The Internal Revenue Service attempted to collect taxes from Edwin P. Hatcher. But poor Hatcher was poor indeed. He was broke.

Then crafty IRS did some checking. It searched county records and found that while owing back taxes, he gave 9.52 acres of Georgia land to his son. Consequently, the IRS notified son Brian it wanted the taxes or the land.

Certain states, Georgia among them, have laws that if a person makes a gift and is "insolvent" after the gift, the transfer can be nullified. Insolvent means debts exceed the market value of the person's assets.

Brian was liable for his father's taxes up to the property's net market value when received.

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The IRS used a different approach against Dormilee Morton. It didn't say she was insolvent but said her gift was fraudulent.

Morton was one of two partners owning a Salem, Mo., construction business that
didn't pay its payroll taxes. That made her personally liable for the $44,000 owed.

Five months after the taxman demanded payment, she conveyed the titles to her home and farm to her children and their spouses. The conveyance document said she could live in the home and receive farm profits.

The IRS demanded the property.

The court said the transactions were obvious efforts to avoid the tax payment. Her actions carried these badges of fraud:

• gave property to a family member.
  
• gave property while anticipating a suit.
  
• gave away all or nearly all her property.
  
• signed a conveyance instrument with limitations not normally found in sales documents.
  
• retained possession of the property.
  

The court set aside the transfer and allowed the IRS to foreclose on the property.

The moral: Better look a gift house in the mouth.