Transferee Liability Law and Legal Definition

Transferee liability refers to a method of imposing tax liability on a person other than the taxpayer who is actually liable for the tax. This method of imposing tax is a tool used by the Internal Revenue Service (IRS) to collect tax. The tool is usually used by the IRS, where a person transfers his/her property and the transferor taxpayer is unable to pay his/her tax liability. The liability in these situations is limited to the value of the asset transferred. There are mainly two types of transferee liability. They are:

1. transferee at law; and

2. transferee in equity.