Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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535.0000 SUCCESSOR'S LIABILITY—Regulation 1702

Annotation 535.0028

535.0028 Fraudulent Conveyance. A taxpayer (A) held a seller's permit as an individual. After audit, a notice of determination was issued. The taxpayer made a gift of all the assets of the business to his wife. His wife operated the business for a period of time and then transferred the assets to a commencing corporation in exchange for stock. The corporation denies any liability for taxpayer A's unpaid taxes.

Former Civil Code section 3439.04 provides that every conveyance made by a person who is or will be rendered insolvent is fraudulent to creditors without regard to his actual interest if the conveyance is made without a fair consideration. Accordingly, if a taxpayer renders himself insolvent by conveying all of his property to someone else, the conveyance can be set aside by the taxpayer's creditor to satisfy a creditor's claim or the creditor can disregard the conveyance and attach or levy execution upon property conveyed. (Civil Code section 3439.09.) This procedure should be followed in the above case. 4/23/85.