Sellers of corporate stock have long been concerned about whether and under what circumstances they may be held liable for unpaid federal income tax liabilities of the corporation for the tax year during which the stock is sold (or prior periods). Obviously, a selling stockholder who has assumed the liability or indemnified the buyer by contract may be liable, and liability may also arise under specialized tax regimes, such as the rules applicable to an affiliated group of corporations electing to file a consolidated return. Even apart from such situations, however, a selling stockholder might conceivably be held liable for such taxes under provisions of the Internal Revenue Code (“Code”) relating to “transferee liability” and under doctrines of state law intended to protect creditors against fraudulent conveyances.
The Code provides, in general, that liabilities of a transferee of property for specified taxes of the transferor may be assessed, collected, and paid in the same manner as provided elsewhere in the Code for collecting such taxes from the transferor.1 This provision of the Code, however, is only procedural, and it does not provide an independent basis for the imposition of liability on the transferee. Rather, the transferee’s liability may arise under state statutes and case law, such as under state laws that provide protection to creditors with respect to a debtor that makes a fraudulent transfer.2
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