By: Amanda Wilson
One of the great features of corporations is that liability in the corporation generally does not extend to its shareholders, including tax liability. Like any rule, though, there is almost always an exception. In this case, the exception can be brutal.
Section 6901 imposes transferee liability on (i) shareholders of dissolved corporations and (ii) parties to a Section 368 reorganization (for example, on the surviving corporation resulting from a merger). The transferee liability is automatic - there is no requirement that the transfer of the assets to the shareholder or new corporation be improper. Section 6901 not only imposes full liability on the transferee for the corporation's tax liability, it adds an extra year to the statute of limitations, giving the IRS more time to go after the transferee.
So if you are considering acquiring, reorganizing with or dissolving a corporation, do not ignore the risk of transferee liability. The risk can be substantial, as shown by yesterday's Tax Court decision Tricarichi v. Commissioner. In that case, the Tax Court found that the sole shareholder of a dissolved corporation was liable for the corporation's $21.2 million of unpaid taxes.