TBL Licensing LLC v. Werfel, No. 22-1783 (1st Cir. 2023)Annotate this Case
The First Circuit affirmed the judgment of the tax court sustaining a notice of deficiency issued by the Internal Revenue Services (IRS) to TBL Licensing LLC for the 2011 tax year, holding that the Tax Commissioner properly determined that TBL's transfer of its intangible property was followed by a disposition of that property, requiring TBL to pay the tax due in a lump sum.
In 2011, TBL transferred the intangible property at issue, which was worth approximately $1.5 billion, to an affiliated foreign corporation. TBL argued that the tax attributable to the transfer, which occurred in the context of a corporate reorganization involving an exchange as described in section 26 U.S.C. 361, could be paid on an annual basis by one of TBL's affiliates. The IRS disagreed and assessed a deficiency based on its position that TBL was required to pay tax on the entire gain and to do so in its 2011 tax return. The First Circuit affirmed, holding that there was nothing in 26 U.S.C. 367(d) that would absolve TBL of its responsibility under the disposition-payment rule.