## Facts

- Coombe Garment Company, a Pennsylvania corporation, distributed all assets to shareholders in 1919 and then dissolved.
- The Commissioner later assessed income and excess profits tax deficiencies against the corporation for 1918 and 1919.
- Only part of the corporate tax was collected, leaving an unpaid balance of $9,306.36.
- I. L. Phillips owned one-fourth of the stock and received $17,139.61 in the liquidation distribution.
- Under § 280(a)(1) of the Revenue Act of 1926, the Commissioner notified Phillips that he intended to assess and collect from him the entire unpaid balance as a transferee.
- The Commissioner did not pursue assessment or collection from other shareholder-transferees.
- Phillips’ executors sought redetermination before the Board of Tax Appeals (BTA); the BTA held the estate liable for the full unpaid balance, and the court of appeals affirmed.

## Issues

1. Whether a shareholder-transferee who received assets of a dissolved corporation may be subjected to summary administrative assessment and collection to satisfy the corporation’s unpaid federal taxes.
2. Whether applying that summary procedure to transferees violates due process when collection may proceed pending review unless a bond is posted and administrative factfinding receives deferential review.
3. Whether the statutory procedure may be applied when the transfer of assets occurred before enactment of the 1926 statute.
4. Whether incorporating transferee liability “at law or in equity,” potentially informed by state law, is an unconstitutional delegation of federal power or violates constitutional uniformity in taxation.
5. Whether the government may proceed against a single transferee for the entire unpaid tax (limited by the value received) without joining other transferees or limiting liability to a pro rata share.

## Decision

- The Supreme Court affirmed the judgment sustaining the transferee assessment against Phillips’ estate.
- The Court held that shareholders who receive assets of a dissolved corporation may be compelled to satisfy unpaid federal corporate taxes from those assets, and § 280 authorizes enforcing that liability through summary tax collection procedures.
- The Court held that due process is satisfied because a transferee has adequate judicial review either by paying and suing for a refund (against the United States or the collector) or by seeking immediate redetermination before the BTA with appellate review.
- The Court held that the procedure may constitutionally apply to transfers occurring before enactment of the 1926 statute because it concerns the method of enforcement rather than creating new substantive liability.
- The Court rejected challenges based on variation in state law, holding such variation does not constitute an unconstitutional delegation or a lack of geographic uniformity.
- The Court held the government may proceed against one transferee for the full unpaid tax balance, up to the amount of assets received, without requiring joinder of other transferees or a pro rata limitation.

## Legal Principles

- A shareholder-transferee who receives assets upon dissolution may be liable, up to the value received, for the dissolved corporation’s unpaid federal taxes under liability recognized “at law or in equity.”
- Congress may authorize the United States to enforce transferee liability through the same summary administrative assessment and collection methods used for delinquent taxpayers.
- Summary tax collection procedures satisfy due process when the affected party has an adequate opportunity for later judicial determination, including refund litigation or administrative redetermination with appellate review.
- Congress may apply a procedural tax collection remedy retroactively to reach pre-enactment transfers when the statute changes the remedy rather than imposing new substantive liability.
- Federal tax collection may incorporate state-law-derived concepts relevant to transferee liability without delegating federal taxing power to the states and without violating constitutional uniformity requirements.
- The government may seek full recovery from a single transferee within the value of assets received, without compulsory joinder of other transferees, provided total recovery does not exceed the unpaid tax.

## Conclusion

The Court upheld § 280’s use of summary assessment and collection against a shareholder-transferee for a dissolved corporation’s unpaid taxes, finding due process satisfied by available post-assessment judicial review, permitting retroactive application to pre-1926 transfers, rejecting uniformity and delegation objections, and allowing collection of the full unpaid balance from one transferee up to the value of assets received.


Phillips v. Commissioner, 283 U.S. 589 (1931)