Diebold Foundation, Inc. v. Commissioner of Internal Revenue

This case involved shareholders who owned stock in a C Corporation, which in turn held appreciated property. Commissioner appealed the district court's holding that Diebold could not be held liable as a transferee of a transferee under 26 U.S.C. 6901. The court concluded that the standard of review for mixed questions of law and fact in a case on review from the Tax Court was the same as that for a case on review after a bench trial from the district court: de novo to the extent that the alleged error was in the misunderstanding of a legal standard and clear error to the extent the alleged error was in a factual determination. On the merits, the court held that the two requirements of 26 U.S.C. 6901 were separate and independent inquiries, one procedural and governed by federal law, and the other substantive and governed by state law; under the applicable state statute, the series of transactions at issue collapsed based upon the constructive knowledge of the parties involved; and the court vacated the Tax Court's decision and remanded for further proceedings. View "Diebold Foundation, Inc. v. Commissioner of Internal Revenue" on Justia Law