Michael's Assets To MBA Financial Case

The IRS stated that the transmission of Michael’s individual proprietorship’s assets to MBA was a capital involvement rather than a sale engendering capital gain. The IRS further claimed that the payments made to the Bells were in fact dividends and that the assets transmitted to MBA could not be repaid or declined.
The Bells and MBA reasoned that the act of restrictions barred the IRS evaluation for the 2008 tax returns. In addition, the Bells and MBA debated that the transference of the sole proprietorship’s assets to MBA was a sale that created a debtor-creditor correlation and should be regarded as such.
With respect to the timeliness of the deficiency notices, the Tax Court noted that Code Sec. 6501(a) usually necessitates that taxes be assessed within three years after a return is filed. Since the absence notices were sent via certified mail on February 7, 2012, they were released before the termination of the three-year period and thus were timely.
The Tax Court noticed that the sole purpose of MBA’s organization was to integrate Michael’s sole proprietorship and that the conjoined relationship between the MBA’s organization and the transfer of the sole proprietorship’s assets weighed in favor of finding that the transfer was a capital contribution. This was particularly so, the court said, in the light of the lack of evidence of a business purpose of the