufta see wis stat ann secs dollar_figure to dollar_figure west according to the court_of_appeals the wisconsin ufta is by its terms expressly supplemented by principles of law and equity see feldman v commissioner f 3d pincite quoting wis stat ann sec_242 recharacterized as a liquidation in which those taxpayers received cash from woodside see id pincite in reaching its second holding that the taxpayers in feldman were trans- ferees of property of woodside for purposes of the applicable law of the state of wisconsin the court_of_appeals first rejected an argument that the commissioner of internal revenue commissioner had advanced regarding the role of federal_law in determining transferee status under applicable state law the commis- sioner argued in feldman as respondent initially argued here that if the court_of_appeals were to recharacterize the transaction in question in feldman in order to ascertain transferee status for purposes of sec_6901 substantive liability under state law should be determined by applying that state law to the transaction as recharacterized under federal_law see id pincite the court_of_appeals held in feldman v commissioner f 3d pincite that under 357_us_39 the existence and the extent of a transferee’s liability including the question of transferee status are determined under applicable state respondent acknowledges in respondent’s supplemental brief that the court_of_appeals in feldman v commissioner f 3d pincite agreed with other circuit courts to require independent determinations of transferee status under federal_law and substantive liability under state law in respondent’s supplemental brief filed in these cases after the court_of_appeals decided feld- man respondent no longer advances that argument law having so held the court_of_appeals turned to an examination of the applicable law of the state of wisconsin after analyzing the applicable law of wisconsin the court_of_appeals held that under that law the purported sale by the taxpayers to midcoast of their stock in woodside should be recast or recharacterized as a liquidation in which those taxpayers received cash from woodside and consequently those taxpayers were transferees of woodside and those transferees were liable for wood- side’s unpaid federal_income_tax liability in question see id pincite the applicable state law in the instant cases is the ufta in effect in indiana indiana ufta ind code ann secs to west and not the wisconsin ufta that was applicable in feldman nonetheless as after the indiana ufta was placed in another section of the indiana code namely ind code ann secs to west ind code ann secs to west is virtually identical to its predecessor ind code ann secs to west for con- venience we generally refer to ind code ann secs to west in the national conference of commissioners on uniform state laws national conference approved and promulgated the uniform fraudulent transfer act that had been drafted by a committee that it had appointed to study the uniform fraudulent conveyance act ufca which the national conference had promulgated in when promulgated in ufta sec_11 7a part ii u l a provided that that act shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject continued pertinent here and as discussed in detail below the indiana ufta appli- cable in the instant cases and the wisconsin ufta applicable in feldman are virtually identical in all material respects as a result we find feldman to be instructive in resolving various questions under the indiana ufta that we shall consider in determining whether each of mr fankhauser mr weintraut and ms fankhauser is liable under sec_6901 as a transferee of property of ffi for ffi’s unpaid deficiency liability in considering the issues presented in these cases we shall follow the order in which the court_of_appeals in feldman ad- dressed the issues presented to it in deciding whether the taxpayers involved continued of this act among states enacting it the respective indiana ufta and wisconsin ufta have provisions that are virtually identical to ufta sec_11 see ind code ann sec this chapter shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this chapter among states enacting it wis stat ann sec dollar_figure this chapter shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this chapter among states enacting it certain unpaid additions to tax and interest as provided by law were also involved in 779_f3d_448 however we do not find the opinion of the court_of_appeals or the opinion of this court to be instructive or helpful in resolving various questions that we shall consider in determining whether each of mr fankhauser mr weintraut and ms fankhauser is liable under sec_6901 as a transferee of property of ffi for ffi’s unpaid penalty liability as well as for interest thereon as provided by law there were liable as transferees of property of woodside for its federal_income_tax liability in question transferee status for purposes of sec_6901 it is respondent’s position that each of mr fankhauser mr weintraut and ms fankhauser is a transferee of property of ffi for purposes of sec_6901 with respect to the spr redemption transaction and the spr sale transaction under the spra in support of that position respondent argues that in substance ffi made various distributions or transfers to each of mr fankhauser mr weintraut and ms fankhauser in each of those spr transactions with respect to the spr redemption transaction under the spra respon- dent argues that in form and in substance ffi made distributions or transfers of ffi’s property to mr fankhauser mr weintraut and ms fankhauser in that transaction as a result respondent maintains each of mr fankhauser mr weintraut and ms fankhauser is a transferee of property of ffi for respondent characterizes the distributions or transfers that respondent claims ffi made to its stockholders in the spr redemption transaction and in the spr sale transaction under the spra as in substance liquidating distributions or transfers we do not use that characterization see infra note immediately following ffi’s distributions of ffw’s membership interests to mr fankhauser mr weintraut and ms fankhauser they owned percent percent and percent respectively of those interests purposes of sec_6901 with respect to the spr redemption transaction under the spra petitioners do not address whether let alone dispute that in the spr redemption transaction under the spra each of them received a distribution or transfer of property of ffi namely a proportionate ownership_interest in ffw nor do petitioners address whether let alone dispute that each of them is a transferee of property of ffi for purposes of sec_6901 with respect to that redemption transaction instead as we understand petitioners’ arguments with respect to the spr redemption transaction under the spra their focus is on why they believe that they are not liable as transferees under the indiana ufta with respect to that redemption transaction in the light of petitioners’ failure to address whether and to dispute that in the spr redemption transaction under the spra they received distributions or transfers of property of ffi namely respective proportionate ownership interests in ffw we conclude that ffi made distributions or transfers of property to mr fankhauser mr weintraut and ms fankhauser in the spr redemption trans- action under the spra and that each of them is a transferee of property of ffi for purposes of sec_6901 with respect to that transactiondollar_figure with respect to the spr sale transaction under the spra respondent argues that in substance ffi made additional liquidating distributions of ffi’s cash to mr fankhauser mr weintraut and ms fankhauser in that transaction as a result respondent maintains each of mr fankhauser mr weintraut and ms fank- hauser is a transferee of property of ffi for purposes of sec_6901 with respect to the spr sale transaction under the spra respondent also argues with respect to the spr sale transaction that t he loan from shapiro to ffia was a ruse recycling a sham feldman wl at remove the shapiro loan from this transaction spr sale transaction and nothing of consequence changes--the shareholders of ffi get paid the same amount dollar_figure from the same trust escrow account id in the same way what remains after disregarding the shapiro loan in ffi is a transfer of cash from ffi to petitioners via the trust escrow account in reality the only money that changed hands was ffi’s cash as a result respondent maintains each of mr fankhauser mr weintraut and ms fankhauser is a transferee of property of ffi for purposes of sec_6901 with respect to the spr sale transaction under the spra the record fully supports our conclusion that ffi made distributions or transfers of property to mr fankhauser mr weintraut and ms fankhauser in the spr redemption transaction under the spra and that each of them is a transferee of property of ffi for purposes of sec_6901 with respect to that transaction petitioners do not address whether let alone dispute that in the spr sale transaction under the spra in substance ffi made additional distributions or transfers of ffi’s cash to mr fankhauser mr weintraut and ms fankhauser and that consequently each of mr fankhauser mr weintraut and ms fankhauser is a transferee of property of ffi for purposes of sec_6901 with respect to the spr sale transaction under the spra instead as we understand petitioners’ arguments with respect to the spr sale transaction under the spra like their arguments with respect to the spr redemption transaction under the spra their focus is on why they believe that they are not liable as transferees under the indiana ufta with respect to that sale transaction petitioners also do not address whether let alone dispute that in the spr sale transaction under the spra the purported loan from ms shapiro was a sham and that what remains after disregarding the shapiro ‘loan’ is a transfer of cash from ffi to mr fankhauser mr weintraut and ms fank- hauser via the trust leagre escrow account and that consequently each of mr fankhauser mr weintraut and ms fankhauser is a transferee of property of ffi for purposes of sec_6901 with respect to the spr sale transaction under the spra instead as we understand petitioners’ arguments with respect to the spr sale transaction under the spra like their arguments with respect to the spr redemption transaction under the spra their focus is on why they believe that they are not liable as transferees under the indiana ufta with respect to that sale transaction in the light of petitioners’ failure to address whether and to dispute that in the spr sale transaction under the spra they received distributions of cash of ffi namely respective proportionate portions of dollar_figure we conclude that each of mr fankhauser mr weintraut and ms fankhauser is a transferee of property of ffi for purposes of sec_6901 with respect to the spr sale transac- tion under the spra nonetheless for the sake of completeness we shall con- sider whether each of them received a distribution or transfer of cash of ffi in the spr sale transaction under the spra namely a proportionate portion of dollar_figure the purchase_price for the purported sale of their ffi stock to midcoast and whether each of them is a transferee of property of ffi for pur- poses of sec_6901with respect to that sale transactiondollar_figure as discussed in detail below the record fully supports our conclusion that ffi made distributions of cash to mr fankhauser mr weintraut and ms fank- hauser in the spr sale transaction under the spra and that each of them is a transferee of property of ffi for purposes of sec_6901 with respect to that trans- action we address in detail only the spr sale transaction and not the spr re- demption transaction under the spra that is because in form each of mr fank- continued respondent contends in respondent’s supplemental brief that p etitioners’ transaction with midcoast is in all material respects identical to the transaction in feldman and that t he seventh circuit_court of appeals decision in feldman strongly supports respondent’s position with respect to the spr sale transaction under the spra petitioners contend in their supplemental brief that feldman is factually distinguishable from the material facts in this case sic and that although the equities in feldman justified the collapse of the transactions at issue there they do not do so here according to petitioners in feldman the evidence showed that taxpayer-shareholders knew or should have known that the corporation’s taxes resulting from its asset sale would not be paid in this case sic however the evidence is otherwise we believe that petitioners’ contentions regarding the alleged material factual differences between feldman v commissioner continued hauser mr weintraut and ms fankhauser received property directly from ffi in the spr redemption transaction--facts that they do not dispute in their supplemental brief petitioners point to other alleged differences between the respective facts in feldman and in these cases most of those alleged differences appear to relate to whether the taxpayers there and here knew or should have known that the respective federal income taxes realized from the respective sales by the respective c corporations in which the taxpayers there and here had been stockholders would not be paid f 3d and the instant cases regarding whether they knew or should have known that ffi’s taxes from its asset sale would not be paid are not relevant to whether they are transferees of property of ffi for purposes of sec_6901 with respect to the spr sale transaction under the spra we shall how- ever consider below in determining whether petitioners are liable as transferees of ffi under the indiana ufta with respect to the spr sale transaction under the spra whether those contentions are relevant to that determination we turn now to the dispute between respondent and petitioners as to whether as respondent maintains the court_of_appeals opinion in feldman strongly supports respondent’s position that each of mr fankhauser mr weintraut and ms fankhauser is a transferee of property of ffi for purposes of sec_6901 with respect to the spr sale transaction under the spra because the material facts in feldman as they relate to that issue are identical to the ma- terial facts in these cases in order to resolve that dispute we compare below certain relevant facts including material facts which we found there see feldman v commissioner wl and on which the court_of_appeals relied in feldman v commissioner f 3d pincite and certain relevant facts including material facts which we have found heredollar_figure in feldman and in these cases the stockholders of a c_corporation that owned certain appreciated assets who also were its officers or related to those officers decided that it was time to terminate the business of the c_corporation and to sell its stock or its assets see id pincite there and here the stockholders were aware that the c corporation’s sale of appreciated assets would generate significant federal and state income taxes see id in feldman and in the instant cases however prospective buyers were interested in purchasing the c corpora- tion’s assets not its stock see id pincite in both instances the stockholders agreed to sell the c corporation’s operating_assets in feldman one buyer pur- chased the c corporation’s assets during the year at issue there see id pincite in the instant cases different buyers purchased different assets of the c_corporation at different times during the year at issue here in feldman the sale of the c cor- poration’s assets caused it to realize income that would have resulted in federal and state income taxes totaling dollar_figure see id in the instant cases the sales of we shall usually cite the court of appeals’ opinion in feldman v com- missioner f 3d pincite for our recitation of certain facts which we found and on which the court_of_appeals relied unless the court_of_appeals does not expressly restate in its opinion a fact that we discuss herein in that event we shall cite our opinion in feldman v commissioner wl the c corporation’s assets caused it to realize income that would have resulted in federal and state income taxes totaling dollar_figure in feldman after the sale of the c corporation’s assets the c_corporation had ceased carrying on any active business and had no operating_assets it was an ‘empty shell’ consisting of cash on hand along with a few notes and receivables id pincite in feldman the c_corporation planned to liquidate and distribute those nonoperating assets to its stockholders see id pincite in the instant cases after the sales of the c corporation’s assets the c_corporation had ceased carrying on any active business had no operating_assets except certain oxidation technology and had nonoperating assets consisting of cash a note from the buyer of the elmwood property certain interest receivable on that note a few other receivables and certain real_property in minnesota in these cases the c ms fankhauser learned around date that the c_corporation had another receivable of which no one associated with ffi or midcoast was aware in namely the prudential demutualization funds receivable of dollar_figure that ffi had never claimed and that the state of indiana was holding in the name of ffi none of the parties to the spra knew about that receivable at the time they were negotiating that agreement or at the closing of the transactions thereunder we conclude that that receivable is not material to and we shall not consider it in our discussion of the issues presented see supra note corporation not only had planned but also had taken formal corporate actions to liquidate and to distribute those nonoperating assets to its stock- holdersdollar_figure in feldman and in these cases the c_corporation did not as planned for- mally liquidate and distribute its assets to its stockholders in both instances a representative of the c_corporation in feldman the c corporation’s accountant and financial advisor and in the instant cases the c corporation’s attorney intro- duced the c corporation’s stockholders to certain representatives of midcoast be- cause midcoast was interested in buying the stock of the c_corporation see feld- man v commissioner f 3d pincite in feldman and in these cases the c specifically on date the ffi stockholders and the ffi directors held respective special meetings at which they approved a plan to liquid- ate and dissolve ffi ie the date plan_of_liquidation in the event and only in the event that the ffi asset sale to gsi closed on date as provided in the ffi asset sale agreement on date the ffi asset sale closed pursuant to the ffi asset sale agreement consequently on date the condition_precedent to the date plan_of_liquidation was satisfied on date the ffi stockholders voted to dissolve ffi in accordance with the date plan_of_liquidation on date the day on which ffi sold the elmwood property it took certain steps in prepa- ration for its planned liquidation and dissolution including filing articles of dissolution with the indiana secretary of state informing the indiana attorney_general and the department of workforce development of indiana that it was dissolving mailing form it-966 to the department of revenue of indiana and mailing form_966 to the irs form_966 that ffi completed and mailed to the irs indicated that ffi’s anticipated l ast month day and year of final tax_year was date corporation’s stockholders were informed that midcoast was interested in buying their stock in a way that would eliminate in feldman or defer in these cases the federal_income_tax and state_income_tax resulting from the sale of the c corporation’s assets in feldman and in these cases the midcoast proposal would enable those stockholders to receive a greater amount a so-called premium from the sale of their stock of the c_corporation than they would receive from the planned liquidation of the c_corporation after the payment of all of the c corpora- tion’s federal_income_tax and state_income_tax attributable to the asset sales see id in feldman and in the instant cases midcoast sent a letter of intent to the c corporation’s stockholders in which it proposed a structure to effect the proposed purchase by it and the proposed sale by those stockholders of their stock in the c_corporation under the proposed structure in feldman the c_corporation was to redeem percent of its stock that the c corporation’s stockholders owned in addition those stockholders were to sell the remainder of their c_corporation stock to midcoast or its designee for a purchase_price that was equal to the amount of the c corporation’s cash as of the closing reduced by a stated percentage per- cent of the c corporation’s anticipated federal and state_income_tax liabilities attributable to the sale of its assets see id under the proposed structure in these cases the c_corporation was to redeem percent of its stock that the c corporation’s stockholders owned in addition those stockholders were to sell the remainder of their c_corporation stock to midcoast or its designee for a purchase_price that was equal to the total amount as of the closing of the c corporation’s cash and the amount of a refund of the ffi state income_tax payments re- duced by a stated percentage percent of the c corporation’s anticipated federal and state_income_tax liabilities attributable to the sales of its assets during in feldman and in the instant cases the stockholders of the c_corporation understood that the corporation’s anticipated federal and state income taxes would not be paid in feldman although midcoast promised to pay those federal and state_income_tax liabilities the stockholders understood that midcoast intend- ed to use certain bad_debts and losses that it had purchased from certain credit card companies in its so-called asset recovery business in order to eliminate those tax_liabilities see feldman v commissioner f 3d pincite in the instant cases midcoast made a qualified promise in the spra to pay the applicable tax author- ities the deferred_tax_liability if any resulting from such gain in light of other post-closing activities of the company however in these cases midcoast also represented and the stockholders of the c_corporation understood that midcoast intended to buy and use charged off debt portfolios in its asset recovery business in order to defer the c corporation’s anticipated federal and state_income_tax liabilities in feldman and in these cases the stockholders of the c_corporation did little or no due diligence in feldman the stockholders obtained a dunn brad- street report on midcoast and called a few references see id pincite here petitioners themselves did no due diligence mr thrapp one of petitioners’ attorneys read some promotional materials that midcoast had prepared before the closing of the spr transactions mr thrapp concluded that as of that closing the leagre escrow account contained the funds needed to effect the closing of those transactions which included the dollar_figure that he and as discussed below mr fankhauser mr weintraut and ms fankhauser knew ms shapiro was to deposit into the leagre escrow account on the day of the closing mr thrapp all of the distributions to ffia or its designee ffi the ffi stock- holders and ms shapiro that were required to implement the spra and the related agreements namely the spra escrow agreement the shapiro escrow agreement and the cash reconciliation agreement were deemed to be made as of the closing of the spra the closing of the spr transactions under the spra was to be deemed effective as of p m on date the date of the closing moreover the spra provided that all of the events that were to occur at the closing under the spra including but not limited to the delivery of the ffi stock certificates and the payment of the purchase_price and all other related exchanges were to be deemed to occur simultaneously reached that conclusion even though he and as discussed below mr fankhauser mr weintraut and ms fankhauser knew that that dollar_figure was to be returned to ms shapiro as of that closing in feldman and in the instant cases the redemption of a portion of the c corporation’s stock and the sale of the balance of that stock to midcoast were effected in essentially the same manner in both instances the parties to the trans- actions used one escrow agent and two escrow agreements see feldman v com- missioner f 3d pincite in feldman the parties to the transactions involved there used a share purchase agreement and two escrow agreements the parties to the first escrow agreement were the c corporation’s stockholders midcoast and the law firm of foley lardner which was the escrow agent the parties to the second escrow agreement in feldman were midcoast ms shapiro a 50-percent owner of midcoast her attorney and foley lardner which was the escrow agent see feldman v commissioner wl at in the instant cases the parties to the spra transactions used a share purchase and redemption because the closing of the transactions under the spra was deemed to occur as of p m on date mr thrapp and as discussed below mr fankhauser mr weintraut and ms fankhauser knew that the distributions required by that agreement and the related agreements including the dollar_figure that was required to be returned to ms shapiro were to be made by wire transfers on the day after the closing agreement spra and two escrow agreements the parties to the first escrow agreement were the c corporation’s stockholders petitioners the c_corporation midcoast and leagre which was the escrow agent the first escrow agreement in the instant cases incorporated a second escrow agreement the parties to that second escrow agreement were ffia midcoast ms shapiro and leagre which was the escrow agent the parties to the respective transactions ie the redemption transaction and the sale transaction in feldman and in these cases used a newly formed limit- ed liability company as part of those respective transactions in feldman the stockholders formed a limited_liability_company to receive the respective proceeds of the redemption transaction and the sale transaction see feldman v commis- sioner f 3d pincite the sole members of the limited_liability_company were the stockholders of the c_corporation whose respective percentage membership in these cases midcoast had designated ffia a limited_liability com- pany as the buyer of the c_corporation ffi stock ffia was a company which mr bernstein the president of midcoast had organized under the laws of the state of indiana two days before the closing of the spr transactions under the spra and of which he was the sole member the record does not establish that mr bernstein contributed to ffia the dollar_figure that its operating_agreement requir- ed him to contribute in return for his interest as its sole member nor does the record establish that ffia had any assets as of the closing of the transactions under spra the record also does not establish that after that closing ffia had any assets other than the stock of ffi interests in that company were the same as their respective percentage stock ownership interests in the c_corporation see feldman v commissioner wl at in the instant cases the c_corporation formed a limited_liability_company that it wholly owned to serve inter alia as a vehicle to transfer to its stockholders petitioners certain of its cash and certain of its noncash assets and all of its liabil- ities except its federal and state_income_tax liabilities in exchange for a specified percentage of the outstanding_stock of the c_corporation that they owned the c_corporation contributed to the newly formed limited_liability_company the bulk of its assets which consisted of certain cash a note from the buyer of the elmwood property certain interest receivable on that note a few other receivables certain real_property in minnesota certain oxidation technology and the right to a refund to be claimed by the c_corporation of certain federal_income_tax payments totaling dollar_figure ie the ffi federal income_tax payments for its taxable_year in these cases the c_corporation also contributed to the limited_liability_company certain nontax liabilities the net value of the assets ie assets less liabilities that the c_corporation contributed to the limited_liability_company was at least dollar_figuredollar_figure in feldman immediately before the closing of the redemption transaction and the sale transaction the c_corporation held certain cash and certain anticipated federal and state_income_tax liabilities see feldman v commissioner f 3d pincite in these cases immediately before the closing of the spr transactions the c_corporation held all of the membership interests in the limited_liability_company to which as discussed above it had contributed most of its assets including the right to a refund of the ffi income_tax payments certain cash and the right to a refund of state_income_tax payments ie the state income_tax pay- ments that it had made for its taxable_year and had certain anticipated the record does not establish a value for the real_estate in minnesota or a value for the oxidation technology that ffi contributed to ffw in anticipation of the closing of the transactions under the spra as stated previously in feldman v commissioner f 3d pincite the total amount of the federal and state_income_tax liabilities of the c_corporation was estimated to be dollar_figure in these cases the c_corporation also held dollar_figure in a bank account that offset a liability in the same amount consisting of outstanding checks see supra note federal and state_income_tax liabilities in addition in feldman and in these cases immediately before the closing of the respective transactions there and here the c_corporation had no operations no employees engaged in operations no income no operational assets except certain oxidation technology in these cases and no liabilities except the anticipated federal and state_income_tax liabilities see id in feldman and in the instant cases the redemption transaction as well as the sale transaction took place see id there and here virtually identical steps were taken in quick succession in order to effect the closing of the redemption of a portion of the c_corporation stock and the purported sale to midcoast by the c corporation’s stockholders of the remaining portion of the c_corporation stock that they owned in feldman the c_corporation redeemed from its stockholders percent of its outstanding_stock and transferred the proceeds from that redemption ie dollar_figure to the limited_liability_company in which those stockholders owned the in these cases the total amount of the anticipated federal and state_income_tax liabilities remaining in the c_corporation was estimated to be dollar_figure which consisted of the anticipated ffi federal and state income_tax liabi- lities of dollar_figure and dollar_figure respectively membership interests see feldman v commissioner wl at the parties to the transactions in feldman then signed on the same date closing date the stock purchase agreement and the two escrow agreements involved there at p m on that date the c_corporation deposited its cash reserves of dollar_figure million into the escrow agent's trust account at p m on the closing date ms shapiro deposited dollar_figure million into the same trust account purportedly as a loan to midcoast to fund the stock purchase transaction at p m on the closing date dollar_figure the purchase_price for the c_corporation stock that the c_corporation stockholders agreed in the stock purchase agreement to sell to midcoast was wired from the escrow agent’s trust account to the limited_liability_company as payment to them for that sale one minute later pincite p m on the closing date dollar_figure million was returned to ms shapiro from that trust account as repayment of the loan that she had purportedly made to midcoast see feldman v commissioner f 3d pincite the day after the date of the redemption transaction and the closing of the sale transaction dollar_figure was in feldman the share purchase agreement between the stockholders of the c_corporation and midcoast was executed immediately after the redemption transaction took place see feldman v commissioner f 3d pincite in feldman there was no promissory note or other writing evidencing ms shapiro’s purported loan and it did not bear interest see feldman v commis- sioner f 3d pincite withdrawn from the escrow trust account and deposited into a newly created bank account of the c_corporation that midcoast the c corporation’s new owner controlled see id in these cases on date in accordance with the terms of the spra the spra escrow agreement the shapiro escrow agreement and the cash reconciliation agreement ffi deposited dollar_figure into the leagre escrow account thereafter on the same day ms shapiro deposited dollar_figure into the leagre escrow account purportedly as a loan to ffia midcoast’s designee on date midcoast deposited into the leagre escrow account dollar_figure the maximum amount of professional fees that it had agreed in the spra to pay on behalf of the ffi stockholders the purported loan of dollar_figure that ms shapiro was to make to mid- coast as part of the spr transactions was not evidenced by a promissory note or any other writing and it did not bear interest paragraph of the spra escrow agreement provided that the dollar_figure which the so-called investor ms shapiro was to transfer into the leagre escrow account as a purported loan was to be transferred by wire into that account only after ffi transferred its remaining cash of dollar_figure into that account consistently paragraph of the shapiro escrow agreement provided that ms shapiro was not to transfer any funds into the leagre escrow account until ffi had transferred into that account sufficient funds for the escrow agent to immediately initiate a wire transfer of the sum of dollar_figure to the account of shapiro also on date in accordance with the terms of the spra the spra escrow agreement the shapiro escrow agreement and the cash reconciliation agreement the following events occurred simultaneously as of p m the c_corporation distributed its membership interests in the limited_liability_company to its three stockholders petitioners in exchange for percent of the outstanding_stock of the c_corporation spr redemption trans- action the c corporation’s stockholders sold the remaining percent of the outstanding_stock of the c_corporation that they owned spr sale transaction in exchange for cash the escrow agent returned dollar_figure from the leagre escrow account to ms shapiro the escrow agent distributed a total of dollar_figure from the leagre escrow account to the c corporation’s stockholders the escrow agent withdrew dollar_figure from the leagre escrow account and sec_1 of the spra provided that the closing thereunder was deemed to be effective as of p m on date section of the spra provided that a ll of the events which are to occur at the closing under this agreement including but not limited to the delivery of the share certificates and the payment of the purchase_price and all other related exchanges shall be deemed to have occurred simultaneously in these cases on date in preparation for the closing of the spra transactions on date the c_corporation transferred to the limited_liability_company that it had formed three days before the closing date certain assets including the right to a refund of the ffi income_tax payments of dollar_figure and certain nontax liabilities deposited those funds into a newly created bank account of ffia’s designee the c_corporation that ffia and michael bernstein midcoast’s president controlled and the escrow agent distributed dollar_figure from the leagre escrow account to the law firm that had represented the c corporation’s stockholdersdollar_figure in feldman and in the instant cases after the transactions involved there and here the c_corporation had anticipated federal and state_income_tax liabilities in a total amount that exceeded the value of its assets see feldman v commissioner f 3d pincite after the redemption transaction and the sale transaction in feldman the c_corporation had dollar_figure in cash on hand that as discussed above had been withdrawn from the escrow trust account and deposited into a the various deposits into and the various distributions from the leagre escrow account were effected via wire transfers the respective bank statements showed those deposits into the leagre escrow account as having occurred on date those bank statements showed those distributions from the leagre escrow account as having occurred on date as discussed above under the spra the spra escrow agreement the shapiro escrow agree- ment and the cash reconciliation agreement the various distributions that those respective agreements required were considered to occur simultaneously as of the closing of the spra which was deemed to occur pincite p m on date for example the spra escrow agreement which incorporated by reference the shapiro escrow agreement and to which the shapiro escrow agreement and the cash reconciliation agreement were attached provided that a t the closing the escrow agent shall pay an amount equal to the investor funds dollar_figure to the investor ms shapiro and shall pay the balance in the escrow account to ffi acquisition or its designee newly created bank account of the c_corporation that midcoast con- trolled and anticipated federal and state_income_tax liabilities totaling approximately dollar_figure or a negative net asset value of approximately dollar_figure see id after the redemption transaction and the sale transaction in these cases the c_corporation had assets totaling dollar_figure which consisted of cash of dollar_figure and the right to a refund of dollar_figure of the ffi state income_tax payments and anticipated federal_income_tax liabilities and anticipated state_income_tax liabilities totaling dollar_figure or a negative net asset value of dollar_figuredollar_figure four days after the closing of the transactions involved in feldman mid- coast withdrew dollar_figure of the dollar_figure that had been deposited from the escrow trust account into a newly created bank account of the c_corporation that midcoast the c corporation’s new owner controlled see feldman v commis- sioner f 3d pincite the funds distributed to ffi ffia’s designee were wired into a new account in ffi’s name at suntrust bank that ffia and mr bernstein controlled on date six days after the closing of the spr transactions mr bernstein had dollar_figure wired from ffi’s suntrust bank account to a midcoast account at the bank of new york after the redemption transaction and the sale transaction in these cases the c_corporation also had dollar_figure in a bank account but that asset offset a liabil- ity consisting of outstanding checks in the same amount in addition as noted above after those transactions the c_corporation had another receivable which consisted of the prudential demutualization funds of dollar_figure that ffi had never claimed and that the state of indiana was holding in the name of the c continued in feldman and in these cases after the closing of the respective transactions there and here the c_corporation did not have any business operations and did not commence any asset recovery business operations or any asset receivable collection business operations see id pincite in feldman and in the instant cases after the closing of the respective transactions there and here the c_corporation claimed certain losses to offset the gains from the sale of its appreciated assets that had taken place before the respective transactions involved occurred see id pincite in feldman the com- missioner denied the losses claimed and issued a notice_of_deficiency to the c_corporation the c_corporation did not respond to the notice_of_deficiency and the commissioner assessed the deficiency certain additions to tax and the accuracy-related_penalty under sec_6662 determined in that notice thereaf- ter the commissioner issued notices of liability to the respective former stock- holders of the c_corporation see feldman v commissioner f 3d pincite in feldman those former stockholders stipulated that the distressed asset debt tax_shelter that midcoast used in an attempt to shelter the gain that the c_corporation had realized from the sale of its appreciated assets was illegal and they did not continued corporation see supra note challenge the assessment of the federal_income_tax liability against the c_corporation see id in the instant cases respondent denied the losses that the c_corporation claimed the c_corporation entered into a closing_agreement with respondent with respect to inter alia those disallowed losses the c_corporation also consented to the assessment and the collection of federal_income_tax of dollar_figure and an accuracy-related_penalty under sec_6662 and h of dollar_figure for its taxable_year thereafter respondent issued respective notices of liability to the respective former stockholders of the c_corporation mr fankhauser mr wein- traut and ms fankhauser for ffi’s total income_tax_liability for its taxable_year of dollar_figure that consisted of federal_income_tax of dollar_figure and an accuracy-related_penalty under sec_6662 and h totaling dollar_figure as well as interest thereon as provided by law petitioners do not dispute on brief that ffi is liable for that tax and that penalty and we concluded that they have abandoned contesting them see supra note respondent conceded in the respective answers in these cases that the remaining unpaid tax_deficiency of ffi that is set forth in the notice of liability as the amount of dollar_figure is actually dollar_figure plus sec_6662 penalty in the amount of dollar_figure plus applicable_interest respondent’s concession reflects that respondent collected from the state of indiana the prudential demutu- alization funds of dollar_figure to which ffi had been entitled in feldman and in the instant cases the c_corporation was admin- istratively dissolved by the appropriate state authority see id pincite we have compared relevant facts including material facts which we found in feldman and on which the court_of_appeals relied and relevant facts including material facts which we have found in these cases as a result of that comparison we reject petitioners’ contention that the facts in feldman are not the same in material respects as the facts that we have found in these casesdollar_figure moreover as a result of our comparison of certain facts in feldman and certain facts in these cases we conclude that the court of appeals’ opinion in feldman strongly supports a finding in these cases that each of mr fankhauser mr weintraut and ms fankhauser is a transferee of property of ffi for purposes of sec_6901 with respect to the spr sale transaction under the spra we shall restate certain of the facts that we have found in the instant cases that lead us to that conclusion as indicated previously we believe that petitioners’ contentions regarding the alleged material factual differences between 779_f3d_448 and the instant cases regarding whether petitioners knew or should have known that ffi’s taxes from its asset sale would not be paid are not relevant to whether they are transferees of property of ffi for purposes of sec_6901 with respect to the spr sale transaction under the spra after the sales of its operating_assets ffi ceased carrying on any active business had no operating_assets except certain oxidation technology and had certain nonoperating assets which consisted of cash a note from the buyer of the elmwood property certain interest receivable on that note a few other receiv- ables and certain real_property in minnesota moreover after ffi sold its operat- ing assets it not only had planned but also had taken formal corporate actions to liquidate and to distribute its nonoperating assets to its stockholders mr fank- hauser mr weintraut and ms fankhauser in addition during after ffi’ sec_2001 asset sales ffi made total federal and state_income_tax payments of dollar_figure that were to be applied against its total federal and state_income_tax liabilities for its taxable_year which were attributable to the gains that it had realized as a result of the ffi asset sales although mr thrapp was aware of ffi’s situation as of early date nonetheless on date he informed the ffi officers mr fank- hauser and mr weintraut that midcoast might be interested in purchasing the stock of ffi at a so-called premium that is to say midcoast might be interested in purchasing the stock of ffi for an amount that was greater than the posttax liquid- ation value of ffi ie the value of ffi’s assets after the payment of its liabilities including its federal and state income liabilities for its taxable_year dollar_figure mr thrapp informed mr weintraut and mr fankhauser that the purchase_price for the stock that midcoast usually paid in deals like the one that it was suggesting was calculated by using a percentage of the acquired company’s total federal and state_income_tax liabilities which varied from acquisition to acquisi- tion but was within a range that midcoast had established mr thrapp who was not a tax professional also advised the ffi officers that it was his understanding that midcoast had a tax strategy that it considered to be proprietary and that it had used in connection with its acquisition methodology in which it acquired c corporations with cash and certain federal and state_income_tax liabilities mr thrapp did not know any of the details of midcoast’s acquisition methodology or its tax strategy however it was mr thrapp’s understanding which he shared mr thrapp had some familiarity with midcoast because it was a client of ice miller on a prior occasion in a transaction that was unrelated to the transac- tions herein and that closed in date mr thrapp considered the infor- mation that ice miller obtained as a result of that representation to be privileged even if mr thrapp had known through ice miller’s representation of midcoast some or all of the details regarding midcoast’s acquisition meth- odology and its tax strategy he would not have been able to disclose any such continued with the ffi officers that midcoast used the cash of an acquired c_corporation in order to buy charged-off debt securities that midcoast intended to use in its so-called asset recovery business but he had no understanding of how midcoast used those securities as part of its tax strategy mr weintraut and mr fankhauser made only certain limited inquiries of mr thrapp with respect to midcoast’s overall acquisition methodology including its tax strategy of acquiring c corporations however mr fankhauser mr weintraut and ms fankhauser knew directly or through mr thrapp that mid- coast’s pricing in its acquisition methodology was inextricably intertwined with its tax strategy on date the same day on which mr thrapp informed the ffi officers about midcoast’s possible interest in purchasing the stock of ffi the ffi officers mr thrapp and ffi’s accountants mr burns and mr vernick of the katz accounting firm held a conference call with certain representatives of midcoast continued details to mr fankhauser mr weintraut and ms fankhauser that was because midcoast was a client of ice miller of which mr thrapp was a partner and mr thrapp was subject_to certain ethical constraints with respect to the disclosure of any client information neither mr thrapp nor any of the ffi stockholders saw any need to and did not press midcoast’s representatives regarding the details of its tax strategy nor did mr thrapp or any of the ffi stockholders see any need to or in fact inquire through their respective contacts whether there were persons who were not employed by midcoast or by ice miller and who might be familiar with midcoast’s acquisition methodology and its tax strategydollar_figure on date mr fankhauser mr weintraut and ms fank- hauser executed an engagement letter dated date in which they retained ice miller to represent ffi and them as stockholders of ffi with respect to midcoast’s proposal to purchase the stock of ffi on date mr bernstein sent to mr fankhauser mr wein- traut and ms fankhauser on behalf of midcoast a nonbinding letter of intent with respect to a proposed acquisition of the stock of ffi by midcoast that required ffi as part of that proposed acquisition to redeem percent of its stock from its stockholders mr fankhauser mr weintraut and ms fankhauser through mr fankhauser knew directly or through mr thrapp that the transactions that the record does not establish why mr thrapp and the ffi stockholders did not inquire through their respective contacts whether there were persons who were not employed by midcoast or by ice miller and who might be familiar with midcoast’s tax strategy midcoast had proposed in the letter of intent would result in their receiving a so-called premium ie a greater amount of assets than they would receive if ffi were to liquidate and the respective federal and state_income_tax liabilities that ffi had as a result of the ffi asset sales were to be paid in full that was why on date the day after midcoast had sent the ffi stockholders the letter of intent those stockholders signed and accepted the terms of that letter when they accepted midcoast’s letter of intent mr fank- hauser mr weintraut and ms fankhauser knew as did mr thrapp that the only reason that the ffi stockholders would be able to receive that so-called premium was that ffi’s total anticipated tax_liability which was attributable to the sales of its assets in would not be paid in other words mr fankhauser mr weintraut and ms fankhauser knew as did mr thrapp that if and only if that total anticipated tax_liability was not paid would they receive the so-called premium that midcoast had proposed in the letter of intent after the ffi stockholders accepted the letter of intent mr thrapp was responsible for negotiating in large part the agreement among those parties regard- ing the transactions that midcoast had proposed in that letter mr weintraut however negotiated directly with certain of midcoast’s representatives as to the percentage of ffi’s total federal and state_income_tax liabilities for its taxable year that midcoast would pay to purchase the stock of the ffi stockholders in doing so mr weintraut attempted to have midcoast agree to pay a percentage that was at the high end of the range of percentages to which he understood midcoast had agreed in the past as part of its acquisition method- ology around date after mr weintraut completed negotiating with certain of midcoast’s representatives as to the percentage of ffi’s total federal and state_income_tax liabilities for its taxable_year that midcoast would pay to purchase the stock of the ffi stockholders mr weintraut prepared a balance_sheet for ffi ie the date balance_sheet that reflected its assets and its liabilities as of that date on the assumption that the transactions proposed in the letter of intent were to occur according to the date balance_sheet ffi was to have the following assets and the following liabilities after it distributed membership interests in ffw to mr fankhauser mr weintraut and ms fankhauser in exchange for percent of the ffi stock that they owned cash of dollar_figure the right to a refund of the ffi state income_tax ffi formed ffw to serve inter alia as a vehicle to transfer to the ffi stockholders certain of ffi’s cash and noncash assets and all of its liabilities except its federal and state_income_tax liabilities for its taxable_year in exchange for percent of the outstanding_stock of ffi that they owned payments of dollar_figure an anticipated federal_income_tax liability for ffi’s taxable_year of dollar_figure and an anticipated state_income_tax liability for ffi’s taxable_year of dollar_figure pursuant to a formula set forth in the date balance_sheet the stock purchase_price for the stock of ffi that midcoast was to purchase from the ffi stockholders was to be determined as shown in that balance_sheet by reducing those total assets ie dollar_figure by percent ie by dollar_figure of those total liabilities ie dollar_figure the balance of dollar_figure was to be the purchase_price for the stock of ffi on date ffia midcoast’s designee to serve as the pur- chaser of the ffi stock ffi and the ffi stockholders entered into the spra the terms of which were similar but not identical to the terms that midcoast had proposed in the letter of intent the only reason that ffi and the ffi stockholders decided to and did execute the spra and the related agreements ie the spra escrow agreement and the cash reconciliation agreement that was attached to the on date in preparation for the transactions contemplated in the letter of intent mr bernstein organized under the laws of the state of indiana ffia as a limited_liability_company to enter into those transactions as midcoast’s designee immediately before the closing of the spr transactions ffia had no assets and immediately thereafter its only asset was the stock of ffi spra escrow agreement was that those stockholders wanted to and midcoast agreed that they would receive a substantially greater amount a so- called premium from the transactions to which they agreed pursuant to those documents that than they would receive from the liquidation of ffi after ffi’s total anticipated tax_liability of dollar_figure which was attributable to ffi’ sec_2001 asset sales had been paid mr fankhauser mr weintraut and ms fankhauser knew as did mr thrapp that the only reason that the ffi stock- holders would be able to receive that substantially greater amount was that ffi’s total anticipated tax_liability of dollar_figure would not be paid in other words mr fankhauser mr weintraut and ms fankhauser knew as did mr thrapp that if and only if that total anticipated tax_liability was not paid would they receive the so-called premium the shapiro escrow agreement also was attached to the spra escrow agreement the respective amounts of the federal and state_income_tax liabilities of ffi for its taxable_year that were attributable to the sales of its assets were estimated to be dollar_figure and dollar_figure respectively under the spra the stockholders of ffi were to retain through their respective ownership interests in ffw that ffi was to distribute to them under that agreement the right to a refund of the ffi federal income_tax payments of dollar_figure which midcoast guaranteed ffi would pay to ffw after ffi received it from the federal govern- ment ffi and thus midcoast was to retain after the transactions in the spra were effected the right to a refund of the ffi state income_tax payments of continued each of the ffi stockholders also knew as did mr thrapp that the so-called loan of dollar_figure that ms shapiro was to make to ffia midcoast’s designee to fund the so-called purchase of the ffi stock was not evidenced by a promissory note or other written document and did not bear interest each of those stockholders also knew as did mr thrapp that that so-called loan of ms shapiro was to be deposited into the leagre escrow account on date but only after ffi had deposited its cash of dollar_figure into that account on that day and that it was to be returned to her as of the closing of the transactions under the spra pincite p m on date which pursuant to the spra was deemed to occur simultaneously moreover each of mr fank- continued dollar_figure because of those anticipated refunds of the ffi federal income_tax payments and the ffi state income_tax payments mr fankhauser mr weintraut and ms fankhauser knew as did mr thrapp that none of ffi’s total anticipated tax_liability of dollar_figure would be paid thereby enabling them to receive a substantially greater amount a so-called premium from the transactions to which they agreed in the spra than they would receive from the liquidation of ffi to which they had agreed before mr thrapp told them about midcoast’s interest in buying their ffi stock see supra note each of mr fankhauser mr weintraut and ms fankhauser also knew that although ms shapiro’s so-called loan of dollar_figure to ffia was to be deemed repaid as of the closing of the spr transactions the wire transfer to ms shapiro’s bank account of dollar_figure from the escrow was not to occur until the day after the closing of those transactions similarly each of them knew that although they were deemed to receive as of the closing of the spr transactions their respective continued hauser mr weintraut and ms fankhauser knew as did mr thrapp that pursuant to the spra the spra escrow agreement and the cash reconciliation agreement ffi was to deposit dollar_figure into the leagre escrow account on date but it was to receive only dollar_figure from that leagre escrow account as of the closing of the spra pincite p m on that date each of the ffi stockholders also knew as did mr thrapp that the difference between the amount that ffi was to deposit into the leagre escrow account ie dollar_figure and the amount that it was to receive from the leagre escrow account ie dollar_figure was equal to dollar_figure which each of them knew as did mr thrapp was the amount of the purchase_price that they were to receive from according to the terms of the spra ffia in addition each of mr fank- hauser mr weintraut and ms fankhauser understood as did mr thrapp that midcoast through ffia was purporting to purchase ffi stock from them in order to acquire ffi so that midcoast would be able to use ffi’s cash in order to buy continued proportionate portions of the purchase_price for the transfer of their ffi stock to ffia the wire transfers to their respective bank accounts of those proportionate portions were not to occur until the day after the closing of those transactions as was true of the respective wire transfers to mr fankhauser mr wein- traut ms fankhauser and ms shapiro ffi ffia’s designee received a wire transfer on the day after the closing of the spr transactions charged-off debt securities that midcoast intended to use in its so-called asset recovery business however each of the ffi stockholders knew as did mr thrapp that midcoast through ffia agreed in the spra to pay them dollar_figure in cash for their ffi stock and that as of the closing of the spr transactions ffia was to receive only dollar_figure of cash and the right to a refund of the ffi state income_tax payments of dollar_figure or a total of dollar_figure in other words each of mr fankhauser mr weintraut and ms fankhauser knew as did mr thrapp that midcoast through ffia agreed in the spra to pay dollar_figure of cash to acquire the ffi stock from them in order to have access for purported use in its asset recovery business to only a total of dollar_figure ie dollar_figure of cash and the right to a refund of the ffi state income_tax payments of dollar_figure in addition each of mr fankhauser mr weintraut and ms fankhauser knew as did mr thrapp or should have known as mr thrapp should have known that ms shapiro’s so-called loan of dollar_figure to ffia was not needed or used in order to effect the spr sale transaction under the spra and that that so- called loan was mere window dressing designed to make it appear that ffia not ffi was providing the funds to be paid to them for the transfer of their ffi stock to ffia in other words each of the ffi stockholders knew as did mr thrapp or should have known as mr thrapp should have known that ms shapiro’s so-called loan of dollar_figure to ffia was devoid of any economic substance--a sham that was designed and intended to make it appear as though ffia not ffi was providing the funds to be paid to the ffi stockholders for the transfer of their ffi stock to ffia moreover each of mr fankhauser mr weintraut and ms fank-hauser knew as did mr thrapp or should have known as mr thrapp should have known that the source of the funds that they were to receive for the transfer of their ffi stock to ffia was ffi not ffia that is to say each of the ffi stockholders as well as mr thrapp knew or should have known that ffi not ffia was to and did pay each of those stockholders each such stockholder’s proportionate portion of the so-called purchase_price ie dollar_figure that each was to receive under the spra in reaching its holding that the taxpayers in 779_f3d_448 were transferees of property of woodside for purposes of sec_6901 the court_of_appeals first observed that the analysis that we had undertaken in feldman v commissioner wl which looks beyond the formalities of certain transactions implicates several related overlapping doctrines used in tax cases and in other areas of the law for the protection of creditors known by different names--eg the substance_over_form_doctrine the business_purpose doctrine the economic_substance doctrine--the animating principle of each is that the law looks beyond the form of a transaction to discern its substance feldman v commissioner f 3d pincite under the federal substance_over_form_doctrine it is the substance not the form of a transaction which determines its federal tax consequences see generally 435_us_561 293_us_465 feldman v commissioner f 3d pincite 248_f3d_572 7th cir aff’g tcmemo_1999_ the court_of_appeals affirmed our finding see feldman v commissioner wl at that in substance the purported stock sale involved there was a liquidation see feldman v commissioner f 3d pincite under the federal economic_substance_doctrine a transaction that does not have economic_substance that is to say a transaction which does not change a taxpayer’s position in a meaningful way and for which the taxpayer does not have a nontax business_purpose will not be respected for federal tax purposes see feldman v commissioner f 3d pincite see also gregory v according to the court_of_appeals in feldman v commissioner f 3d pincite the federal economic_substance_doctrine borrows heavily from both the business-purpose and substance-over-form doctrines under the business pur- pose doctrine a transaction must have a valid nontax business_purpose in order to be respected for federal tax purposes see 293_us_465 feldman v commissioner f 3d pincite helvering 293_us_465 248_f3d_572 the court_of_appeals affirmed our findings see feldman v commissioner wl at that the purported stock sale involved there had no nontax business_purpose and no economic_substance see feldman v commissioner f 3d pincite under the so-called sham_transaction doctrine established in federal tax law federal sham_transaction doctrine a transaction that is devoid of any economic_substance and with no nontax purpose is a sham which will not be respected for federal tax purposes see generally frank lyon co v commissioner u s although the court_of_appeals did not mention that we relied on the federal sham_transaction doctrine in feldman we did see feldman v commis- sioner wl at in determining whether a transaction is an economic sham certain courts consider the factors of lack of economic_substance and no nontax purpose to be disjunctive other courts consider those factors to be conjunctive we need not decide which test for the economic sham_transaction doctrine to apply here that is because we find below both lack of economic_substance and no nontax purpose in 85_tc_332 citing 435_us_561 we defined the term sham in substance also known as economic sham as the expedient of drawing up papers to characterize transactions contrary to objective economic realities and which have no economic significance beyond expected tax benefits in other words a sham in substance is merely a mislabeling of what actually occurred see 87_tc_1087 aff’d sub nom 861_f2d_494 7th cir continued pincite 364_us_361 293_us_465 924_f2d_1018 11th cir aff’g 91_tc_733 the court_of_appeals affirmed our finding see feldman v commissioner wl at that the purported loan of ms shapiro involved there was a sham that was devoid of substance see feldman v commissioner f 3d pincite we consider each of the federal substance_over_form_doctrine the federal economic_substance_doctrine and the federal sham_transaction doctrine although closely related and overlapping doctrines in federal tax law to be an independent or alternative basis under which we shall reach our ultimate findings as to whether each of mr fankhauser mr weintraut and ms fankhauser is a transferee of property of ffi for purposes of sec_6901 with respect to the spr sale trans- action under the spra continued as is true of other doctrines established in federal tax law that look to the substance and not the form of a transaction the federal economic_substance_doctrine and the federal sham_transaction doctrine are closely related to and borrow from each other in fact some courts believe that the federal sham trans- action doctrine is another name for the federal economic_substance_doctrine see eg 728_f3d_676 7th cir aff’g 137_tc_70 yosha v commissioner f 2d pincite based upon our examination of the entire record before us we find that in determining whether each of mr fankhauser mr weintraut and ms fankhauser is a transferee of property of ffi in the spr sale transaction under the spra for purposes of sec_6901 under each of the federal substance_over_form_doctrine the federal economic_substance_doctrine and the federal sham trans- action doctrine ms shapiro’s purported loan here like ms shapiro’s pur- ported loan in feldman v commissioner f 3d pincite was a sham that was devoid of any economic_substance the spr sale transaction under the spra like the purported stock sale involved in feldman v commissioner f 3d pincite had no nontax business_purpose ms shapiro’s purported loan here like ms shapiro’s purported loan in feldman v commissioner f 3d pincite had no nontax business_purpose the spr sale transaction under the spra like the purported stock sale involved in feldman v commissioner f 3d pincite- had no economic_substance ms shapiro’s purported loan here like ms shapiro’s purported loan in feldman v commissioner f 3d pincite should be disregarded the spr sale transaction under the spra like the purported stock sale involved in feldman v commissioner f 3d pincite should be dis- regarded and ffi not ffia made a distribution or transfer of ffi’s funds in the spr sale transaction under the spra to each of mr fankhauser mr wein- traut and ms fankhauser like the c_corporation not midcoast made to each of its stockholders in feldman v commissioner f 3d pincite of each such stockholder’s proportionate portion of the purchase_price ie dollar_figure that each such stockholder was to receive for their stock under the spra based upon our examination of the entire record before us we find that under each of the federal substance_over_form_doctrine the federal economic_substance_doctrine and the federal sham_transaction doctrine each of mr fank- hauser mr weintraut and ms fankhauser is a transferee of property of ffi for purposes of sec_6901 with respect to the spr sale transaction under the spra liability under indiana ufta it is respondent’s position that each of mr fankhauser mr weintraut and ms fankhauser is liable under the indiana ufta as a transferee of property of ffi with respect to the spr redemption transaction and the spr sale transaction under the spra for ffi’s unpaid deficiency liability and ffi’s unpaid respondent characterizes the distributions or transfers made to the ffi stockholders in the spr sale transaction under the spra as in substance liquid- ating distributions or transfers from ffi we do not have to characterize those distributions or transfers as liquidating or any other type of distributions or transfers in order to conclude as we do that ffi made a distribution or transfer of its property to each of the ffi stockholders as part of the spr sale transaction under the spra and that each of them is a transferee of ffi’s property for pur- poses of sec_6901 with respect to that transaction penalty liability in support of that position respondent argues that for purposes of the indiana ufta in substance ffi made various distributions or transfers to each of mr fankhauser mr weintraut and ms fankhauser in the spr redemption transaction and the spr sale transaction under the spra and that those distributions or transfers were fraudulent under each of the two so- called constructive fraud provisions in ind code ann secs and transfers for purposes of the indiana ufta with respect to the spr redemption transaction under the spra respondent argues that for purposes of the indiana ufta in form and in substance ffi made a distribution or transfer of its property namely a proportionate ownership_interest in ffw to each of mr fankhauser mr weintraut and ms fankhauser in that transaction respondent also claims that each petitioner is liable for interest as provid- ed by law with respect to ffi’s unpaid deficiency liability and ffi’s unpaid penalty liability as of the closing of the spr redemption which pursuant to the terms of the spra was deemed to occur simultaneously with the closing of the spr sale transaction mr fankhauser mr weintraut and ms fankhauser owned per- cent percent and percent respectively of ffw’s membership interests petitioners do not address whether let alone dispute that in the spr redemption transaction under the spra each of them received a distribution or transfer of property of ffi namely a proportionate ownership_interest in ffw instead as we understand petitioners’ arguments with respect to the spr redemp- tion transaction under the spra their focus is on why they believe that any such transfers that ffi made to them were not fraudulent under either of the construc- tive fraud provisions in the indiana ufta in the light of petitioners’ failure to address whether and to dispute that in the spr redemption transaction under the spra they received distributions or transfers of property of ffi namely respective proportionate ownership interests in ffw we conclude that for purposes of the indiana ufta ffi made a distribu- tion or transfer of property to each of mr fankhauser mr weintraut and ms fankhauser in the spr redemption transaction under the spra with respect to the spr sale transaction under the spra respondent argues that for purposes of the indiana ufta in substance ffi made a distribution or transfer of its property namely a proportionate portion of dollar_figure the total purchase_price for their ffi stock to each of mr fankhauser mr weintraut and the record fully supports our findings that ffi made distributions or transfers of property to mr fankhauser mr weintraut and ms fankhauser in the spr redemption transaction under the spra ms fankhauser in that transaction in support of that argument re- spondent relies on 779_f3d_448 and advocates the use in these cases of the type of state law equitable principles on which the court_of_appeals relied in that case in considering respondent’s arguments with respect to the spr sale transac- tion under the spra we bear in mind and respondent and petitioners agree that resolution of the issue of whether for purposes of the indiana ufta in substance ffi made a distribution or transfer of its property to each of mr fankhauser mr weintraut and ms fankhauser in the spr sale transaction under the spra depends on the law of the state of indiana we also bear in mind and the parties also agree that in resolving that issue we must apply the law of the state of indiana in the manner in which the supreme court of indiana indiana supreme court has indicated it would apply that law see 387_us_456 if the indiana supreme court has not addressed the issue we must apply what we find to be the law of the state of indiana after as of the closing of the spr sale transaction which pursuant to the terms of the spra was deemed to occur simultaneously with the closing of the spr redemption transaction distributions of dollar_figure dollar_figure and dollar_figure totaling dollar_figure were deemed made to mr fankhauser mr weintraut and ms fankhauser respectively that is to say as of that closing distributions of percent percent and percent of the purchase_price of dollar_figure were deemed made to those respective ffi stockholders having given proper regard to relevant rulings of other courts of the state of indiana see id in considering respondent’s arguments with respect to the spr sale transac- tion under the spra we also bear in mind and respondent and petitioners also agree that the issue of whether for purposes of the indiana ufta it is appro- priate to use certain equitable principles to disregard the form of certain transac- tions here the spr sale transaction under the spra in order to ascertain whether there was a transfer of a debtor’s property here ffi’s property to its stockholders here mr fankhauser mr weintraut and ms fankhauser is an issue that the indiana supreme court has not addressed the definition of the term trans- fer in the indiana ufta like the definition of that term in the wisconsin ufta involved in 779_f3d_448 is very broad compare ind code ann sec with wis stat ann sec_242 the indiana ufta like the wisconsin ufta involved in feldman is flexible and expressly incorporates equitable principles that look to substance rather than form compare as discussed below however certain federal courts construing the indiana ufta have addressed that question in boyer v crown stock distrib in re crown unlimited mach inc adv no wl bankr n d ind date aff’d boyer v crown stock distrib inc wl n d ind date aff’d in part rev’d in part 587_f3d_787 7th cir ind code ann sec with wis stat ann sec_242 and the indiana supreme court would and therefore we should look to certain eq- uitable principles in determining whether for purposes of the indiana ufta in substance ffi made a distribution or transfer of its property to each of the ffi stockholders in the spr sale transaction under the spra at least as far as petitioners are concerned the parties disagree over which equitable principles the indiana supreme court would use in order to determine whether for purposes of the indiana ufta in substance ffi made a distribution or transfer of its property to each of the ffi stockholders in the spr sale transaction under the spra petitioners believe that which equitable principles the indiana in an attempt to distinguish the holdings of the court_of_appeals in 779_f3d_448 petitioners advance many of the arguments that we address here in a supplemental brief that the court allowed petitioners as well as respondent to file after that opinion was issued we did not give the parties the opportunity to file responsive briefs to their respective supplemental briefs consequently we do not know whether respondent believes that which equitable principles the indiana supreme court would use is material to resolving the issues under the indiana ufta presented here nor do we know whether respondent considers the so-called equitable collapsing doctrine that petitioners maintain is the only equitable doctrine that the indiana supreme court would apply to be materially different from the equitable substance over form principles and the equitable sham_transaction principles which are established in the law of indiana and on which as discussed below respondent relies or from any other equitable principles that are consistent with ind code ann sec that the principles of equity supplement this chapter of the indiana code codifying the indiana ufta supreme court would use is critical to their position that in substance ffi did not make any such distribution or transfer that is because petitioners maintain the substance over form equitable principles established in wisconsin law wisconsin substance over form principles that the court_of_appeals used in feldman v commissioner f 3d pincite and the equitable doctrines from federal tax law such as step transaction and substance over form that respon- dent advocates we use in these cases differ from the equitable collapsing petitioners assert in various places in their supplemental brief that respon- dent is arguing that certain equitable tax doctrines established in the federal tax law are to be used in determining whether for purposes of the indiana ufta in substance ffi made a distribution or transfer of its property to each of mr fank- hauser mr weintraut and ms fankhauser in the spr sale transaction under the spra transaction those assertions are unfounded see supra note and we reject them doctrine that petitioners advocate we use here in that they do not require any showing of knowledge before turning to petitioners’ argument we note that we have serious reser- vations regarding petitioners’ contention that the equitable collapsing doctrine that they urge we use here is materially different from the equitable substance over form principles established in indiana law indiana substance over form princi- ples that respondent advocates we use in these cases and that we conclude are materially the same as the wisconsin substance over form principles that the court_of_appeals used in feldman in fact in boyer v crown stock distrib in re petitioners provide the following description of the equitable collapsing doctrine also known as the collapsing doctrine which they found in an opinion of the u s bankruptcy court of the district of new jersey that that court had marked not for publication the ‘collapsing’ doctrine is essentially an equit- able doctrine allowing a court to dispense with the structure of a transaction or series of transactions route mass l l c v bank in re route mass l c c adv no mbk wl at bankr d n j date we shall refer to the equitable doctrine that petitioners urge we use in these cases as the equitable collapsing doctrine as discussed more fully below petitioners contend that case law from other jurisdictions utilizes the equitable collapsing doctrine which in this case sic requires that respondent prove that petitioners knew or should have known that ffia and or midcoast was going to cause ffi’s taxes to not be paid according to petitioners respondent has failed to carry that burden_of_proof for convenience we shall often refer to the requirement that petitioners contend should be imposed on respondent in these cases and that as discussed below certain courts have imposed on creditors in certain other cases as the knowledge requirement crown unlimited mach inc adv no wl at bankr n d ind date aff’d boyer v crown stock distrib inc wl at n d ind date aff’d in part rev’d in part 587_f3d_787 7th cir a case involving the application of the same constructive fraud provisions of the indiana ufta ie ind code ann secs and on which respondent is relying here and which we discuss in detail below the u s bankruptcy court bankruptcy court and the u s district_court district_court described collapsing or recharacterizing the trans- actions involved there as what would occur if indiana substance over form principles that require that the substance of a transaction to prevail over its form were determined to be appropriate principles to use given the facts and circum- stances of the case see alterman v commissioner tcmemo_2015_231 at referring interchangeably to the equitable principle in florida law of collapsing transactions and the equitable doctrine_of substance over form under the florida ufta in interpreting the indiana ufta we may rely on inter alia the inter- pretation by a bankruptcy court or other federal court see eg 139_f3d_574 7th cir we also have serious reservations regarding petitioners’ contention that only cases using the equitable collapsing doctrine have before applying that doctrine required a creditor to show that a purported transferee of the debtor knew or should have known that the debt would not be paid see id at requiring the commissioner to show actual or constructive knowledge by the purported transferee before applying the equitable doctrine_of substance over form under the florida ufta despite the serious reservations that we have we turn now to petitioners’ argument regarding the equitable principles which they contend the indiana supreme court would use and which we believe they are advocating in an effort to persuade us that 779_f3d_448 is materially distin- guishable from and thus inapposite to the instant cases we start by summarizing the parties’ respective positions as to which equitable principles they maintain the indiana supreme court would use in determining whether for purposes of the indiana ufta in substance ffi made a distribution or transfer of its property to each of the ffi stockholders in the spr sale transaction under the spra respondent argues that indiana courts including the indiana supreme court use indiana substance over form principles in various contexts including most notably indiana tax cases respondent maintains that those courts including the indiana supreme court would use those same principles in determin- ing whether for purposes of the indiana ufta the spr sale transaction under the spra in substance was a liquidation of ffi in which ffi made distributions or transfers of its cash totaling dollar_figure to mr fankhauser mr weintraut and ms fankhauser according to respondent the indiana supreme court’s use of indiana substance over form principles would lead it to conclude that for purposes of the indiana ufta that spr sale transaction in substance was a liquidation of ffi in which ffi made distributions or transfers of its cash totaling dollar_figure to the ffi stockholders we understand respondent also to be arguing in the alternative that the indiana supreme court would use the equitable principles of the sham_transaction doctrine established in the law of indiana indiana sham_transaction doctrine in various contexts including indiana tax cases according to respondent even if respondent were not relying in the alternative on the indiana sham_transaction doctrine we would and we do nonetheless consider it here in deter- mining whether for purposes of the indiana ufta in substance ffi made a distribution or transfer of its property to each of the ffi stockholders in the spr sale transaction under the spra in this connection while respondent is relying principally on indiana substance over form principles certain of the arguments that respondent advances in relying on those principles overlap with the equitable principles of the indiana sham_transaction doctrine discussed in more detail below we note that the indiana supreme court held in ind dep’t of state revenue v belterra resort ind llc n e 2d ind that continued t he loan from shapiro to ffia was a ruse recycling a sham feldman wl at remove the shapiro loan from this transaction spr sale transaction and nothing of consequence changes--the shareholders of ffi get paid the same amount dollar_figure from the trust same escrow account id in the same way what remains after disregarding the shapiro loan in ffi is a transfer of cash from ffi to petitioners via the trust escrow account in reality the only money that changed hands was ffi’s cash petitioners counter that in determining whether for purposes of the indiana ufta in substance ffi made a distribution or transfer of its property to each of continued ‘ a transaction structured solely for the purpose of avoiding taxes with no other legitimate business_purpose will be considered a sham for indiana taxation purposes ’ belterra n e 2d pincite citing 293_us_465 55_sct_266 79_led_596 as is true in federal tax law the indiana sham_transaction doctrine is similar in material respects to indiana substance over form principles as is also true in federal tax law the indiana sham_transaction doctrine also is similar in material respects to the so-called step_transaction_doctrine established in indiana law indiana step_transaction_doctrine indeed the indiana supreme court concluded in belterra resort ind llc n e 2d pincite citing mason metals co v ind dep’t of state revenue n e 2d ind t c and bethlehem steel corp v ind dep’t of state revenue n e 2d ind t c in indiana the sub- stance rather than the form of transactions determines their tax consequences in this case the indiana use_tax consequences must be analyzed under the judicially created ‘step transaction’ doctrine to determine their substance citation omitted citing gregory v helvering u s pincite all of the different indiana equitable principles or doctrines that the indiana supreme court uses in a variety of cases including different types of indiana tax cases were developed because the indiana courts including the indiana supreme court believed it necessary and appropriate to look beyond the form of a transaction to its substance this is precisely what the ufta including the indiana ufta and the wisconsin ufta that the court_of_appeals applied in 779_f3d_448 requires mr fankhauser mr weintraut and ms fankhauser in the spr sale transaction under the spra transaction the indiana supreme court would use the equitable collapsing doctrine in advancing that position petitioners acknowledge that in the absence of any authority in indiana law expressly addressing whether a transfer has occurred for purposes of the indiana ufta the indiana supreme court could look to the statute and reason by analogy as was done in feldman however petitioners maintain that the indiana supreme court would not do what the court_of_appeals did in 779_f3d_448 that is because petitioners contend when faced with an issue like the issue under the indiana ufta presented in these cases the indiana supreme court would and the court_of_appeals for the seventh circuit would presumes that the indiana supreme court will ascertain the majority view regarding that issue of other jurisdictions that have adopted the ufta and follow that majority view according to petitioners the majority view is that the equitable collapsing doc- trine would be applied in determining whether in substance there was a transfer of a debtor’s property for purposes of the ufta in contrast the wisconsin sub- stance over form principles that the court_of_appeals used in feldman represents according to petitioners a minority view that is distinguishable from that majority view as a result petitioners maintain feldman is distinguishable as a matter of law and has no application here an additional reason offered by petitioners in support of their position that the indiana supreme court would use the equitable collapsing doctrine is that that court would want to avoid the conflict that petitioners claim would be created if respondent’s equitable doctrines were used between ind code ann sec which incorporates equitable principles into the indiana ufta and ind code ann sec which requires the application and the con- struction of the indiana ufta in a manner that effectuates the general purpose of the model ufta of making that law uniform among the jurisdictions that enact it before addressing petitioners’ argument that the wisconsin courts’ use of equitable substance over form principles under the wisconsin ufta see feldman v commissioner f 3d pincite represents a minority view we note that the equitable collapsing doctrine as described by petitioners in their supplemental brief see supra note would appear to allow a court to do in material respects essentially the same thing as wisconsin substance over form principles indiana substance over form principles and the indiana sham_transaction doctrine as well as other indiana equitable principles such as the indiana step_transaction_doctrine allow a court to do that is to say all of those equitable principles or doctrines allow a court to look beyond the form of a transaction to the substance of the transaction we turn now to petitioners’ argument that the wisconsin courts’ use of equitable substance over form principles under the wisconsin ufta see feldman v commissioner f 3d pincite represents a minority view in feldman the court_of_appeals held in light of the broad definition of ‘transfer’ in wisconsin fraudulent-transfer law and the general applicability of substance-over-form analysis the shareholders are properly deemed to be transferees under state law as well as federal id before the court_of_appeals declared that holding it set out the legal framework in which it reached it that framework consisted of the following legal principles established by the ufta and adopted by the wisconsin ufta the term transfer in the wisconsin ufta like the definition of that term in the ufta adopted by other jurisdictions is defined very broadly state fraudulent-transfer law is itself flexible and looks to equitable principles like ‘substance over form ’ just like the federal tax doctrines substance over form business_purpose and economic_substance wisconsin like other jurisdic- tions that have adopted the ufta has long followed the general_rule that ‘ e quity looks to substance and not to form’ and wisconsin courts use the see supra note ‘substance over form’ principle in a variety of contexts most notably including tax cases id pincite quoting cunneen v kalscheuer n w wis as for the first principle that the term transfer in the wisconsin ufta like the definition of that term in the ufta adopted by other jurisdictions is defined very broadly and the third principle that wisconsin like other jurisdic- tions that have adopted the ufta has long followed the general_rule that ‘ e quity looks to substance and not to form’ petitioners do not dispute and we conclude that they are valid principles under the indiana ufta in support of its conclusion that wisconsin courts use the ‘substance over form’ principle in a variety of contexts most notably including tax cases the court_of_appeals cited examples of wisconsin caselaw involving not only wisconsin tax issues as petitioners allege but also wisconsin nontax issues feldman v commissioner f 3d pincite ind code ann sec west in effect in defined the term transfer to mean any mode of disposing of or parting with an asset or an interest in an asset whether direct or indirect absolute or conditional or voluntary or involuntary the term includes payment of money release lease and creation of a lien or other encumbrance that definition of the term transfer was in all material respects identical to the definition of that term in ind code ann sec west that was in effect after the definition of the term transfer in the indiana ufta in effect in and after is in all material respects identical to the definition of that term in the wisconsin ufta compare ind code ann sec west and ind code ann sec west with wis stat sec_242 continued as for the second principle that state fraudulent-transfer law is itself flexible and looks to equitable principles like ‘substance over form ’ just like the federal tax doctrines substance over form business_purpose and economic_substance in positing that principle the court_of_appeals relied on boyer f 3d pincite a case that it had decided under the indiana ufta see feldman v commissioner f 3d pincite the court_of_appeals had concluded in boyer that the f raudulent conveyance doctrine is a flexible principle that looks to substance rather than form and protects creditors from any transactions the debtor engages in that have the effect of impairing their rights while ensuring that the debtor can continue to do business and assuring third parties that transactions done with the debtor at arm’s length will not be second-guessed boyer f 3d pincite alteration in boyer quoting douglas g baird elements of bankruptcy 4th ed we agree with the court of appeals’ conclusion in boyer continued the indiana supreme court like the supreme court of wisconsin that the court_of_appeals cited in feldman v commissioner f 3d pincite has long followed the general principle that equity looks to substance and not to form the third principle set forth above see eg state ex rel mcgonigle v madison circuit_court n e 2d ind otis v gregory n e ind in 587_f3d_787 the court_of_appeals did not even mention let alone use what petitioners call the collapsing doctrine or the equitable collapsing continued involving the indiana ufta on which it relied in feldman v commis- sioner f 3d pincite involving the wisconsin ufta that the second principle set forth above in feldman is a valid principle under the indiana ufta as for the fourth principle that wisconsin courts use the ‘substance over form’ principle in a variety of contexts most notably including tax cases wis- consin substance over form principles petitioners do not dispute and we con- clude that indiana courts like wisconsin courts use the substance over form principle in a variety of contexts most notably including tax cases petitioners do however contend that respondent is wrong in asserting that we may rely on continued doctrine in determining whether in substance there was a transfer of the debtor’s property to certain persons for purposes of applying the constructive fraud pro- visions of the indiana ufta however as discussed previously in the pro- ceedings below in that case both the bankruptcy court and the district_court described collapsing or recharacterizing the transactions involved there as what would occur if indiana substance over form principles that require that the substance of a transaction to prevail over its form were determined to be appro- priate principles to use given the facts and circumstances of the case see boyer v crown stock distrib inc wl at in re crown unlimited mach inc wl at see eg belterra resort ind llc n e 2d pincite citing belterra resort ind llc v ind dep’t of state rev n e 2d ind walter v balogh n e 2d ind bethlehem steel corp v ind dep’t of state rev n e 2d ind t c monarch beverage co inc v ind dep’t of state rev n e 2d ind t c indiana tax cases as support for using indiana substance over form prin- ciples for purposes of the indiana ufta we believe that the court_of_appeals which decided 779_f3d_448 would and we do reject petitioners’ contention in determining whether each of the c corporation’s stock- holders involved in feldman was a transferee of property of the c_corporation for purposes of the wisconsin ufta with respect to the purported sale transaction involved in that case the court_of_appeals relied on inter alia wisconsin tax cases that had applied substance over form principles we have examined the holding and the rationale of the court_of_appeals that i n light of the broad definition of ‘transfer’ in wisconsin fraudulent- transfer law and the general applicability of substance-over-form analysis the shareholders of the debtor-c corporation in question are properly deemed to be transferees under state law as well as federal id we have also examined the legal framework in which it reached that holding and rationale see id pincite- we conclude that nothing in that holding that rationale or that legal frame- work provides any support for petitioners’ argument that the wisconsin courts’ use of wisconsin substance over form principles under the wisconsin ufta see supra note represents a minority view in fact the holding and the rationale of the court_of_appeals and the legal framework in which it reached that holding in feldman refute that argument and we reject it we conclude that in determining whether for purposes of the indiana ufta in substance ffi made a distribution or transfer to each of mr fankhauser mr weintraut and ms fankhauser in the spr sale transaction under the spra the indiana supreme court would use the same type of analysis that the court_of_appeals used in 779_f3d_448 when it was making a similar determination under the wisconsin ufta that is to say the indiana supreme court would use indiana substance over form principles we further conclude in the alternative that in making that determination the indiana supreme court would use the same type of analysis that the court_of_appeals used in in the light of the conclusions of the court_of_appeals in feldman v commissioner f 3d pincite that the principles under the wisconsin ufta are consistent with the principles of the ufta we believe that if the court_of_appeals had believed that the wisconsin courts’ use of wisconsin substance over form principles under the wisconsin ufta reflected a minority view it would have expressly so stated it did not we also reject the second argument of petitioners regarding the alleged conflict that would be created between ind code ann secs and if indiana substance over form principles and not the equitable collapsing doctrine were used that argument is premised upon petitioners’ view which we have rejected that the law of wisconsin as articulated by the court_of_appeals in feldman v commissioner f 3d pincite represents a minority view boyer f 3d pincite with respect to the indiana ufta that is to say the indiana supreme court would use the equitable ‘flexible principle under the indiana ufta that looks to substance rather than form and protects creditors from any transactions the debtor engages in that have the effect of impairing their rights while ensuring that the debtor can continue to do business and assuring third parties that transactions done with the debtor at arm’s length will not be second-guessed ’ id quoting baird supra pincite see also 817_f3d_979 7th cir a basic precept of fraudulent- transfer doctrine is substance trumps form citing boyer f 3d pincite in addition we conclude in the alternative that in determining whether for purposes of the indiana ufta in substance ffi made a distribution or transfer to each of mr fankhauser mr weintraut and ms fankhauser in the spr sale trans- action under the spra the indiana supreme court would use the same type of analysis that it and other indiana courts have used in a variety of cases under which a transaction that is a sham and devoid of economic_substance is disre- garded that is to say the indiana supreme court would use the indiana sham_transaction doctrine there are other equitable principles eg the indiana step_transaction_doctrine that we conclude in the alternative the indiana supreme court would use continued we address next whether petitioners are correct in their contention that only the equitable collapsing doctrine requires that respondent prove that petitioners knew or should have known that ffia and or midcoast was going to cause ffi’s taxes to not be paid as we indicated previously the equitable collapsing doc-trine relies on equitable principles that are not materially different from inter alia indiana substance over form principles which in turn are materially the same as wisconsin substance over form principles that the court_of_appeals used in 779_f3d_448 in fact as also noted above some courts have referred interchangeably to the equitable principles of collapsing transactions and the equitable principles of substance over form see eg alterman v com-missioner tcmemo_2015_231 at involving the florida ufta in re crown unlimited mach inc wl at involving the indiana ufta aff’d boyer wl at moreover as we also indicated above in certain cases that have referred interchangeably to the equitable principles of collapsing transactions and the equitable principles of substance over form certain courts have before using those principles under the continued under the indiana ufta provided that those other indiana equitable principles do what the equitable principles that the indiana ufta as well as the ufta adopted by other jurisdictions do that is to say look to substance rather than form see boyer f 3d pincite applicable state ufta required a creditor to show that a purported transferee of the debtor knew or should have known that the debt would not be paid see eg alterman v commissioner at involving the florida ufta furthermore as petitioners point out in certain cases that have referred only to the equitable principles of collapsing transactions certain courts have before using those principles under the applicable state ufta required a creditor to show that a purported transferee of the debtor knew or should have known that the debt would not be paid see eg 680_f3d_417 4th cir involving the north carolina ufta aff’g tcmemo_2011_63 48_f3d_623 2d cir involving the new york uniform fraudulent conveyance act however none of the cases imposing the knowledge requirement involved the indiana ufta the only cases that we have found involving the indiana ufta in which the court used equitable principles that look to substance rather than form in determining whether there was a transfer of the debtor’s property to certain certain jurisdictions such as the state of new york did not adopt the ufta but retained the ufca that like the ufta is designed to protect creditors from fraudulent_conveyances or transfers nor did any of the cases imposing the knowledge requirement involve the wisconsin ufta persons are 587_f3d_787 and 817_f3d_979 we discuss only 587_f3d_787 that is because the court_of_appeals in cont’l cas co f 3d pincite relied on the so-called alter ego theory and not on the indiana ufta to hold certain individuals liable for fraudulent transfers to certain corporations that they owned and controlled in boyer a bankruptcy proceeding crown unlimited machine inc old crown sold all of its assets to a newly formed corporation new crown which changed its name after that sale crown sale to the name of the seller in exchange for dollar_figure million in cash and a dollar_figure million promissory note note that was secured_by all of the company’s assets we shall sometimes refer to the cash and the note that new crown transferred to old crown as the sales proceeds and the payment of the cash proceeds by new crown to old crown as the cash sales pro- ceeds payment pursuant to an understanding of the parties to the crown sale immediately before the closing old crown transferred dollar_figure from its bank account to a separate bank account and then distributed those funds as dividends to its stockholders preclosing dividend distributions see boyer f 3d pincite at the closing new crown transferred the sales proceeds to old crown in exchange for its then remaining assets after the closing old crown distributed the cash that it had received as part of the sale price to its stockholders and ceased being an operating company in each of the two years after the closing pursuant to the terms of the note new crown made a payment to old crown of dollar_figure on the note collectively postclosing note payments which it distribut- ed to its stockholders see id see also in re crown unlimited mach inc wl at we shall refer to all of the events that occurred relating to the old crown sale including those that are not recited herein but are recited in in re crown unlimited mach inc as the old crown sale transaction after the closing of the crown sale new crown began operating the busi- ness in which old crown had been engaged before the sale of old crown’s assets but new crown was not successful new crown began bankruptcy proceedings about three and a half years after it purchased old crown’s assets there were not enough funds in new crown to pay its unsecured creditors and the trustee in bank- ruptcy trustee brought an adversary action against old crown as the initial trans- feree and its stockholders old crown stockholders as the subsequent and im- mediate or mediate transferees in that action the trustee acknowledged that in form new crown had purchased old crown’s assets and made transfers of certain funds to old crown to pay for those assets and that if the form of the trans- the old crown stockholders were members of the same family see in re crown unlimited mach inc wl at action were to be respected a old crown would be the initial transferee to whom an affirmative defense might be available under ind code ann sec and b the old crown stockholders would be subsequent and immediate or mediate transferees to whom an affirmative defense might be available under u s c sec b however the trustee maintained that the substance of the crown sale of assets should prevail over its form and that if the sub- stance were to prevail the transaction should be collapsed and recharacterized as a stock sale by the old crown stockholders to new crown that was financed by encumbering the assets of old crown ie a leveraged_buyout lbo in that event according to the trustee new crown the debtor would be considered to have purchased the stock of the old crown stockholders with funds secured_by old crown’s assets thereby allowing those stockholders to cash_out any equity in old crown which served as a mere conduit for those stockholders of the stock purchase_price and whose business remained burdened with the resulting debt as a result the trustee contended new crown the debtor would be considered to have made distributions to the old crown stockholders that were fraudulent transfers under each of the constructive fraud provisions in ind code ann secs we shall refer to the trustee’s theory that the substance of the crown sale of its assets should prevail over its form as the trustee’s substance over form theory and and those stockholders would be con- sidered initial transferees not subsequent and immediate or mediate transferees to whom no affirmative defenses would be available under u s c sec b see boyer wl at before considering the trustee’s substance over form theory the bankruptcy court did not first require as petitioners urge we must do in these cases a showing by the trustee that the old crown stockholders knew or should have known that new crown’s debts would not be paid id at although the bankruptcy court was unwilling to accept and in fact rejected the trustee’s substance over form theory under which the entire transaction would be collapsed and recharac- terized as an lbo it did so for the following reasons the bankruptcy court had concluded that acceptance of the trustee’s substance over form theory not only unnecessarily complicates this matter but also inaccurately characterizes what transpired overlooks significant facts and would operate to deprive the individual defendants ie the old crown stockholders of the defenses that u s c the constructive fraud provisions of the indiana ufta on which the trustee relied in 587_f3d_787 in re crown unlimited machine inc wl aff’d boyer wl are the same constructive fraud provisions on which as discussed herein respondent relies in these cases b gives to subsequent transferees but not to initial transferees in re crown unlimited mach inc wl at having rejected the trustee’s substance over form theory and having accept- ed the form of the entire old crown sale transaction the bankruptcy court held that the preclosing dividend distributions did not involve property of the debtor new crown and that a t the time that dividend was paid the money belonged to the debtor’s seller old crown and not to the debtor thus it was not ‘a transfer made by the debtor’ and as such cannot be avoided as fraudulent under either i c or i c id at the bankruptcy court then addressed whether having accepted the form of the entire old crown sale transaction the transfers by new crown the debtor to old crown were avoidable transfers under each of the two constructive fraud provisions in ind code ann secs and in addressing that issue the bankruptcy court observed that since fraudulent conveyance laws are intended to protect a debtor’s creditors the transaction is to be evaluated from their perspective not that of the defendant transferee id at after a thorough the bankruptcy court stated that c ollapsing the transaction would transform the individual defendants from subsequent transferees into initial transferees and deprive them of defenses available only to subsequent transferees under u s c sec b in re crown unlimited mach inc wl at analysis of the facts and the law the bankruptcy court held that the cash sales proceeds payment and the postclosing note payments were fraudulent trans- fers by new crown the debtor to old crown see id at the bankruptcy court next turned to the questions under u s c sec as to what the trustee was entitled to recover and from whom that court conclud- ed that old crown was the initial transferee and that the old crown stockholders were the subsequent and immediate or mediate transferees under that provision the bankruptcy court observed just because a fraudulent transfer is recover- able as here from the initial transferee old crown does not automatically mean we note that in considering each of the constructive fraud provisions in the indiana ufta the bankruptcy court indicated that in determining whether a debtor made a transfer without receiving a reasonably equivalent value in ex- change for the transfer under ind code ann secs and it must consider all of the facts and circumstances including the good_faith of the transferee and whether the transfer was the result of an arms length transaction in re crown unlimited mach inc wl at however the bankruptcy court concluded that those other considerations are not determinative of whether reasonable equivalent value was given by the transferee under those provisions see id in support of that conclusion that court cited 92_f3d_139 3d cir in in re r m l inc a bankruptcy proceeding involving u s c sec the u s court_of_appeals for the third circuit held that the debtor involved in that case did not receive reasonably equivalent value despite the good_faith of the transferee the arms length nature of the transaction and the charging of market rates for the fees in the transaction see id see also in re crown unlimited mach inc wl at that it is also recoverable from the subsequent transferees section b of u s c gives immediate and mediate transferees affirmative defenses that are not available to the initial transferee in re crown unlimited mach inc wl at the affirmative defense good_faith defense that the old crown stock- holders the immediate or mediate transferees raised was that they took property of new crown the debtor for value in good_faith and without knowledge of the voidability of the transfer u s c sec b the old crown stock- old crown claimed an affirmative defense under ind code ann sec d which allows inter alia a good_faith transferee or obligee to the extent of the value given the debtor for the transfer or obligation a right to retain any interest in the asset transferred or a reduction in the amount of the liability on the judgment see in re crown unlimited mach inc wl at the bankruptcy court rejected that affirmative defense because it found that old crown was not a good_faith transferee under ind code ann sec d id in reaching that finding the bankruptcy court noted that w hether the recipient of a fraudulent conveyance qualifies as a good_faith transferee is a question of fact which largely turns on the knowledge of the transferee at the time of the transaction sought to be avoided in re crown unlimited mach inc wl at the bankruptcy court indicated that although there was little agreement among courts as to the appropri- ate legal standard for the affirmative defense under ind code ann sec sec d and similar provisions under the ufta enacted by other jurisdictions a court must take an objective approach to determine what the transferee knew or should have known such that the transferee does not act in good_faith when it has sufficient knowledge to place the transferee on inquiry notice of the void- ability of the transfer id quoting 342_br_183 bankr d n j as discussed below the bankruptcy court applied a similar continued holders had the burden of proving their entitlement to that affirmative defense the bankruptcy court expressly found that except for one of the old crown stockholders named steven stroup ii mr stroup ii who was old crown’s president and its majority stockholder and who negotiated the sale of old crown’s assets to new crown see in re crown unlimited mach inc wl at the old crown stockholders did not have a high degree of involvement in the transaction or his mr stroup ii knowledge of its details id at the bankruptcy court further found that it appears that they old crown stockholders except mr stroup ii were more or less content to let mr stroup ii make the necessary decisions and run things accordingly the bankruptcy court found that those stockholders had no reason to know of the possibly fraudulent nature of the transaction that resulted in the distributions they received id at the findings of the bankruptcy court that the old crown stockholders took property in good_faith for purposes of u s c sec b did not however lead that court to conclude that the old crown stockholders except for mr stroup ii had proved their entitlement to the affirmative defense under that provision continued test in determining whether the old crown stockholders as immediate or mediate transferees took property in good_faith for purposes of the affirmative defense under u s c sec b that was because those stockholders also had to prove that they took property for value with respect to that question the bankruptcy court conclud- ed that value for the purpose of u s c b ‘looks to what the trans- feree gave up’ id at quoting 838_f2d_890 7th cir the bankruptcy court found that the old crown stockholders gave nothing in exchange for their distributions from crown stock old crown according to that court t hose distributions were made not in return for some exchange of property or services or the payment of an antecedent debt but solely on account of their status as shareholders in the company such distributions are not an exchange of anything and do not con- stitute value for purposes of u s c b id at consequently the bankruptcy court held that none of the old crown stockholders was entitled to the affirmative defense under u s c sec b id at the bankruptcy court decision in boyer was appealed to the u s district_court for the northern district of indiana the district_court affirmed the bank- ruptcy court decision see boyer wl the district_court like the district_court did not reach the issue presented on appeal by old crown and the old crown’s stockholders that the bankruptcy court had erred in holding that the transfers by new crown to old crown in the old crown sale transaction were avoidable transfers under the constructive fraud provisions in continued the bankruptcy court rejected the trustee’s substance over form theory and as a result found as the bankruptcy court had found that the preclosing dividend dis-tributions were paid when the funds with which those distributions were made belonged to old crown and not to new crown the debtor consequently the district_court held as the bankruptcy court had held that those distributions were not transfers made by new crown the debtor and therefore may not be avoided as fraudulent under ind code ann sec see boyer wl at the district_court judgment in boyer was appealed to the court_of_appeals for the seventh circuit the court_of_appeals affirmed in part and reversed in part that judgment see 587_f3d_787 the reversal was with respect to the district court’s holding that the preclosing dividend distributions were not trans- fers made by new crown the debtor to the old crown stockholders and therefore may not be avoided as fraudulent under ind code ann sec as was true of the bankruptcy court and the district_court the court_of_appeals began its analysis of the issues presented with what it described as the trustee’s continued ind code ann sec that was because it had affirmed the bankruptcy court’s decision that those transfers were avoidable transfers under the construc- tive fraud provisions in ind code ann sec see boyer wl at argument for recharacterizing the old crown sale transaction as a sale by the old crown stockholders of the stock of old crown ie an lbo instead of a sale by old crown of its assets see id pincite the court_of_appeals acknowledged that the old crown sale of its assets differed in two formal respects from a so-called conventional lbo in which an investor purchases the stock of a corporation from its stockholders with the proceeds of a loan that is secured_by the corporation’s assets the first formal difference according to the court_of_appeals was that the old crown sale involved the purchase of old crown’s assets and not its stock the second formal difference according to the court_of_appeals was that despite a load of debt and a dearth of cash the corporation new crown limped along for three-and-a-half years before col- lapsing into the arms of the bankruptcy court see id pincite despite the two formal differences from a conventional lbo that the court_of_appeals found in the old crown sale transaction it indicated that whether one calls it an lbo or not is not critical however the court_of_appeals indicated that if one has to call the overall old crown sale transaction something the something is an lbo id pincite what was critical to the court_of_appeals was determining when an lbo is legitimate and when it is a fraudulent transfer the court_of_appeals observed that in making that determination with respect to the old crown sale transaction it must bear in mind that the ‘ f raudulent conveyance doctrine is a flexible principle that looks to substance rather than form and protects creditors from any transactions the debtor engages in that have the effect of impairing their rights while ensuring that the debtor can continue to do business and assuring third parties that transactions done with the debtor at arm’s length will not be second-guessed’ boyer f 3d pincite alteration in boyer quoting baird supra pincite as far as the court_of_appeals was concerned if the preclosing dividend distributions were part and parcel of the transaction that fatally depleted new crown’s assets it was part and parcel of a fraudulent conveyance id pincite the court_of_appeals then addressed whether there was any significance to the first formal difference between the old crown sale transaction and a conven- tional lbo in which the stock and not the assets of a corporation is purchased the court dismissed that formal difference as of no conceivable significance pointing out that an lbo can also take the form of an asset purchase see id pincite the court_of_appeals explained that although the acquisition was nomi- nally of the assets of old crown it was actually of the ownership of the company for old crown distributed the money it received in the sale forthwith to its shareholders and from then on existed only as a shell id pincite the court_of_appeals continued its explanation and stated new crown operated under the same name as its predecessor and its trade creditors and other unsecured creditors were not even told about the transaction that reticence would be normal if the stock of a corporation were sold rather than its assets but in a sale of its assets the seller’s creditors would expect to be notified that they would henceforth be dealing with a different firm id pincite the court_of_appeals next addressed what it had called the second formal difference between the old crown sale transaction and a conventional lbo ie despite a load of debt and a dearth of cash the corporation limped along for three-and-a-half years before collapsing into the arms of the bankruptcy court see id pincite the court first explained that a company might be insolvent that is to say it liabilities exceeded its assets and nonetheless might continue to operate as long as it was able to raise enough money to pay its debts as they became due or perhaps longer if its creditors were forbearing however the court_of_appeals concluded that that was not the financial situation in which new crown found itself as a result of the terms of the old crown sale transaction according to the court that sale transaction reduced new crown’s ability to borrow on favorable terms because in order to buy old crown’s assets new crown had encumbered all of the assets of old crown that new crown owned after that transaction as collateral for the money that it borrowed to make that purchase moreover the court_of_appeals continued new crown was forced to engage in continual borrowing during its remaining life and on unfavorable terms boyer f 3d pincite that was because according to the court_of_appeals most of old crown’s cash had been committed to making the preclosing dividend distributions to the old crown stockholders and the postclosing note payments to old crown and to paying almost dollar_figure annually in order to service the note to the bank repre- senting the loan that financed its purchase of the old crown assets the court_of_appeals pointed out that seven months before it began bankruptcy proceedings new crown had run up dollar_figure million in debt and its assets were worth less than half that amount id as far as the court was concerned new crown had made payments and incurred obligations because of the old crown sale trans-action for which it received nothing in return except the dollar_figure capital_contribution of its sole stockholder and certainly did not receive reasonably equivalent value as a result the court_of_appeals found that even if new crown was not in fact in- solvent when it started its business after the old crown sale transaction it began life with ‘unreasonably small’ assets given the nature of its business id the court emphasized that it was this difference between insolvency on the day an lbo is effected and having at that time such meager ie unreasonably small assets that bankruptcy is a consequence both likely and foreseeable that is the difference between insolvency and unreasonably small assets in the lbo context id the court_of_appeals found that new crown was naked to any fi- nancial storms that might assail it because of its commitments as a result of the old crown sale transaction the court thus affirmed the bankruptcy court’s find- ing that new crown survived for three and a half years after the old crown sale transaction only on ‘life support’ id pincite consequently the court_of_appeals held that the statutory condition for a fraudulent conveyance under ind code ann sec was satisfied--or so at least the bankruptcy judge could and did find without committing a clear error id pincite the court_of_appeals then turned to the preclosing dividend distributions which the lower courts ie the bankruptcy court and the district_court having rejected the trustee’s substance over form theory had found were payments made by old crown before that transactions closed and thus were not transfers under the the court_of_appeals had observed earlier in boyer that a corporate transfer is fraudulent within the meaning of ind code ann sec even if there is no fraudulent intent if the corporation didn’t receive ‘reasonably equivalent value’ in return for the transfer and as a result was left with insufficient assets to have a reasonable chance of surviving indefinitely boyer f 3d pincite citing rose v mercantile nat’l bank of hammond n e 2d ind ct app vacated in part on other grounds n e 2d ind indiana ufta by new crown the debtor to those stockholders the court_of_appeals found that those distributions were an integral part of the lbo in so finding the court pointed out that dividends are rare for family-owned companies like old crown that they represented percent of its profits for the year before the old crown sale transaction closed which was unreasonably large given that company’s cash needs and that the old crown stockholders had thereby drained old crown of its cash a fact which was not known by its then current and future unsecured creditors see boyer f 3d pincite from those findings the court_of_appeals held these indications that the dividend was part of the fraudulent transfer rather than a normal distribution of previously earned profits--that it wasn’t an ordinary dividend but rather the withdrawal of an asset vital to the acquiring firm new crown the debtor --were sufficient to place a burden on old crown and the old crown stockholders of producing evidence that it was a bona_fide dividend a burden they failed to carry id pincite in so holding with respect to the preclosing dividend distributions the court_of_appeals did not first impose let alone make any reference to the knowledge requirement that petitioners argue is a prerequisite under the indiana ufta before it is permissible to apply equitable principles to determine whether in the spr sale transaction under the spra there was a transfer under the indiana ufta of ffi’s property to each of mr fankhauser mr weintraut and ms fankhauser in fact the knowledge requirement that petitioners urge we adopt for purposes of the indiana ufta here was not satisfied in boyer as to any of the old crown stockholders except mr stroup ii as discussed previously the bankruptcy court expressly had found when it was considering the so-called good_faith defense under u s c sec b raised by the old crown stockholders that the old crown stockholders did not have a high degree of involvement in the transaction or his mr stroup ii knowledge of its details in re crown unlimited mach inc wl at the bankruptcy court further found that it appears that they old crown stockholders except mr stroup ii were more or less content to let mr stroup ii make the necessary decisions and run things id accordingly the bankruptcy court found that those stockholders had no reason to know of the possibly fraudulent nature of the transaction that resulted in the dis- tributions they received id the court_of_appeals did not disturb those findings of the bankruptcy court several years after the court_of_appeals for the seventh circuit decided 587_f3d_787 it again was asked in feldman v commissioner f 3d the district_court also did not disturb the findings of the bankruptcy court regarding the lack of knowledge and thus good_faith of the old crown stock- holders except mr stroup ii see boyer wl whether the creditor there the commissioner was required to satisfy the knowledge requirement before the court would use applicable state law equitable principles namely wisconsin substance over form principles in determining whether under the applicable state’s namely wisconsin’s ufta there was a transfer of the debtor’s property to the debtor’s stockholders in the sale transaction involved in that case see id pincite consistent with what it had implicitly found in boyer f 3d pincite under the law in indiana including the indiana ufta the court_of_appeals explicitly held that under the law of wisconsin including the wisconsin ufta due diligence and lack of knowledge of illegality is simply beside the point in determining whether the sale transaction involved in that case could be recast or recharacterized under the wisconsin ufta as a transfer by the debtor to its stockholders see feldman v commissioner f 3d pincite in rejecting the knowledge requirement in feldman the court_of_appeals relied on badger state bank v taylor n w 2d wis see feldman v commissioner f 3d pincite according to the court_of_appeals t he wisconsin supreme court has explained that subjective intent and good_faith play no role in the application of the constructive-fraud provisions of wisconsin’s ufta badger conclusion id we have found no jurisdiction that has enacted the ufta which has rejected the principle embodied in the badger conclusion to the contrary we have found authority indicating that the badger conclusion under the wisconsin ufta that the wisconsin supreme court articulated in badger state bank is generally accepted by the state of indiana as well as other jurisdictions that have enacted the ufta in 371_br_877 bankr n d ind involving inter alia the constructive fraud provisions of the indiana ufta the bankruptcy court concluded that a ‘constructively fraud- ulent conveyance’ under the indiana ufta has nothing to do with the intent or motivation surrounding the transfer instead its fraudulent nature is determined solely by the circumstances of the transaction itself in badger state bank v taylor n w 2d wis the wisconsin supreme court did not have before it the issue of whether to recast or recharacterize a transaction under the wisconsin ufta when it reached the badger conclusion as restated by the court_of_appeals in feldman and quoted in the text we are persuaded that if the court_of_appeals had believed that other jurisdictions had rejected the badger conclusion it would have expressly so stated it did not see feldman v commissioner f 3d pincite as was true of the wisconsin supreme court in badger state bank n w 2d the bankruptcy court did not have before it in manning v wallace continued moreover the holding of the court_of_appeals in boyer that there were transfers from new crown the debtor to the old crown stockholders under the indiana ufta when they received the preclosing dividend distributions neces- sarily was premised on that court’s belief that subjective intent and good_faith have no role in the application of the constructive fraud provisions of the indiana ufta see boyer f 3d pincite see also nesco inc v cisco no cv wl s d ga date involving georgia ufta inter- pool ltd v patterson 890_fsupp_259 n s d n y involving florida ufta 494_br_413 ndollar_figure bankr d minn involving minnesota ufta rose v mercantile nat’l bank of hammond continued in re first fin assocs inc 371_br_877 bankr n d ind the issue of whether to recast or recharacterize a transaction under the indiana ufta when it reached the conclusion quoted in the text as discussed above the court_of_appeals and the district_court did not disturb the express findings of the bankruptcy court when it was considering the so-called good_faith defense under u s c sec b raised by the old crown stockholders that the old crown stockholders except mr stroup ii did not have a high degree of involvement in the transaction or his mr stroup ii knowledge of its details in re crown unlimited mach inc wl at nor did the court_of_appeals or the district_court disturb the bankruptcy court’s express findings that it appears that they old crown stockholders except mr stroup ii were more or less content to let mr stroup ii make the necessary decisions and run things id and that therefore those stockholders had no reason to know of the possibly fraudulent nature of the transaction that resulted in the distributions they received id n e 2d ind ct app involving indiana ufta vacated in part on other grounds n e 2d ind orthotec llc v healthpoint capital llc n y misc lexis at n y sup ct involving california ufta sease v john smith grain co n e 2d ohio ct app involving ohio ufta ufta prefatory note 7a part ii u l a we conclude that the indiana supreme court will not impose and that the court_of_appeals for the seventh circuit will hold that the indiana supreme court will not impose the knowledge requirement before using indiana substance over form principles in order to determine whether ffi made a distribution or transfer under the indiana ufta of its property to each of mr fankhauser mr weintraut and ms fankhauser in the spr sale transaction under the spra see 587_f3d_787 assuming arguendo that contrary to our holding the court_of_appeals for the seventh circuit were to conclude that the indiana supreme court would im- pose the knowledge requirement before using indiana substance over form prin- as was true of badger state bank n w 2d and in re first fin assocs inc 371_br_877 the courts in the cases in the string citation in the text did not have before them the issue of whether to recast or recharacterize a transaction under the applicable state ufta see supra note sec_139 and sec_141 ciples in order to determine whether ffi made a distribution or transfer under the indiana ufta of its property to each of mr fankhauser mr weintraut and ms fankhauser in the spr sale transaction under the spra we find on the record before us that that requirement is satisfied with respect to each of them before considering whether each of mr fankhauser mr weintraut and ms fankhauser knew or should have known so-called constructive knowledge that ffi’s federal_income_tax liability for its taxable_year would not be paid we note that constructive knowledge includes so-called inquiry knowledge see 736_f3d_172 2d cir involving new york ufca vacating and remanding salus mundi found v commissioner tcmemo_2012_61 starnes v commissioner f 3d pincite involving the north carolina ufta a transferee has inquiry knowledge where the transferee was aware of circumstances that should have led the trans- feree to inquire further into the circumstances of the transaction but failed to make such inquiry hbe leasing corp f 3d pincite involving the new york ufca see diebold found inc v commissioner f 3d pincite as the court_of_appeals for the second circuit stated in diebold found inc v commis- sioner f 3d pincite w hen entering into a particular transaction for the express purpose of limiting--or altogether avoiding--tax liability parties are all the more likely to have this duty to inquire in such cases the surround-ing circumstances always include a deliberate effort to avoid liability and it would be the very rare case indeed where a purchasing party would assume such liability without an appropriate discount in the sale price in such scenarios being aware that this is the case parties have a duty to inquire further into the circumstances of the trans- action citation omitted there is some ambiguity with respect to the precise test for constructive knowledge in that certain courts define that term as the knowledge that ordinary diligence would have elicited while other courts require a more active avoidance of the truth see id pincite because we find that each of mr fankhauser mr weintraut and ms fankhauser had constructive knowledge under either of those tests we need not and do not resolve which test to apply in these cases in order to determine whether each of the ffi stockholders had constructive knowledge including inquiry knowledge that ffi’s federal_income_tax liability for its taxable_year would not be paid we must examine all of the facts and circumstances see id pincite we start with the failure on the part of the ffi stockholders as well as mr thrapp to learn anything about the tax strategy of midcoast in addition to what they understood the results of that tax strategy would be for ffi namely ffi’s total anticipated tax_liability of dollar_figure would not be paid but would be deferred neither the ffi stock- holders nor mr thrapp saw any need to and did not press midcoast’s representatives regarding the details of its tax strategy its acquisition strategy and its asset recovery business all of which they understood were inextricably inter- twined nor did the ffi stockholders or mr thrapp see any need to or in fact inquire through their respective contacts whether there were persons who were not employed by midcoast or by ice miller and who might be familiar with mid- coast’s tax strategy acquisition methodology and its asset recovery business the only reason offered at trial why none of the ffi stockholders or mr thrapp made any inquiries regarding midcoast’s tax strategy was that they understood that that strategy was proprietary and that consequently midcoast would not share any details about it with them petitioners proffered that explan- ation even though mr fankhauser mr weintraut and ms fankhauser knew directly or through mr thrapp that midcoast’s pricing in its acquisition meth- odology was inextricably intertwined with its tax strategy mr fankhauser mr weintraut and ms fankhauser as well as mr thrapp knew that the transactions that midcoast had proposed in the letter of intent and to which they agreed in the spra would result in their receiving a greater amount of assets--a so-called premium--than they would receive if ffi were to liquidate and the respective federal and state_income_tax liabilities that ffi incurred as a result of the ffi asset sales were paid in full the ffi stockholders as well as mr thrapp also knew that the only reason that the ffi stockholders would be able to receive such a premium was that ffi’s total anticipated tax_liability of dollar_figure would not be paid in other words mr fankhauser mr weintraut and ms fankhauser as well as mr thrapp knew that if and only if that total anticipated tax_liability was not paid would the ffi stockholders receive the so-called premium on the record before us we find that the failure on the part of the ffi stock- holders as well as mr thrapp to learn anything about the tax strategy of mid- coast especially since they understood that the results of that tax strategy purport- ed to be that ffi’s total anticipated tax_liability of dollar_figure would not be paid but would be deferred was willful and unreasonable on that record we further find that that failure was an attempt on their part to avoid making any inquiries that would raise red flags we turn next to the failure on the part of the ffi stockholders as well as mr thrapp to make inquiries about the unusual pricing methodology that mid- that midcoast considered its tax strategy to be proprietary and thus would not be disclosed to them was a red flag not a reason to make no inquiries regarding that strategy coast intended to use which they understood midcoast had used in the past in establishing the purchase_price for its acquisition of the stock of c corpora- tions the ffi stockholders as well as mr thrapp understood that pursuant to midcoast’s pricing methodology the purchase_price that it was willing to pay was calculated by using a percentage of the total of the acquired c corporation’s federal_income_tax liability and state_income_tax liability which varied from acquisition to acquisition but was within a range that midcoast had established in these cases mr fankhauser and mr weintraut were experienced businessmen who owned and operated ffi and mr thrapp was an experienced corporate and business lawyer in fact mr weintraut negotiated directly with midcoast’s representatives the percentage of the total of ffi’s federal and state_income_tax liabilities for its taxable_year that midcoast would pay to purchase the stock of the ffi stockholders in doing so mr weintraut attempted to have midcoast agree to pay a percentage that was at the high end of the range of percentages to which he understood midcoast had agreed in the past as part of its acquisition methodology after some negotiation the purchase_price to which the ffi stockholders and midcoast agreed was dollar_figure each of mr fankhauser the purchase_price of dollar_figure that mr weintraut negotiated with midcoast’s representatives was equal to the total ie dollar_figure of ffi’s continued mr weintraut and ms fankhauser as well as mr thrapp should have known and would have known as discussed below if the ffi stockholders had retained a tax professional that a buyer interested in purchasing the stock of a c_corporation that had substantial total federal and state_income_tax liabilities would usually discount the amount that it would be willing to pay to buy the stock of such a corporation in order to take account of those liabilities not pay the premium that they knew they would receive if they were to enter into the trans- actions that midcoast proposed on the record before us we find that the failure on the part of the ffi stockholders as well as mr thrapp to make inquiries about the unusual pricing methodology that midcoast intended to use was willful and unreasonable on that record we further find that that failure was an attempt on their part to avoid mak- ing any inquiries that would raise red flags we consider now the failure on the part of the ffi stockholders to make inquiries regarding the tax consequences to them and ffi from the transactions that midcoast had proposed by retaining a tax professional to advise them and ffi continued cash of dollar_figure and the right to a refund of the ffi state income_tax payments of dollar_figure which ffi would be considered to have as of the closing of the spr redemption transaction under the spra reduced by percent ie by dollar_figure of ffi’s total anticipated tax_liability of dollar_figure with respect to those transactions they failed to do so even though ffi had retained tax professionals over the years to provide it with tax_advice with respect to certain matters mr fankhauser mr weintraut and ms fankhauser offer as an explanation for that failure that at no time after midcoast proposed the transactions in the letter of intent and before the closing of the transactions under the spra did mr thrapp or mr hupfer with ice miller or mr burns or mr vernick with the katz accounting firm inform ffi and the ffi stockholders about possible tax problems associated with those transactions nor did mr thrapp mr hupfer mr burns or mr vernick recommend to ffi and the ffi stockholders that they retain any_tax professional to provide advice with respect to the trans- actions that midcoast had proposed and the transaction to which they agreed in the spra petitioners’ explanation as to why they did not retain a tax professional rings hollow the record does not establish that any of the professionals who were advising and working with the ffi stockholders and ffi regarding the midcoast proposed transactions was a tax professional consequently we believe that unlike a tax professional none of them would have been aware of and sensitive to any potential tax problems that midcoast’s proposed transactions and the transactions to which the ffi stockholders and ffi agreed in the spra posed to those stockholders and that corporation moreover we believe that if the ffi stockholders had attempted to retain a tax professional they probably would have been able to retain one who was familiar with midcoast and the transactions with c corporations in which it had engaged in the past and which it continued to promote in its promotional materials we also believe as discussed above that if the ffi stockholders had retained a tax professional that professional would have advised them that a buyer interested in purchasing the stock of a c_corporation that had substantial total federal and state_income_tax liabilities would usually discount the amount that it would be willing to pay to buy the stock of such a corporation in order to take account of those liabilities not pay a premium on the record before us we find that the failure on the part of the ffi stock- holders to make inquiries regarding the tax consequences to them and ffi from the transactions that midcoast had proposed by retaining a tax professional to advise them and ffi with respect to those transactions was willful and unreason- able on that record we further find that that failure was an attempt on their part to avoid receiving any_tax advice that would raise red flags we address next the failure on the part of the ffi stockholders as well as mr thrapp to make inquiries regarding how midcoast’s planned operation of its asset recovery business in ffi would result in ffi’s not paying but deferring ffi’s total anticipated tax_liability of dollar_figure each of mr fank- hasuer mr weintraut and ms fankhasuer knew as did mr thrapp that as of the closing of the respective transactions on date ffi had no opera- tions no employees engaged in operations no income and no operational assets each of them also knew as did mr thrapp that on date after the spr transactions closed simultaneously pincite p m ffi had assets totaling dollar_figure which consisted of cash of dollar_figure and the right to a refund of dollar_figure of state income_tax payments and anticipated federal_income_tax liabilities and anticipated state_income_tax liabilities totaling dollar_figure or a negative net asset value of dollar_figure in addition each of mr fankhauser mr weintraut and ms fankhauser understood as did mr thrapp that midcoast through ffia was purporting to purchase their ffi stock so that midcoast would be able to use ffi’s cash in order to buy charged-off debt securities that midcoast intended to use in its so-called the ffi stockholders also knew as did mr thrapp that after the spr transactions under the spra closed they would have through their respective ownership interests in ffw the right to a refund of the federal_income_tax pay- ments of dollar_figure that ffi had made during as payments toward ffi’s anticipated federal_income_tax liability of dollar_figure in addition after the spr transactions under the spra closed ffi would have the right to a refund of the state income_tax payments of dollar_figure that ffi had made during as payments toward ffi’s anticipated state_income_tax liability of dollar_figure see supra note sec_34 and asset recovery business however each of the ffi stockholders also knew as did mr thrapp that midcoast through ffia agreed in the spra to pay them dollar_figure in cash for their ffi stock and that as of the closing of the spr trans- actions ffi ffia’s designee was to receive only dollar_figure ie cash of dollar_figure and the right to a refund of the ffi state income_tax payments of dollar_figure in other words each of mr fankhauser mr weintraut and ms fankhauser knew as did mr thrapp that midcoast through ffia agreed in the spra to pay dollar_figure in cash in return for only dollar_figure which midcoast purportedly would use in the asset recovery business that it was to operate in ffi the financial terms of the spr transactions on their face made no business sense for midcoast’s alleged operation of its assets recovery business in ffi and cried out for an explanation inquiries by the ffi stockholders or by mr thrapp about midcoast’s plans for the operation of its asset recovery business in ffi would have disclosed that midcoast intended for ffi to engage in a transaction within approximately one week after the closing on date of the spr transactions in that transaction ffi was to sell at a very substantial claimed loss certain t-bills that were to be contributed to it by a company ffi financial that ffia and willows holdings had formed on the day after that closing that t-bill transaction on its face appeared to be inconsistent with midcoast’s purported intention to operate its asset recovery business in ffi by having ffi acquire charged-off debt securities for use in such a business in other words that transaction raised another red flag but because neither the ffi stockholders nor mr thrapp ever asked about midcoast’s plans for the operation of its asset recovery business in ffi they did not know about the t-bill transaction if they had known about that transaction the ffi stockholders or mr thrapp could have then asked what the planned acquisition and the planned sale of t-bills at the end of had to do with acquiring charged-off debt securities for use in the asset recovery business in included in the representations which were made for purposes of the manatt opinion letter and on which manatt relied for purposes of the opinions expressed in that letter including that the carryover tax basis for subsidiary ffi was dollar_figure for the treasury bills parent fii financial contributed to subsidiary were the following representations both parent and subsidiary entered into the contribution principally with a view toward making an economic profit apart from tax con- sequences the contribution will strengthen the balance_sheet of subsidiary in preparation for subsidiary entering into a new line_of_business subsidiary also will use pre-contribution assets in its new business the new business is that subsidiary will purchase port- folios of credit card receivables and collect those receivables the above-quoted representations are inconsistent with ffi’s acquisition from ffi financial of certain t-bills as well as its sale of those t-bills within days after acquiring them at a very substantial claimed loss which they understood midcoast intended ffi to engage the answer to that question would have been nothing thereby raising an additional red flag the ffi stockholders as well as mr thrapp also could have asked about how the expected significant loss from the sale of the t-bills was calculated they would have learned that the value of the t-bills was dollar_figure and that the very sub- stantial loss that ffi was to claim in its tax_return for its taxable_year was premised on the representation inter alia by mr bernstein and other interested persons that the basis of the t-bills was dollar_figure in addition the ffi stock- holders and mr thrapp would have learned if they had asked that ffi intended to use the very significant claimed loss from the sale of the t-bills to re-duce the significant gains that ffi had realized from the ffi asset sales if the ffi stockholders had retained a tax professional before committing in the spra to the transactions that midcoast proposed in the letter of intent we believe that any such tax professional would have raised serious concerns regarding the propriety of that significant claimed t-bill loss and would have wanted to make further inquiries about how and why mr bernstein and others were able to represent that the t-bills had a basis of dollar_figure if the ffi stockholders or mr thrapp had inquired about how ffi’s basis in the t-bills was determined the answer could have raised more danger signals on the record before us we find that the failure on the part of the ffi stock-holders as well as mr thrapp to make inquiries regarding how midcoast’s planned operation of its asset recovery business in ffi would result in ffi’s not paying but deferring ffi’s total anticipated tax_liability of dollar_figure was willful and unreasonable on that record we further find that that failure was an attempt on their part to avoid making any inquiries that would raise red flags we turn now to the failure on the part of mr fankhauser mr weintraut and ms fankhauser as well as mr thrapp to make inquiries or conduct due diligence regarding ffia midcoast’s designee as the purported purchaser of the ffi stock from the ffi stockholders each was them knew or should have known through due diligence that ffia was created by mr bernstein on december the ffi stockholders did not personally undertake any due diligence on behalf of ffi or themselves with respect to the transactions that midcoast had proposed in the letter of intent instead the ffi stockholders relied on mr thrapp to conduct due diligence with respect to those transactions mr thrapp spent some time performing a limited amount of due diligence on behalf of ffi and the ffi stockholders that consisted for the most part of reviewing certain promotional materials that midcoast had prepared mr thrapp did not perform due diligence with respect to ffia that midcoast designated to serve as the purchaser of the stock of the ffi stockholders mr thrapp claimed to have believed that the limited amount of due diligence that he performed was adequate taking into account the information and the circumstances with respect to the transactions that midcoast had proposed in the letter of intent and the signatories to that letter about which he had knowledge or an understanding mr thrapp further claimed to have believed that the knowledge and the understanding that he had with continued a few days before the parties were to execute the spra and effect the transactions to which they had agreed therein ffia had no assets when it agreed to the spra on date apparently not even the dollar_figure of capital that mr bernstein was supposed to have contributed to it nonetheless petitioners and mr thrapp want us to believe that they were willing to rely on the covenants the representations and the warranties of ffia because of the indem- nification obligations of ffia in the event of any breaches of any of those cove- nants representations and or warranties we refuse to do so because of its financial condition we believe and so should have the ffi stockholders and mr thrapp that ffia would not have been able to satisfy any financial obligations resulting from those covenants representations and or warranties on the record before us we find that the failure on the part of the ffi stock- holders as well as mr thrapp to make inquiries or conduct due diligence regard- continued respect to the transactions that midcoast had proposed in the letter of intent and the signatories to that letter enabled him to determine and to assess the risks that he concluded those transactions posed to his clients ffi and the ffi stockholders mr thrapp claimed to have held those beliefs even though he did not know any of the details of midcoast’s acquisition methodology its asset recovery business or its tax strategy he was not a tax professional and thus was not qualified to know of or be sensitive to any_tax risks associated with those transactions and he knew that the funds that were to be provided by ms shapiro to midcoast in order to effect the acquisition of the ffi stock were to be returned to her as of the closing of that transaction ing ffia midcoast’s designee as the purported purchaser of the ffi stock from the ffi stockholders was willful and unreasonable on that record we further find that that failure was an attempt on their part to avoid making any inquiries that would raise red flags we turn finally to the failure on the part of the ffi stockholders as well as mr thrapp to make any inquiries regarding the so-called loan by ms shapiro of dollar_figure to ffia midcoast’s designee which according to the terms of the spra ffia was to use to purchase the ffi stock each of mr fankhauser mr weintraut and ms fankhauser each of whom had signed the spra the spra escrow agreement to which the shapiro escrow agreement was attached and the cash reconciliation agreement which also was attached to the spra escrow agree- ment as well as mr thrapp knew that that purported loan of ms shapiro was not evidenced by a promissory note or other written document and did not bear inter- est each of the ffi stockholders as well as mr thrapp also knew that that purported loan by ms shapiro was to be deemed repaid as of the closing of the transactions under the spra which was deemed to occur simultaneously pursuant to that agreement morever each of them knew as did mr thrapp that mr fankhauser mr weintraut and ms fankhauser also knew that because the spr transactions closed simultaneously pincite p m on december continued pursuant to the spra and the related agreements ffi was to deposit dollar_figure into the leagre escrow account on date and that ffi as ffi’s designee was to receive only dollar_figure from that escrow account as of the closing of the transactions under the spra pincite p m on date each of mr fankhauser mr weintraut and ms fankhauser also knew as did mr thrapp that the difference between the amount that ffi was to deposit into the leagre escrow account ie dollar_figure and the amount that ffi as ffia’s designee was to receive from that escrow account ie dollar_figure was equal to dollar_figure each of the ffi stockholders knew as did mr thrapp that that difference was equal to the amount of the purchase_price that they were to receive for their ffi stock under the spra from according to the terms of that agreement ffia continued the wire transfer from the leagre escrow account to ms shapiro’s bank account of dollar_figure and the wire transfers from that same leagre escrow account to their respective bank accounts of their proportionate portions of the purchase_price for their ffi stock were not to occur until the day after the closing of those transactions as was true of the respective wire transfers to mr fankhauser mr weintraut ms fankhauser and ms shapiro ffi received a wire transfer on the day after the closing moreover each of mr fankhauser mr weintraut and ms fank- hauser knew as did mr thrapp or should have known as mr thrapp should have known that ms shapiro’s so-called loan of dollar_figure to ffia was not needed or used in order to effect the purchase of the ffi stock under the spra and that that so-called loan was mere window dressing designed to make it appear that ffia not ffi was providing the funds to be paid to them for the transfer of their ffi stock to ffia in other words each of the ffi stockholders knew as did mr thrapp or should have known as mr thrapp should have known that ms shapiro’s so-called loan of dollar_figure to ffia was devoid of any economic sub- stance--a sham that was designed and intended to make it appear as though ffia not ffi was providing the funds to be paid to the ffi stockholders for the transfer of their ffi stock to ffia moreover each of mr fankhauser mr weintraut and ms fankhauser knew as did mr thrapp or should have known as mr thrapp should have known that the source of the funds that they were to receive for the transfer of their ffi stock to ffia was ffi not ffia that is to say each of the ffi stockholders as well as mr thrapp knew or should have known that ffi not ffia was to and did pay each of those stockholders each such stockholder’s proportionate portion of the so-called purchase_price ie dollar_figure that each was to and did receive under the spra on the record before us we find that the failure on the part of the ffi stockholders as well as mr thrapp to make inquiries regarding the so-called loan by ms shapiro of dollar_figure to ffia midcoast’s designee which according to the terms of the spra ffia was to use to purchase the ffi stock was willful and unreasonable on that record we further find that that failure was an attempt on their part to avoid making any inquiries that would raise red flags based upon of our examination of all the facts and circumstances that we have found in these cases we find that each of mr fankhauser mr weintraut and ms fankhauser as well as mr thrapp willfully and unreasonably avoided making inquiries that they should have made with respect to the transactions which midcoast proposed and the transactions to which they agreed in the spra we believe that the ffi stockholders instead succumbed to the allure of receiving a so-called premium from those transactions that midcoast held out enticingly to them even though they knew that that premium would be paid only if ffi’s total anticipated tax_liability of dollar_figure was not paid on the basis of all of the relevant facts and circumstances we find that each of mr fankhauser mr weintraut and ms fankhauser had inquiry and thus con- structive knowledge that midcoast intended to implement a scheme that would leave ffi without sufficient assets to satisfy ffi’s total anticipated tax liability of dollar_figure on the basis of those facts and circumstances we further find that each of mr fankhauser mr weintraut and ms fankhauser knew or should have known ie had constructive knowledge that ffi’s federal_income_tax liability for its taxable_year would not be paid to find otherwise would we believe bless the willful_blindness of mr fankhauser mr weintraut and ms fankhauser as well as their attorney mr thrapp the constructive knowl- edge test was designed to root out diebold found inc v commissioner f 3d pincite we address now whether under the indiana ufta in substance ffi made a distribution or transfer of its property to each of mr fankhauser mr weintraut and ms fankhauser in the spr sale transaction under the spra in making that determination we rely on indiana substance over form principles and in the alter- native on the indiana sham_transaction doctrine we consider each of indiana substance over form principles and the indiana sham_transaction doctrine al- though closely related and overlapping in material respects to be an independent or alternative basis under which we shall reach our ultimate findings as to that issue under the indiana ufta we restate initially that we concluded above and the parties agree that the definition of the term transfer in the indiana ufta like the definition of that term in the wisconsin ufta is very broad moreover we concluded above and the parties agree that indiana courts like wisconsin courts use indiana substance over form principles in a variety of contexts most notably including tax cases under indiana substance over form principles as under wisconsin substance over form principles it is the substance not the form of a transaction which is controlling with respect to the indiana sham_transaction doctrine indiana courts allow a transaction to be disregarded as a sham in a variety of contexts including tax cases see eg belterra resort ind llc n e 2d pincite citing gregory v helvering u s pincite long v state n e 2d ct app ind bedree v bedree n e 2d ct app ind wallace v rogier n e 2d ct app ind based upon our examination of the entire record before us we find that in determining whether under the indiana ufta ffi made a transfer of its property to each of mr fankhauser mr weintraut and ms fankhauser in the spr sale transaction under the spra under each of indiana substance over form principles see supra note see supra note see supra note sec_121 and sec_123 and the indiana sham_transaction doctrine ms shapiro’s purported loan here like ms shapiro’s purported loan in feldman v commissioner f 3d pincite was a sham that was devoid of any economic_substance the spr sale transaction under the spra like the purported stock sale involved in feldman v commissioner f 3d pincite had no nontax business_purpose ms shapiro’s purported loan here like ms shapiro’s purported loan in feldman v commissioner f 3d pincite had no nontax business_purpose the spr sale transaction under the spra like the purported stock sale involved in feldman v commissioner f 3d pincite had no economic_substance ms shapiro’s purported loan here like ms shapiro’s purported loan in feldman v commissioner f 3d pincite should be disregarded the spr sale trans- action under the spra like the purported stock sale involved in feldman v commissioner f 3d pincite should be disregarded and ffi not ffia made in the spr sale transaction under the spra a distribution or transfer of its funds to each of mr fankhauser mr weintraut and ms fankhauser like the c_corporation not midcoast made to each of its stockholders in feldman v commissioner f 3d pincite of each such stockholder’s proportionate portion of the purchase_price ie dollar_figure that each such stockholder was to receive for their stock under the spra based upon our examination of the entire record before us we find that under each of indiana substance over form principles and the indiana sham trans- action doctrine in substance ffi made a distribution or transfer of its property under the indiana ufta to each of mr fankhauser mr weintraut and ms fank- hauser in the spr sale transaction under the spra on that record we further find that each of them is a first transferee of property of ffi in that transaction under ind code ann sec b respondent characterizes the distributions or transfers made to the ffi stockholders in the spr sale transaction under the spra as in substance liquid- ating distributions or transfers from ffi we do not have to characterize those distributions or transfers as liquidating or any other type of distributions or transfers in order to conclude as we do that under the indiana ufta in substance ffi made a distribution or transfer of its property to each of the ffi stockholders in the spr sale transaction under the spra we concluded previously that ffi made a distribution or transfer of its property to each of mr fankhauser mr weintraut and ms fankhauser in the spr redemption transaction under the spra and that each of them is a transferee of property of ffi with respect to that transaction for purposes of the indiana ufta see infra note fraudulent transfers under the indiana ufta it is respondent’s position that ffi’s transfers of its property to each of mr fankhauser mr weintraut and ms fankhauser in the spr transactions under the spra were fraudulent under each of the constructive fraud provisions of the indiana ufta consequently respondent maintains each of them is liable under the indiana ufta for respondent’s claim for ffi’s total liability for its taxable_year which claim consisted of a deficiency in tax of dollar_figure and an accuracy-related_penalty under sec_6662 totaling dollar_figure as well as interest thereon as provided by law ffi’s interest liability we shall refer to the liability of each petitioner for ffi’s total liability for its taxable_year in- cluding ffi’s interest liability that respondent argues each of them has under the indiana ufta as transferee_liability respondent further maintains that in addi- respondent alleged in the respective answers in these cases and petition- ers do not dispute that the amount of ffi’s deficiency in tax for its taxable_year that remains unpaid is dollar_figure respondent did not calculate or show in the respective notices of liability that respondent issued to mr fankhauser mr weintraut and ms fankhauser the amount of interest as provided by law on ffi’ sec_2001 tax_liability the record otherwise establishes that as of date respondent had assessed a total of dollar_figure of interest with respect to that liability see discussion infra respondent acknowledges on brief that each petitioner’s liability as a transferee is limited to the net value of the assets that ffi transferred to each of them in the spr transactions under the spra see discussion infra tion to the transferee_liability of each of mr fankhauser mr weintraut and ms fankhauser each of them is liable for interest transferee interest as provided by law as we understand respondent’s position respondent maintains that respon- dent’s claim against each of mr fankhauser mr weintraut and ms fankhauser for ffi’s total liability for its taxable_year should be analyzed as a single claim under the constructive fraud provisions of the indiana ufta in other words we understand respondent to be arguing that we should not analyze sepa- rately under those constructive fraud provisions the components of ffi’s total unpaid liability namely ffi’s unpaid deficiency liability and ffi’s unpaid penalty liability respondent appears to acknowledge that respon- dent’s claim for transferee interest should be analyzed separately from respon- dent’s claim for ffi’s total unpaid liability petitioners appear to disagree with respondent and counter that not only respondent’s claim for transferee interest but also respondent’s claim for ffi’s unpaid deficiency liability and for ffi’s unpaid penalty liability should be analyzed separately under the constructive fraud provisions of the indiana ufta although we do not agree with petitioners that respondent’s claim for ffi’s unpaid deficiency liability and for ffi’s unpaid penalty liability should be analyzed separately we shall nonetheless analyze each of those separately and explain in our consideration of ffi’s unpaid penalty liability why we disagree with petitioners respondent’s claim for ffi’s unpaid deficiency liability respondent relies on each of the constructive fraud provisions in ind code ann secs and in support of respondent’s claim that each of mr fankhauser mr weintraut and ms fankhauser is liable for that ffi’s unpaid deficiency liability we address only ind code ann sec that is because our analysis under that provision resolves that issue in respondent’s favor as to that claim ind code ann sec which applies to a creditor’s claim that arose before the transfer was made by the debtor provides in pertinent part if a transfer is fraudulent under ind code sec or the transfer is voidable under ind code ann sec a if a transfer is voidable under ind code ann sec a under ind code ann sec b the creditor may recover judgment for the value of the asset transferred as adjusted under subsection c ind code ann sec c or the amount necessary to satisfy the creditor’s claim whichever is less that judgment may be entered against inter alia the first transferee of the asset transferred we found above that each of mr fankhauser mr wein- traut and ms fankhauser is a first transferee of ffi under ind code ann sec b a transfer made or an obligation incurred by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor a was insolvent at the time or b became insolvent as a result of the transfer or obligation in order to establish that the transfers that ffi made of its property to each of mr fankhauser mr weintraut and ms fankhauser in the spr transactions under the spra ffi’s transfers were fraudulent under ind code ann sec respondent must show that respondent had a claim for ffi’s unpaid deficiency liability before ffi made those transfers preexisting claim re- quirement ffi did not receive reasonably equivalent value in exchange for ffi’s transfers reasonably equivalent value requirement and ffi was in- solvent at the time of or was rendered insolvent as a result of those transfers insolvency requirement with respect to the preexisting claim requirement respondent maintains that respondent’s claim for ffi’s unpaid deficiency liability arose on the sale of ffi’s assets which was prior to ffi’s transfers to petitioners as a result respondent argues respondent’s claim for ffi’s unpaid deficiency liability arose before ffi’s transfers as required by ind code ann sec petitioners counter that b ecause a tax is considered due and owing on the required tax_return filing_date respondent’s alleged claim for ffi’s unpaid deficiency liability did not arise until after the date closing date on sic the spra according to petitioners before the required tax_return filing_date for ffi’ sec_2001 federal_income_tax return its federal_income_tax lia- bility for its taxable_year was contingent as we understand petitioners’ argument they acknowledge that respondent is correct that respondent’s claim for ffi’s unpaid deficiency liability arose on the sale of ffi’s assets which was prior to ffi’s transfers to petitioners however they contend that that claim was a contingent claim and thus does not qualify under ind code ann sec as a claim of respondent that arose before those transfers we reject petitioners’ argument that respondent’s claim for ffi’s unpaid deficiency liability does not qualify under ind code ann sec as a claim of respondent that arose before ffi’s transfers that argument ignores the following definition of the term claim for purposes of indiana ufta in ind code ann sec which is virtually identical to ind code ann sec west in effect in as used in this chapter indiana ufta claim means a right to payment whether the right is reduced to judgment or not liquidated or unliquidated fixed or contingent matured or unmatured disputed or undisputed legal or not equitable or not or secured or unsecured on the record before us we find that respondent’s claim for ffi’s unpaid deficiency liability is a contingent claim or an unmatured claim under ind code ann sec or that arose before ffi’s transfers to each of mr fankhauser mr weintraut and ms fankhauser in the spr transactions under the spra see eg feldman v commissioner f 3d pincite asset sale--the triggering event for the federal_income_tax liability--occurred before the transfer of debtor’s cash to the debtor’s shareholders for purposes of wisconsin ufta 144_tc_235 same under nebraska ufta cullifer v commissioner tcmemo_2014_208 at same under texas ufta aff’d f app’x wl 11th cir date on the record before us we further find that respondent has satisfied the preexisting claim requirement in ind code ann sec with respect to ffi’s unpaid deficiency liability with respect to the reasonably equivalent value requirement petitioners do not claim that ffi received reasonably equivalent value in exchange for ffi transfers on the record before us we find that ffi did not receive reasonably equiv- alent value for ffi transfers on that record we further find that respondent has satisfied the reasonably equivalent value requirement in ind code ann sec with respect to ffi’s unpaid deficiency liability with respect to the insolvency requirement respondent argues that ffi was rendered insolvent by ffi’s transfers to each of mr fankhauser mr weintraut and ms fankhauser in the spr transactions under the spra that is because according to respondent after those transfers ffi failed the balance_sheet test for solvency in support of that argument respondent relies on ind code ann sec c which provides that ‘ a debtor is insolvent if the sum of the debtor’s debts is greater than all of the debtor’s assets at a fair valuation petitioners counter that the spr redemption transaction was a condition_precedent to the sale spr sale transaction of remaining stock although ffi transferred its interest in ffw to petitioners in partial_redemption of peti- tioners’ ffi stock that transfer was not fraudulent because after the redemption ffi was solvent the only support in the record for petitioners’ claim that the spr redemption transaction under the spra was a condition_precedent to the sale is the testimony of mr thrapp one of petitioners’ attorneys the testimony of mr thrapp on which petitioners rely disregards and contradicts the terms of the spra to which ffi the ffi stockholders and ffia midcoast’s designee agreed the spra provided in pertinent part section simultaneous occurrence of events at closing all of the events which are to occur at the closing under this agreement including but not limited to the delivery of all share certificates and the payment of the purchase_price and all other related exchanges shall be deemed to have occurred simultaneously on the record before us we reject mr thrapp’s testimony and petitioners’ argument that is premised on that testimony that the spr redemption transaction under the spra was a condition_precedent to the sale petitioners further counter respondent’s contention that ffi was rendered insolvent by ffi’s transfers to each of mr fankhauser mr weintraut and ms fankhauser in the spr transactions under the spra by contending that ffi was solvent immediately after closing on date with dollar_figure of total assets and dollar_figure of total liabilities it is not clear how petitioners arrived at the conclusion that ffi had immediately after closing on date dollar_figure of total assets and dollar_figure of total liabilities in any event that contention is not supported by the record and assuming arguendo that we had found that the spr redemption trans- action was a condition_precedent to the spr sale transaction that finding would not change our findings below that ffi became insolvent within the meaning of ind code ann sec c by ffi’s transfers to each of mr fankhauser mr weintraut and ms fankhauser in the spr transactions under the spra and that respondent has satisfied the insolvency requirement in ind code ann sec with respect to ffi’s unpaid deficiency liability the spr redemption transaction and the spr sale transaction which by the terms of the spra were deemed to occur simultaneously were inextricably related and inter- dependent neither transaction would have occurred unless the other occurred each of those transactions under the spra must be considered together in deter- mining whether ffi became insolvent within the meaning of ind code ann sec c by ffi’s transfers to each of mr fankhauser mr weintraut and ms fankhauser in those transactions we reject it we found on the record before us that on date after the spr transactions closed simultaneously pincite p m ffi had assets totaling dollar_figure which consisted of cash of dollar_figure and the right to a refund of dollar_figure of state income_tax payments and anticipated federal and state income_tax_liability totaling dollar_figure or a negative net asset value of dollar_figure on the record before us we find that ffi the debtor became insolvent within the meaning of ind code ann sec c as a result of ffi’s transfers to each of mr fankhauser mr weintraut and ms fankhauser in the spr transactions under the spra on that record we further find that respon- the closing of the spr transactions under the spra was deemed to be effective as of p m on date moreover the spra provided that all of the events that were to occur at the closing under the spra including but not limited to the delivery of the ffi stock certificates and the payment of the purchase_price and all other related exchanges were to be deemed to occur simultaneously consequently all of the distributions to ffia or its designee ffi the ffi stockholders and ms shapiro that were required to implement the spra and the related agreements namely the spra escrow agreement the shapiro escrow agreement and the cash reconciliation agreement were deemed to be made as of the closing of the spra because the closing was deemed to occur as of p m on date those distributions were in fact made in most instances by wire transfers on the day after the closing see supra note regarding ffi’s bank account balance of dollar_figure ffi’s outstanding checks of dollar_figure and the prudential demutualization funds receivable of dollar_figure and note regarding the state retail_sales_tax refunds of dollar_figure dent has satisfied the insolvency requirement in ind code ann sec with respect to ffi’s unpaid deficiency liability based upon our examination of the entire record before us we find that ffi’s transfers to each of mr fankhauser mr weintraut and ms fankhauser in the spr transactions under the spra were fraudulent transfers under ind code ann sec on that record we further find that each of them is liable for ffi’s unpaid deficiency liability respondent’s claim for ffi’s unpaid penalty liability before analyzing respondent’s claim for ffi’s unpaid penalty liability under the indiana ufta we will explain as we indicated previously we would why we believe that respondent’s claim under the constructive fraud provisions of the indiana ufta for ffi’s unpaid deficiency liability and for ffi’s unpaid penalty liability should be analyzed together and not separately as discussed above ind code ann sec defines the term claim broadly to mean any right to payment regardless of whether that right is con- tingent or unmatured we believe that respondent may have a claim for ffi’s unpaid penalty liability under the indiana ufta regardless of whether that see supra note penalty had been asserted at the time of ffi’s transfers to each of the ffi stockholders in the spr transactions under the spra see tricarichi v commis- sioner tcmemo_2015_201 at in addition the indiana ufta does not require that a creditor here respondent establish that the debt in question here ffi’s unpaid penalty liability was contemplated at the time of the transfer here ffi’s transfers to each of the ffi stockholders see id in any event we now analyze whether each of mr fankhauser mr wein- traut and ms fankhauser is liable under the constructive fraud provisions of the indiana ufta for ffi’s unpaid penalty liability in support of respondent’s position that each of them is so liable respondent relies on 55_tc_543 aff’d per curiam 453_f2d_1375 5th cir and lee optical associated cos pension_plan tr v commissioner tcmemo_1989_152 petitioners counter that under 209_f3d_1082 8th cir rev’g tcmemo_1996_530 none of them is liable for ffi’s unpaid penalty liability we do not find any of the cases on which the parties rely in support of their respective positions with respect to respondent’s claim for ffi’s unpaid penalty liability to be apposite or helpful in resolving whether under the indiana ufta each of mr fankhauser mr weintraut and ms fankhauser is liable for that penalty liability in none of those cases did the court reach its conclusions regarding whether the transferee was liable for additions to tax and or penalties on the basis of the applicable state ufta indeed in none of those cases had the state adopted the ufta as of the period at issue in each of those cases in fact in estate of glass one of those cases on which respondent relies the ufta had not even been promulgated by the national conference of com- missioners on uniform state laws at the time that case was decided let alone as of the period at issue in that case moreover the conclusions in the cases on which respondent relies are just that--conclusions with no reasoning which cite other cases that state conclusions with no reasoning moreover the conclusions in the case on which petitioners rely were dependent on the nebraska ufca that required the commissioner to prove that the transfer was made with the intent to defraud future creditors stanko v commissioner f 3d pincite we address now without the benefit of any apposite or helpful cases cited by the parties the constructive fraud provision in ind code ann sec a in order to determine whether each of mr fankhauser mr weintraut and ms fankhauser is liable for ffi’s unpaid penalty liability we address only that provision because our analysis thereunder resolves that issue in respondent’s favor as to that claim ind code ann sec a which applies to a creditor’s claim that arose before or after the transfer was made by the debtor provides a transfer made or an obligation incurred by a debtor is fraudulent as to a creditor whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor a was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction in order to establish that ffi’s transfers to each of mr fankhauser mr weintraut and ms fankhauser in the spr transactions under the spra were fraudulent under ind code ann sec a respondent must show that ffi did not receive reasonably equivalent value in exchange for those transfers reasonably equivalent value requirement and at the time of ffi’s we use the same defined term reasonably equivalent value requirement when referring to the requirement in ind code ann sec that we used when referring to the requirement in ind code ann sec that is because that requirement is identical in each of those provisions transfers ffi was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction unreasonably small asset requirement with respect to the reasonably equivalent value requirement in ind code ann sec a petitioners did not dispute and we found in our con- sideration of whether each of mr fankhauser mr weintraut and ms fankhauser is liable for ffi’s unpaid deficiency liability that ffi did not receive reason- ably equivalent value for ffi transfers and that respondent satisfied the reasonably equivalent value requirement in ind code ann sec we further find that respondent has satisfied the reasonably equivalent value requirement in ind code ann sec a with respect to ffi’s unpaid penalty liability with respect to the unreasonably small assets requirement we must ex- amine the conditions that existed at the time ffi’s transfers were made as of the closing of the spr transactions under the spra pincite p m on date not on what happened thereafter see boyer f 3d pincite in deter- mining whether the unreasonably small asset requirement is satisfied in these cases we must evaluate on an objective basis whether at the time of those transfers ffi had such meager assets that bankruptcy was a consequence both likely and foreseeable id in other words we must evaluate on an objective basis whether at the time of ffi transfers it had the ability to generate enough cash to pay its debts and remain financially stable we have found that ffi became insolvent within the meaning of ind code sec c ie ffi’s total debts exceeded its assets as a result of ffi’s transfers in the spr transactions under the spra in this connection we have found that immediately after the closing pincite p m on date of the spr transactions under the spra the only assets of ffi were cash of dollar_figure and the right to a refund of dollar_figure of state income_tax pay- ments and its only liabilities were ffi’s total anticipated tax_liability of dollar_figure consequently we found that after that closing ffi had a nega- tive net asset value of dollar_figure we also found that immediately after the closing of the spr transactions on date ffi had no operations no employees engaged in operations no income and no operational assets see supra note sec_34 and see supra note regarding ffi’s bank account balance of dollar_figure ffi’s outstanding checks of dollar_figure and the prudential demutualization funds receivable of dollar_figure and note regarding the state retail_sales_tax refunds of dollar_figure on the record before us we further find that as of the closing of the spr transactions under the spra ffi did not have the ability to pay ffi’s total anticipated tax_liability let alone have the ability to generate enough cash to pay its debts and remain financially stable after ffi’s transfers to each of mr fankhauser mr weintraut and ms fankhauser in those transactions on that record we further find that it was reasonably foreseeable at the time of ffi’s transfer to each of the ffi stockholders that ffi would have insufficient capital or profits to engage in and sustain any business operations on the record before us we find that respondent has satisfied the unreason- ably small assets requirement in ind code ann sec a based upon our examination of the entire record before us we find that ffi’s transfers to each of mr fankhauser mr weintraut and ms fankhauser in the spr transactions under the spra were fraudulent transfers under ind code our finding that it was reasonably foreseeable at the time of ffi’s trans- fers to each of the ffi stockholders that ffi would have insufficient capital or profits to engage in and sustain any business operations is reinforced by our finding that each of mr fankhauser mr weintraut and ms fankhauser had inquiry and thus constructive knowledge that midcoast intended through the spra to implement a scheme to leave ffi without sufficient assets to satisfy ffi’s total anticipated tax_liability of dollar_figure and thereby cause it not to pay that liability ann sec a on that record we further find that each of them is liable for ffi’s unpaid penalty liability respondent’s claim for transferee interest petitioners do not dispute that if we were to find which we have that each of them is liable for ffi’s total unpaid liability including interest as required_by_law on that liability to the extent of the net value of the assets that ffi trans- ferred to each of them each also would be liable for so-called postnotice inter- est the dispute between the parties is over so-called prenotice interest ie interest that begins to accrue on a date before the date on which a notice of liability is issued to a transferee-taxpayer and that continues to accrue to the latter date prenotice interest period see 35_tc_393 the date on which prenotice interest begins to accrue depends on the see supra note postnotice interest begins to accrue on the date on which a notice of lia- bility is issued and continues to accrue to the date on which the transferee_liability is fully paid postnotice interest period see 281_f2d_577 5th cir 37_tc_945 shockley v commissioner tcmemo_2016_8 at postnotice interest accruing during the postnotice interest period is computed pursuant to sec_6601 see estate of stein v commissioner t c pincite shockley v commissioner at sec_6621 establishes the rate of interest for postnotice interest for the postnotice interest period see shockley v commissioner at amount of assets that the transferor-taxpayers transferred to the transferee- taxpayer see id it is respondent’s position that respondent is entitled to prenotice interest from each of mr fankhauser mr weintraut and ms fankhauser in support of that position respondent argues for the prenotice period interest depends on state law 35_tc_393 but when the transferred assets are greater than the liability as for mr fankhauser then pre- notice interest accrues under federal_law 37_tc_945 weintraut and mrs fank- hauser are liable for prenotice interest because under indiana state law prejudgment_interest is proper when the trier of fact does not have to exercise judgment in order to assess the amount of damages larson v karagan n e 2d ind app the amounts of the transfers were agreed under the spra to be dollar_figure to fankhauser dollar_figure to weintraut and dollar_figure to mrs fankhauser the interest due under it appears that respondent included in the respective amounts of ffi’s transfers to mr fankhauser mr weintraut and ms fankhauser that respondent claims were agreed under the spra their respective shares ie dollar_figure dollar_figure and dollar_figure after withholding for federal and state income taxes of certain state retail_sales_tax refunds totaling dollar_figure that ffi received from the state of indiana after the closing of the spr transactions and that ffi sent to ffw in date after estimating and deducting those taxes we do not believe that those respective amounts of certain state retail sales_taxes were agreed under the spra as respondent claims see supra note nor do we believe that those respective amounts of certain state retail sales_taxes should be included in the respective amounts of ffi’s transfers to mr fankhauser mr weintraut and ms fankhauser under the spra see supra note we set forth below the net value of the assets that we find ffi transferred to each of mr fankhauser mr continued indiana law accrues from the due_date prescribed for payment of the tax it is petitioners’ position that respondent is not entitled to any prenotice interest on any respective transferee liabilities that we find for mr fankhauser mr weintraut and ms fankhauser in support of their position petitioners rely on 209_f3d_1082 the court_of_appeals for the eighth circuit indicated in that case that it found nothing in nebraska fraudulent con- veyance law allowing such a recovery_of interest the court pointed out that u nder the new uniform fraudulent transfer act adopted by nebraska the creditor is limited to recovering ‘the value of the asset at the time of the fraud- ulent transfer subject_to adjustment as the equities may require ’ id pincite quoting neb rev stat ann sec c west although the court_of_appeals concluded in stanko that the nebraska ufca and caselaw thereunder continued weintraut and ms fankhauser see infra note the ufta that nebraska adopted in did not apply retroactively to conveyances made before its enactment see 209_f3d_1082 n 8th cir the conveyance at issue in stanko was made before nebraska’s enactment of the ufta see id on brief petitioners mistakenly claim that the court_of_appeals for the eighth circuit decided 209_f3d_1082 under the nebraska ufta stanko involved the nebraska ufca which was in effect for the continued were silent on the issue the court nonetheless held because the delay in recovering from the transferee that occurred before the commissioner assessed transferee_liability is attributable to the commissioner absent proof of transferee deceit we conclude the equities do not require an award of interest for that period id petitioners’ position disregards certain caselaw discussed below address- ing prenotice interest where a taxpayer to whom another taxpayer transferred assets is liable as a transferee for that transferor-taxpayer’s tax_liability none- theless we will address petitioners’ argument in support of their position with respect to respondent’s claim for prenotice interest petitioners argue that they any delay in issuing such notice of transferee_liability to each petitioner was attributable entirely to respondent’s delay in prosecuting this matter as a result petitioners maintain under ind code ann sec c the equities do not require an award of prenotice interest continued period at issue therein see id pincite ind code ann sec c provides that if a creditor is entitled under ind code ann sec b to a judgment that is based upon the value of the assets that the debtor transfers in a transfer that is fraudulent under the indiana ufta the judgment must be for an amount equal to the value of the asset at the time of the transfer subject_to adjustment as the equities may require continued in the instant cases just as the equities did not require an award of prenotice interest in stanko v commissioner f 3d pincite petitioners’ argument assumes that there was a delay in the issuance of the respective notices of liability to them and that that delay was attributable entirely to respondent we consider whether those assumptions are valid in the face of the facts that we have found we have found that around date respondent began an examination of ffi’s taxable_year that examination disclosed that ffi had respective loss_carrybacks to that taxable_year from its taxable_year sec_2002 and around date respondent began an examination of ffi’s taxable_year and around date respondent began an examination of ffi’s taxable_year although the record does not establish why the examination of ffi’s tax- able year began around date the record does establish and we have found that ffi was represented by counsel throughout the irs’ examination of all three taxable_year sec_2001 sec_2002 and and the resolution of that examination the record also establishes and we also have found that during the period that started in and ended in mr bernstein who was then president of continued see supra note ffi executed on behalf of ffi several forms 872-i in which ffi consented to the extension to various dates of the period of assessment of ffi’s federal in- come tax for its taxable_year mr bernstein executed the last of those forms around the end of date which was at the same time respondent began an examination of ffi’s taxable_year that form extended until date the time for assessment of ffi’s federal_income_tax for its taxable_year we infer and find from our consideration of all of the facts that we have found relating to the respective examinations that respondent conducted with respect to ffi and petitioners that if respondent had unreasonably delayed the examination of ffi’s taxable_year ffi either on its own and or upon the advice of its counsel would have been unwilling to continue to consent as late as around the end of date to the extension until date of the period of assessment of ffi’s federal_income_tax for its taxable_year around date respondent assigned the same revenue_agent who was examining ffi’s taxable_year sec_2001 and sec_2002 to begin a transferee_liability examination with respect to mr fankhauser mr weintraut and ms fankhauser as the stockholders of ffi before the closing of the spra on date since the irs’ examination of ffi’s taxable_year sec_2001 and sec_2002 was still on- going and respondent had not yet initiated an examination of ffi’s taxable_year from which ffi had carried a loss back to its taxable_year that transferee_liability examination remained inactive until the irs completed its ex- amination of ffi’s taxable_year sec_2001 sec_2002 and and had undertaken col- lection efforts with respect to the respective tax_liabilities for those years which the irs had determined and to which ffi agreed on date the irs opened a collection file with respect to ffi’s unpaid liability for its taxable_year and assigned the matter to one of its revenue officers on date mr bernstein executed on behalf of ffi the ffi closing_agreement in which ffi and respondent agreed to certain adjustments to ffi’s federal_income_tax for certain of its taxable years including its taxable_year sec_2001 sec_2002 and in addition ffi consented in the ffi closing_agreement to an accuracy-related_penalty under sec_6662 on date mr bernstein executed on behalf of ffi form_4549 in which ffi consented to the assessment for inter alia its taxable_year of a deficiency in tax of dollar_figure and an accuracy-related_penalty under sec_6662 totaling dollar_figure respondent thereafter assessed ffi’s unpaid tax_liability as well as interest thereon as provided by law on date mr bernstein completed on behalf of ffi form 433-b a statement that the irs requests a taxpayer that operates a business to complete that shows the business’s income expenses assets liabilities and certain other financial information as part of the revenue officer’s attempt to collect ffi’s unpaid liability he performed certain searches for any assets belonging to ffi but he did not find any such assets on date respondent filed a notice_of_federal_tax_lien in marion county indiana with respect to ffi’ sec_2001 unpaid tax_liability and interest thereon as provided by law on date respondent sent eight levies to certain banks and other companies that might have held accounts in ffi’s name or that might have owed ffi money those eight levies pertained inter alia to any assets of ffi that mr bernstein had shown in ffi’s form 433-b respondent recovered no funds as a result of the eight levies see supra note see supra note on date the revenue_officer searched respondent’s data- base for any income that had been reported as having been paid to ffi the revenue_officer found no such income reported for any year after on date the revenue_officer prepared and on the next day his manager signed form_53 with respect to what that form described as cur rently not collectible assessed balance totaling dollar_figure that the irs had made for ffi’s taxable years assessment of dollar_figure assessment of dollar_figure and assessment of dollar_figure form_53 showed that certain searches had been made and certain sources had been checked on date in order to determine whether ffi had any assets or income on date the revenue_officer prepared a collectibility determination report in that cdr the revenue_officer discussed the assessments totaling dollar_figure that the irs had made against ffi for its taxable years assessment of dollar_figure assessment of dollar_figure and assessment of dollar_figure in the cdr the revenue_officer stated in pertinent part the assessed tax_liabilities of ffi have been deemed to be currently not collectible in addition to this finding ffi was also deemed to be insolvent the revenue_officer indicated in the cdr that on date certain search- es relating to whether ffi owned motor vehicles aircraft watercraft or real prop- erty had been performed on the accurint database which had information from public sources those searches disclosed that ffi owned none of those items except the elmwood avenue property however a subsequent review by the reve- nue officer of accurint property assessment and property deeds records revealed that that property had been sold on date the cdr indicated that certain additional searches had been made to determine whether ffi owned any assets or had any income but those searches disclosed no such assets or income the revenue_officer concluded the cdr with the following statement all reasonable efforts and all required actions have been taken to determine that the taxes cannot be collected from ffi the revenue_officer did not search the state of indiana’s web site for unclaimed property or funds belonging to ffi in when the irs had completed its collection efforts with respect to ffi’s unpaid tax_liability and concluded that that liability was currently not collectible the irs reactivated its transferee_liability examination with respect to mr fankhauser mr weintraut and ms fankhauser it was at that time that mr fankhauser first learned about ffi’s unpaid tax_liability and was informed by the irs that it was seeking to collect that unpaid liability from inter alia him as a transferee of ffi on date the irs’ appeals_office held a so-called fast track appeals_office conference with petitioners regarding the transferee_liability ex- amination that the irs was conducting with respect to them on date respondent timely issued respective notices of liability to mr fankhauser mr weintraut and ms fankhauser for ffi's unpaid tax_liability of dollar_figure which consisted of a deficiency in tax of dollar_figure and an accuracy-related_penalty under sec_6662 totaling dollar_figure on the record before us we reject the assumptions in petitioners’ argument in support of their position that none of them is liable for prenotice interest that there was a delay in the issuance of the respective notices of liability to them and that that delay was attributable entirely to respondent on that record we see supra note even if we were assume arguendo that respondent were entitled under ind code ann sec b to a judgment that is based upon the value of the assets that ffi transferred to each of mr fankhauser mr weintraut and ms fankhauser in transfers that we have found to be fraudulent under the construc- tive fraud provisions of the indiana ufta an assumption the validity of which with respect to mr fankhauser we consider below we would not be persuaded on the record before us that the equities to which ind code ann sec c refers require us to conclude that respondent is not entitled to prenotice interest from any of them also reject petitioners’ reliance on 209_f3d_1082 on the record before us we reject petitioners’ arguments in support of their position that respondent is not entitled to prenotice interest from any of them we address now respondent’s position that respondent is entitled to pre- notice interest from each petitioner and that the determination of that interest de- pends on whether ffi transferred assets to each of them that was greater or less than ffi’s total unpaid liability we are in general agreement with respon- dent’s position to understand why we believe that it would be helpful to set forth the rationale for concluding that a creditor is entitled to prenotice interest and the explanation of the two different types of prenotice interest as explained in 35_tc_393 on which respondent relies in advancing respon- dent’s position in lowy the parties had stipulated that the taxpayer was liable as a trans- feree for the respective federal tax_liabilities and the respective federal additions to tax_liabilities for two taxable years collectively federal transferee liabilities of a corporation that had distributed certain assets to the transferee-taxpayer the not only are the facts involved in 209_f3d_1082 materially distinguishable from the facts involved in the instant cases stanko involved the nebraska ufca which was in effect for the period at issue therein it did not involve the nebraska ufta see id pincite see also supra note sec_171 and sec_172 transferee-taxpayer in lowy argued that he was not liable for any interest accruing before the date on which the commissioner issued the notice of liability to him the commissioner took the position that the transferee-taxpayer was liable for interest that started to accrue on the respective dates on which the respective federal tax_liabilities for the two taxable years in question were required to be paid see id pincite we began our consideration of the issue presented in lowy by pointing out that t here are at least two different concepts relating to interest collectible from a transferee--one founded upon federal statute and the other upon state law id pincite we explained the concept relating to interest that is founded on federal statute as follows the federal statute itself spells out a liability for interest on a deficiency and fixes it pincite per cent per annum from the due_date by which the tax must be paid when a tax is not paid the united_states becomes entitled by federal statute not only to the tax and additions penalties eg for negligence or fraud but also for interest at the rate of per cent from the due_date and these additions and interest are collectible together with the basic deficiency by the united_states such is the right which the federal statute itself creates in respect of the deficiency in tax and such is the measure of the taxpayer's liability to the government had there been no transfer of assets by the corporation such would be the extent of its liability to the united_states however it did transfer its assets to petitioner transferee-taxpayer in an amount far greater than its total potential liability for taxes penalties and interest the parties have stip- ulated that petitioner is a transferee of the corporate assets and is liable as such transferee for specified taxes and penalties owing by the corporation for the years and the net effect of this stipulation is that the debtor the corporation transferred its assets in such manner as to enable the creditor the government to follow those assets in the hands of the transferee in order to satisfy its claim against the debtor to be sure the liability of the transferee as such must arise under applicable state law cf 357_us_39 but the quantum of the creditor's right--ie the amount of tax due the additions to tax for negligence or fraud and the amount of interest applicable thereto--must of necessity be deter- mined in accordance with the federal statute certainly it is the in- ternal revenue code and not new york law which fixes the amount of deficiency in tax and it is similarly the internal_revenue_code rather than state law which spells out the right of the government to the so-called penalties and interest these amounts in the aggregate constitute the claim of the united_states against the taxpayer- transferor and they similarly measure the claim against the transferred assets lowy v commissioner t c pincite we then turned in lowy to a discussion of what we believed was t he confusion where the amount of the transferred assets is less than the amount of the creditor’s claim and where in order to make the creditor whole it may be necessary to find some liability against the transferee for interest in respect of the transferred assets id pincite with respect to that situation--the situation relating to interest founded on state law--we explained as follows such interest by its very nature can arise only under state law and must comply in every respect with applicable state law not only as to rate but also as to the starting point thus if the transferred assets herein had been equal to only dollar_figure substantially less than the amount of the basic deficiencies they would plainly have been insufficient to satisfy the government’s claim however in such circumstances the transferee would have had the use of the trans- ferred assets over a period of time and it is quite possible that he would be liable under state law for interest not on the govern- ment’s claim against the transferor but on the amount of the trans- ferred assets measured from a point of time that would not be earlier than the date of transfer t he transferee proceedings herein are merely a substitute for a remedy against the transferee which must exist in the first instance under state law but the underlying rights which the creditor is seeking to enforce are rights that have their source in the internal_revenue_code it is that law which spells out a liability for interest on a tax_deficiency and fixes it pincite per cent per annum from the date that the tax and returns are due state law has no more to do with the determination of the amount of this liability than it has with fixing the liability for additions due to fraud or failure_to_file returns or with the correct computation of the basic tax itself these are liabilities that are founded on federal statute it is therefore wholly inappropriate in this case where the transferred assets are more than ample to dis- charge the full federal liability of the transferor including interest to look to state law for the creation of any right to interest however as indicated above where the transferred assets are insufficient it is true that the creditor may have a further right to collect interest from the transferee based upon the wrongful use of those assets by the transferee prior to payment the latter right is one that is founded upon state law and it is only in such circumstances that it becomes appropriate to investigate state law to determine the rate of interest the date from which it runs and the like id pincite fn ref omitted in the notice of liability that respondent issued to mr fankhauser respondent determined that because the net value of the assets that ffi transferred to him ie dollar_figure was greater than the amount of the total ie dollar_figure of ffi’ sec_2001 tax_liability ie dollar_figure and ffi’ sec_2001 penalty liability ie dollar_figure the amount of his transferee_liability is the total amount of those liabilities as well as interest as provided by law in the notice of liability that respondent issued to mr weintraut respondent determined that because the net value of the assets that ffi transferred to him ie dollar_figure was less than the amount of the total ie dollar_figure of ffi’ sec_2001 tax_liability ie dollar_figure and ffi’ sec_2001 penalty liability ie dollar_figure the amount of his transferee_liability is limited to that net value as well as interest as provided by law in the notice of liability that respondent issued to ms fankhauser re- spondent determined that the amount of her transferee_liability is the total ie dollar_figure of ffi’ sec_2001 tax_liability ie dollar_figure and ffi’ sec_2001 penalty liability ie dollar_figure as well as interest as provided by law in that notice re- spondent did not limit ms fankhauser’s transferee_liability to the net value of the assets that ffi transferred to her which respondent determined in that notice was dollar_figure as well as interest as provided by law as noted pre- viously respondent acknowledges on brief that each petitioner’s transferee_liability under the indiana ufta is limited to the net value of the assets that ffi transferred to each of them in the spr transactions under the spra plus transferee interest we note that the respective total net values of the assets that we find ffi transferred to each of mr fankhauser mr weintraut and ms fankhauser in the spr transactions under the spra are different both from the respective total values of the transfers that respondent determined in the respective notices of liability that respondent issued to them and that respondent claims on brief the parties stipulated and we have found that immediately before the closing of the spra on date ffi had certain assets which included its membership interest in ffw that had a value of dollar_figure and certain nontax liabilities held by ffw that totaled dollar_figure see supra note the parties also stipulated and we also have found that as of the closing of the spr redemption transaction under the spra ffi transferred to mr fankhauser mr weintraut and ms fankhauser in percentage membership interests in ffw of percent percent and percent respectively as a result as of that closing mr fankhauser mr weintraut and ms fankhauser held membership interests in ffw the respective net values of which rounded to the nearest dollar were dollar_figure dollar_figure and dollar_figure we also have found that as of the closing of the spr sale transaction under the spra ffi made respective transfers to mr fankhauser mr weintraut and ms fankhauser of dollar_figure dollar_figure and dollar_figure which totaled dollar_figure the amount of the purchase_price set forth in the spra for the ffi stock of mr fankhauser mr weintraut and ms fank- hauser in addition as noted supra note we do not believe that the respective amounts of certain state retail sales_taxes should be included in the respective amounts of ffi’s transfers to mr fankhauser mr weintraut and ms fankhauser under the spra the parties’ stipulations and our findings establish that the respective total values of the assets that ffi transferred to mr fankhauser mr weintraut and ms fankhauser in the spr transactions under the spra were dollar_figure dollar_figure and dollar_figure on the record before us we find that the net value of the assets that ffi transferred to each of mr weintraut and ms fankhasuer in the spr trans- actions is less than ffi’s total liability for its taxable_year including the amount of interest as provided by law calculated from the date on which ffi’s tax_liability for that year was required to be paid to the date on which respondent issued the respective notices of liability to them consequently we conclude that any prenotice interest for which each of them may be liable is interest that is based upon the law of indiana see lowy v commissioner t c pincite in contrast we are unable to find definitively on the record before us whether the net value of the assets that ffi transferred to mr fankhauser in the spr transactions is less than or greater than ffi’s total liability for its taxable_year including the amount of interest as provided by law calculated from the date on which ffi’s tax_liability for that year was required to be paid to the date on which respondent issued the notices of liability in question that is because as noted previously respondent did not calculate or show in the notice of liability that respondent issued to mr fankhauser or in the respective notices of liability issued to mr weintraut and ms fankhauser the amount of interest as provided by law on the total of ffi’s deficiency liability and penalty liability for its taxable see supra note year although the record otherwise establishes that as of date respondent had assessed a total of dollar_figure of interest on the total of ffi’s deficiency liability and penalty liability for its taxable_year respondent issued the notice of liability to mr fankhauser on date approx- imately 2½ years thereafter additional interest as provided by law continued to accrue after date on the total of those ffi liabilities to the date on which respondent issued the notices however the record does not establish the amount of that additional interest although we believe that it is likely that the net value of the assets that ffi transferred to mr fankhauser in the spr transactions re- mains greater than ffi’s total liability for its taxable_year including the amount of interest as provided by law calculated from the date on which ffi’s tax_liability for that year was required to be paid to the date on which respondent issued the notices of liability to him we are reluctant to make a definitive finding in that regard on the record before us the interest calculations with respect to ffi’ sec_2001 deficiency liability and ffi’ sec_2001 penalty liability will involve the computation of interest at different rates compounded for a period of over nine years those calculations must take account of the fact that respondent collected from the state of indiana the prudential demutualization funds of dollar_figure to which ffi had been entitled which reduced the amount of ffi’s unpaid tax_liability as of the date on which respondent collected those funds we thus are reluctant to make any definitive determination at this time as to whether the prenotice interest for which continued we direct the parties to undertake as part of the computations under rule the calculation of the amount of interest as provided by law on the total of ffi’s tax_liability and penalty liability for its taxable_year for the period that commenced on the date on which the tax for ffi’s taxable_year 2001was required to be paid and that ended as of the day before the date on which re- spondent issued the respective notices of liability to petitioners we further direct that as part of the rule_155_computations the parties compare the total of ffi’s liability for its taxable_year including the amount of interest so calculated to the net value determined consistent with our findings herein of the assets that ffi transferred to mr fankhauser in the event that the calculations and the comparison that we have directed the parties undertake as part of the rule_155_computations were to show that the net value of the assets that ffi transferred to mr fankhauser in the spr trans- actions is greater than ffi’s total liability for its taxable_year including the amount of interest calculated as directed above we would conclude that respon- dent is entitled to prenotice interest from him that is founded upon federal_law namely the internal_revenue_code see lowy v commissioner t c at continued mr fankhauser is liable is interest that is based upon federal_law or interest that is based upon the law of indiana in that event we would further conclude that the prenotice interest period with respect to mr fankhauser would commence on the date on which ffi was required to pay the tax due for its taxable_year and would run up to the date on which the notice of liability was issued see estate of stein v commissioner t c pincite lowy v commissioner supra shockley v com- missioner tcmemo_2016_8 at moreover any interest accruing during that prenotice interest period would be determined under sec_6601 see estate of stein v commissioner t c pincite and the rate of interest on any such interest would be determined under sec_6621 see shockley v commissioner at in other words if the calculations and the comparison that we have directed the parties to undertake as part of the rule_155_computations were to show that the net value of the assets that ffi transferred to mr fankhauser in the spr transactions is greater than the total of ffi’s liability for its taxable_year including the amount of interest calculated as described above he would be liable for the full amount of that total liability of ffi including that amount of interest which would be the prenotice interest for which he would be liable in the unlikely event that the calculations and the comparison that we have directed the parties undertake as part of the rule_155_computations were to show that the net value of the assets that ffi transferred to mr fankhauser in the spr transactions is less than ffi’s total liability for its taxable_year in- cluding the amount of interest calculated as described above on ffi’s tax_liability and penalty liability for its taxable_year we would conclude as we have with respect to mr weintraut and ms fankhauser that any prenotice interest for which he may be liable is interest that is based upon the law of indiana see lowy v commissioner t c pincite the parties do not cite and we have not found any indiana authority in- volving a fraudulent transfer under the indiana ufta that addresses squarely whether a creditor is entitled to prenotice interest and if so how and from what date that prenotice interest is to be calculated respondent invites our attention to certain caselaw in indiana and we have found additional indiana caselaw that considers so-called prejudgment_interest which may be awarded before a judg- ment the award of prejudgment_interest under indiana law is founded solely upon the theory that there has been a deprivation of the use of money and that unless interest is added the injured party cannot be fully compensated for the loss suffered interest is not recoverable as interest but as additional damages to accomplish full compensation money store inv corp v summers n e 2d ind ct app we conclude that the concept underlying the award of prejudgment_interest in indiana law is applicable in considering whether to award prenotice in- terest to a creditor who is entitled to a recovery in the case of a fraudulent transfer under the indiana ufta we further conclude that indiana caselaw addressing prejudgment_interest is relevant to our consideration of any prenotice interest for which each of mr weintraut and ms fankhauser and mr fankhauser depending on the results of the rule_155_computations as discussed above may be liable the indiana court_of_appeals has observed that indiana courts have long held that a statute is not the exclusive authority for prejudgment_interest and that m any indiana cases have awarded prejudgment_interest in the absence of a statute authorizing such an award where the damages were ‘ascertainable in accor- dance with fixed rules of evidence and accepted standards of valuation’ at the time the damages accrued oil supply co inc v hires parts serv inc n e 2d ind ct app quoting bland trucking inc v kiger n e 2d ind ct app aff’d in part rev’d in part on another issue n e 2d ind see also troutwine estates dev co llc v comsub design eng’g inc n e 2d ind ct app according to the indiana supreme court expressly affirmed the indiana court of appeals’ holding on prejudgment_interest see oil supply co inc v hires parts serv inc n e 2d n ind the indiana court_of_appeals o nce the trier of fact determines that a party is liable for damages ‘prejudgment interest is proper only where a simple mathematical computation is required ’ oil supply co inc n e 2d pincite quoting bland trucking inc n e 2d pincite in other words as respondent points out the indiana court_of_appeals held that an award of prejudgment in- terest is appropriate where the trier of fact does not have to exercise judgment in order to determine the damages see larson v karagan n e 2d ind ct app on the record before us we find that respondent was deprived of the use of the money that ffi was required to remit to the irs in payment of its tax_liability for its taxable_year on the date on which that liability was required to be paid on that record we further find that the rationale for awarding prejudgment_interest in indiana law is present in these cases with respect to each of mr wein- traut and ms fankhauser and mr fankhauser depending on the results of the rule_155_computations as discussed above we have found see supra note the respective net values of the assets that ffi transferred to mr weintraut and ms fankhauser and to mr fankhauser in the spr transactions the transferee_liability of each of mr weintraut and ms fankhauser and mr fankhauser is determinable we conclude that we do not have to exercise any judgment or discretion in order to determine the amounts of prejudgment_interest we further conclude that the prejudgment or prenotice interest period would be measured from a point of time that would not be earlier than the date of the ffi transfer s to each of mr weintraut and ms fankhauser and mr fankhauser depending on the results of the rule com- putations as discussed above lowy v commissioner t c pincite up to but not including the date on which respondent issued the notice of liability to each of them see 281_f2d_577 5th cir on the record before us we find that the prejudgment or prenotice interest period should begin on the date on which ffi’s tax_liability for its taxable_year was required to be paid we consider now the rate that should be used in calculating prejudgment or prenotice interest in the case of each of mr weintraut and ms fankhauser and mr fankhauser depending on the results of the rule_155_computations as dis- cussed above ind code ann sec lexisnexis establishes the prejudgment_interest rate where an award for tortious conduct has been made at the simple rate of interest determined by the court however under that statute t he rate set by the court may not be less than six percent per year and not be more than ten percent per year ind code ann sec lexisnexi sec_2013 establishes the prejudgment_interest rate pincite percent per year where an award has been made as follows a on money due on any instrument in writing which does not specify a rate of interest and which is not covered by ic uniform consumer credit code or this article special provisions concerning certain transactions b money due on an account_stated account closed or for money had and received for_the_use_of another and retained without his consent each of these two indiana code provisions appears to be applicable in these cases on the one hand fraudulently depriving a creditor of money to which the creditor is entitled may be viewed as in the nature of tortious conduct conse- quently it would appear that ind code ann sec should govern the prejudgment_interest rate here on the other hand fraudulently depriving a creditor of money to which the creditor is entitled may be viewed as involving money due on any instrument in writing which does not specify a rate of in- terest ind code ann sec or money due on an account_stated or an account closed id consequently it would appear that ind code ann sec should govern the prejudgment_interest rate here we have found no other guidance under the law of indiana regarding the rate that should be used in calculating prejudgment_interest we direct the parties to cooperate and stipulate as part of the rule_155_computations what the appropriate prejudgment or prenotice interest rate should be in the case of each of mr weintraut and ms fankhauser and mr fankhauser depending on the results of the rule_155_computations as discussed above conclusion we have considered all of the parties’ respective contentions and arguments that are not discussed herein and we find them to be without merit irrelevant and or moot we note here one argument of petitioners that we have not expressly addressed but that we have considered petitioners argue that respondent failed to engage in reasonable efforts to collect ffi’s unpaid tax_liability and that therefore respondent may not collect the amount of that liability as well as interest thereon as provided by law assuming arguendo that respondent was required to engage in reasonable efforts to collect ffi’s unpaid tax_liability in order for each petitioner to be liable as a transferee on the record before us we reject petitioners’ argument on the record before us we find that respondent pursued reasonable collection efforts with respect to ffi’s unpaid tax_liability we make this finding although we have also found that respondent was unaware of the prudential demutualization funds of dollar_figure until date when respon- dent’s revenue_officer was told about those funds by mr fankhauser to reflect the foregoing and respondent’s concession regarding the amount of ffi’s tax_liability excluding the penalty liability for its taxable_year that remains unpaid an appropriate order will be issued denying in part and granting in part petitioners’ motion in limine and decisions will be entered under rule