Thursday, October 11, 2007

Tax Help: Fraudulent Transfers

The IRS can recover property transferred under a fraudulent conveyance. See United States v. Scherping, 187 F.3d 796, 804-06(8th Cir. 1999), cert. denied, 528 U.S. 1162 (2000). Whether a conveyance may be set aside as fraudulent is determined in accordance with state law.

United States of America, Plaintiff v. Alvin A. Tolbert, Roberta Sue Tolbert, A&R Equity Holdings, Defendants, U.S. District Court, West Dist. Ark., Fayetteville Div.; Civil No. 06-5146, September 13, 2007.

[ Code Sec. 6503]
Validity of Tax Assessments
IRS certificates of assessments for unpaid taxes are sufficient evidence to establish the validity of the assessments and support a summary judgment reducing those assessments to a judgment in favor of the Government. See United States v. Gerards, 999 F.2d 1255, 1256 (8 Cir. 1993), cert. denied, 510 th U.S. 1193 (1994); United States v. Meisner, 2007 W.L. 203950, *2 (D. Neb. Jan. 25, 2007). In an action to reduce federal tax assessments to judgment, certificates of assessments offered by the Government establish the Government's prima facie case and shift to the taxpayer the burden of proving that the IRS tax assessments are incorrect. See Mattingly v. United States, 924 F.2d 785, 787 (8 Cir. 1991); Kiesel v. United States, 545 F.2d th 1144, 1146 (8 Cir. 1976); Meisner, 2007 W.L. 203950, * 2. th The Government has submitted Certified Form 4340 Certificates of Assessments for Mr. Tolbert's income tax liabilities for the years 1992 through 2002. In response, Mr. Tolbert has submitted copies of IRS 1040 Forms which he completed on August 7, 2007, indicating that he had no wages for the years in question.

Statute of Limitations
The Government had ten years from the date of the assessments to bring suit. See 26 U.S.C. §6502(a)(1).The Government points out, and it is not in dispute, that Mr. Tolbert was in bankruptcy for 119 days during 1998 and 1999. The statute of limitations was tolled during this time period and for six months thereafter. See 26 U.S.C. §6503(b).

Attachment of Tax Liens to the Property and Fraudulent Transfer
If any person liable to pay any tax neglects or refuses to pay it after demand, the amount owing "shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person." 26 U.S.C. §6321. The lien "shall arise at the time the assessment is made and shall continue until the liability for the amount so assessed . . . is satisfied." 26 U.S.C. §6322. Thus, on the dates of the assessments for the tax years in question, federal tax liens attached to all of Mr. Tolbert's property.

The Government may collect the tax debts of a taxpayer from property that has been fraudulently transferred to another. See United States v. Scherping, 187 F.3d 796, 804-06(8th Cir. 1999), cert. denied, 528 U.S. 1162 (2000). The Government argues that the conveyance of the subject property from the Tolberts to A & R Equity was a fraudulent conveyance and that the property is therefore subject to the tax liens.Whether a conveyance may be set aside as fraudulent is determined in accordance with state law. Id. at 804. Under Arkansas law, a transfer of property by a debtor is considered fraudulent if the debtor made the transfer with actual intent to hinder, delay, or defraud a creditor. See Ark. Code Ann. §4-59-204(a)(1). The factors to be considered in determining the intent to defraud include whether:
* the transfer was to an insider;

* the debtor retained possession or control of the property after the transfer;

* the transfer occurred shortly before or shortly after a substantial debt was incurred;

* the transfer was of substantially all the debtor's assets; and

* the value of the consideration received by the debtor was reasonably equivalent to the value of the property transferred.
See Ark. Code Ann. §4-59-204(b).

Sale of the Property

11. When "there has been a refusal or neglect to pay any tax, or to discharge any liability in respect thereof," the Government may bring an action in federal court to enforce the tax liens and a district court may decree a sale of the property and order a distribution of the proceeds. 26 U.S.C. §7403(a), (c).

Having set aside the fraudulent conveyance of the property to A & R Equity, the property reverts back to being held by Mr. and Mrs. Tolbert as tenants by the entirety. Property held by spouses as tenants by the entirety may be sold to satisfy the delinquent taxes of one spouse. See United States v. Craft, 535 U.S. 274, 283-88 (2002); United States v. Ryals, 480 F.3d 1101, 1109-1110 (11 Cir. 2007); Hatchett v. United States, 330 F.3d 875, 880-84 th (6 Cir. 2003), cert. denied, 541 U.S. 1029 (2004).

As the Government recognizes, upon the sale of the property, Mrs. Tolbert would be entitled to one-half interest in the sale proceeds. While Mrs. Tolbert contends, in her response to the summary judgment motion, that she has paid the majority of the mortgage payments on the property, her interest in the property -as a co-tenant by the entirety - is worth no more than half the value of the property. Further, while in certain limited circumstances a court has equitable discretion to decline to order the sale of property subject to tax liens, such circumstances are not present here. See United States v. Bierbrauer, 936 F.2d 373, 376 (8 Cir. 1991) (court's discretion in this regard is "`limited th . . . [and] should be exercised rigorously and sparingly, keeping in mind the Government's paramount interest in prompt and certain collection of delinquent taxes' ") (quoting United States v. Rodgers, 461 U.S. 677, 711 (1983)).

12. Based on the foregoing, the Courts finds that the Government's Motion for Summary Judgment (Doc. 20) should be and hereby is GRANTED, as the Government is entitled to a judgment on the tax liens and an order of foreclosure and judicial sale of the subject property.A separate judgment and order of sale will be entered accordingly.

Alvin S. Brown, Esq.
Tax Attorney
703 425-1400

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Liens: Property Subject to Tax Liens: Fraudulent conveyances

Property was fraudulently conveyed to a third party in an attempt to defeat the U.S.'s interest as a creditor.

Canadian American Co., Inc., CA-2, 53-1 USTC ¶9286, 202 F2d 751.

W.C. Graham, CA-9, 57-1 USTC ¶9645, 243 F2d 919.

Hyde Properties, CA-6, 75-1 USTC ¶9470, 507 F2d 301.

F.D. Duncan, CA-5, 79-2 USTC ¶9431, 597 F2d 51.

R.C. Fernon, Jr., CA-5, 81-1 USTC ¶9287, 640 F2d 609.

M.A. Wurdemann, CA-8, 81-2 USTC ¶9757, 663 F2d 50.

Carr Enterprises, Inc., CA-8, 83-1 USTC ¶9202, 698 F2d 952.

D.M. Pilla, CA-8, 83-2 USTC ¶9455, 711 F2d 94.

B.J. Chapman, CA-5, 85-1 USTC ¶9337, 756 F2d 1237.

Commonwealth Commercial State Bank, DC Mich., 39-1 USTC ¶9385, 27 FSupp 787.

W.M. Leach, DC Fla., 40-1 USTC ¶9399.

C.L. Hunter, DC Fla., 40-1 USTC ¶9400.

E.F. Shoemaker, DC Ark., 53-1 USTC ¶9209, 110 FSupp 898.

H. Kaplan, DC N.Y., 54-2 USTC ¶9532.

J.A. Schofield, 3rd, DC Pa., 60-2 USTC ¶9729.

H. Milloff, DC D of C, 62-2 USTC ¶9538, 306 F2d 783.

H. Schroeder, DC Iowa, 63-2 USTC ¶9608.

I. Prather, DC Ga., 66-2 USTC ¶9769.

R.N. Ream, DC Pa., 67-2 USTC ¶9703.

J.A. Wiltse, DC Calif., 68-1 USTC ¶9415.

J.D. Dobbelmann, DC Minn., 69-2 USTC ¶9591.

G. Barnes, DC Okla., 71-2 USTC ¶9638.

M.E. St. Mary, DC Pa., 72-1 USTC ¶9319, 334 FSupp 799.

W.F. Biddle, DC Fla., 73-1 USTC ¶9354.

L.F. Livingstone, DC Mass., 75-1 USTC ¶9242, 381 FSupp 607.

A.J. Werner, DC Wis., 75-2 USTC ¶9672.

T.J. Piscopo, DC Mass., 75-2 USTC ¶9691.

W.C. Briggs, DC Va., 76-2 USTC ¶9543.

H.B. Ressler, DC Fla., 77-1 USTC ¶9459, 433 FSupp 459. Aff'd on another issue, CA-5, 78-2 USTC ¶9571, 576 F2d 650.

H.G. Steiner, DC Wis., 77-2 USTC ¶9716, 441 FSupp 1069.

S.A. Dryden, DC Ga., 78-1 USTC ¶9108.

P.A. Gant, DC Ga., 78-2 USTC ¶9789.

W. Cox, DC S.C., 79-2 USTC ¶9434.

E. Bretz, DC Mont., 80-2 USTC ¶9675.

J.E. Wilson, DC Tex., 80-2 USTC ¶9824, 500 FSupp 831.

G.C. Stophel, DC Tenn, 81-2 USTC ¶9669, aff'd CA-6, in unpublished opinion, 5/17/82.

M.F. Kennedy, DC N.H., 82-1 USTC ¶9239.

L.C. Brown, DC Iowa, 81-2 USTC ¶9649.

M.F. Estes, DC Tenn., 82-1 USTC ¶9388.

B.H. Grice, DC Ala., 83-1 USTC ¶9399, 567 FSupp 113.

J.E. Morgan, DC Colo., 83-2 USTC ¶9535.

G.L. Turner, DC Fla., 83-2 USTC ¶9703.

S.L. Ambrose, DC Ohio, 84-2 USTC ¶9858.

Indiana National Bank, DC Ill., 84-2 USTC ¶9884.

E.L. May, DC Calif., 84-2 USTC ¶9970.

R.H. Schock, DC Calif., 85-1 USTC ¶9330.

B.G. Braswell, DC Ala., 85-2 USTC ¶9685.

L. Wodtke, DC Iowa, 86-2 USTC ¶9669.

I.R. Hoffman, DC Wis., 86-2 USTC ¶9733, 634 FSupp 346.

W.D. Gascock, DC Ala., 86-2 USTC ¶9794, 631 FSupp 383.

R. Jones, Sr., DC Mo., 86-2 USTC ¶9832.

W.E. Drexler, Sr., DC Okla., 87-2 USTC ¶9493.

J.A. Course, DC Ill., 87-2 USTC ¶9553.

W.E. Drexler, Jr., DC Okla., 87-2 USTC ¶9575.

Dardanelle Co. Trust, DC Minn., 88-1 USTC ¶9260 and 9261.

D. Morton, DC Mo., 88-1 USTC ¶9334, 682 FSupp 999.

M. Jack, DC Va., 88-1 USTC ¶9274.

D.W. Freeman, DC W.Va., 89-1 USTC ¶9127. Aff'd, CA-4 (unpublished opinion 1/11/90).

J.R. Montgomery, DC Tex., 89-1 USTC ¶9212. Aff'd, CA-5 (unpublished opinion 12/21/89).

J.W. Hart, DC Ill., 89-1 USTC ¶9255.

L. Simpson, DC Fla., 89-1 USTC ¶9285.

L.W. Berman, CA-6, 89-2 USTC ¶9524, 884 F2d 916.

Harris Bank/Glencoe-Northbrook, N.A., DC Ill., 89-2 USTC ¶9567.

J. Rode, DC Mich., 90-2 USTC ¶50,383, 749 FSupp 1483. Aff'd, CA-6 (unpublished opinion 8/30/91).

E.L. Denlinger, CA-7, 93-1 USTC ¶50,040, 982 F2d 233.

G.D. Sellner, DC Mont., 90-2 USTC ¶50,452.

E.D. Christensen, DC Utah, 90-2 USTC ¶50,543, 751 FSupp 1532. Dism'd, CA-10 (unpublished opinion 4/8/92).

M.E. Parks, DC Utah, 91-1 USTC ¶50,263.

E.K. Troyer, DC Ind., 91-2 USTC ¶50,401. Aff'd, CA-7 (unpublished opinion 12/16/92).

C. Murphy, Jr., DC Miss., 92-1 USTC ¶50,165.

Red Stripe, Inc., DC N.Y., 92-1 USTC ¶50,277, 792 FSupp 1338.

L. Scherping, DC Minn., 92-2 USTC ¶50,345.

W.B. Freeman, DC N.J., 93-1 USTC ¶50,296. Aff'd, CA-3 (unpublished opinion 12/28/93).

T.C. Brown, DC Ill., 93-2 USTC ¶50,375, 820 FSupp 374.

R. Mantarro, DC Ohio, 94-1 USTC ¶50,229.

W.J. McCullough, DC Ill., 94-1 USTC ¶50,280.

J.P. Veigle, DC Fla., 94-2 USTC ¶50,589, 873 FSupp 623.

A.M. Mayfield, DC Ind., 95-1 USTC ¶50,066.

A. Alden, DC Calif., 94-2 USTC ¶50,610. Aff'd, CA-9 (unpublished opinion), 97-2 USTC ¶50,604.

F.A. Wright, DC Calif., 96-1 USTC ¶50,005. Aff'd, CA-9 (unpublished opinion), 96-2 USTC ¶50,377, 90 F3d 473. Cert. denied, 4/21/97.

R.E. Hatfield, DC Ill., 96-2 USTC ¶50,342.

W.H. Zuhone, Jr., DC Ill., 96-2 USTC ¶50,366.

R.A. Sherlock, DC La., 96-2 USTC ¶50,462. Aff'd, per curiam, CA-5 (unpublished opinion), 98-1 USTC ¶50,139.

T.E. O'Day, DC Fla., 97-1 USTC ¶50,250.

R.M. Odd, CA-9 (unpublished opinion), 96-2 USTC ¶50,497.

W.E. Smith, DC Ind., 96-2 USTC ¶50,668.

D.D. Fitzgerald, DC Fla., 97-1 USTC ¶50,238.

R.L. Bodwell, DC Calif., 96-2 USTC ¶50,592. Aff'd, CA-9 (unpublished opinion), 98-1 USTC ¶50,172.

L.K. Hudnall, DC Fla., 96-2 USTC ¶50,609.

M. Carlin, DC N.Y., 97-1 USTC ¶50,302.

F.A. Brickman, DC Ill., 97-1 USTC ¶50,350.

R.P. Upton, DC Conn., 97-1 USTC ¶50,366.

E.S. Dubey, DC Calif., 97-1 USTC ¶50,392.

P. Marguglio, DC N.J. (unpublished opinion), 97-2 USTC ¶50,662.

T.P. Sheridan, CA-7 (unpublished opinion), 97-2 USTC ¶50,677, aff'g an unreported District Court case.

N. Nirelli, DC N.Y., 97-2 USTC ¶50,751.

G.J. Landsberger, DC Ariz., 97-2 USTC ¶50,822. Aff'd, CA-9 (unpublished opinion), 99-1 USTC ¶50,318.

H.E. Wilfley, DC Ore., 97-2 USTC ¶50,825.

R.S. Waltman, DC Ind., 97-2 USTC ¶50,760.

C.A. Cody, DC Ind., 98-1 USTC ¶50,205.

S.G. Hansel, DC N.Y., 98-1 USTC ¶50,293.

S.G. Hansel, DC N.Y., 99-1 USTC ¶50,432.

H.I. Green, CA-3, 2000-1 USTC ¶50,151, 201 F3d 251.

J.A. Kudasik, DC Pa., 98-2 USTC ¶50,535.

R. Dahmer, DC Mo., 99-1 USTC ¶50,482. Aff'd, per curiam, CA-8 (unpublished opinion), 2000-2 USTC ¶50,680.

E.L. LaBine, DC Ohio, 99-1 USTC ¶50,448.

U. Freudenberg, DC Tenn., 99-2 USTC ¶50,623.

L. Scherping, CA-8, 99-2 USTC ¶50,758, 187 F3d 796. Cert. denied, 2/22/2000.

Stretch-O-Rama, DC Tex., 99-2 USTC ¶50,847.

M.W. Simmons, CA-9 (unpublished opinion), 99-2 USTC ¶50,894, aff'g DC Calif., 98-1 USTC ¶50,418.

M.J. Stalker, DC Fla., 2000-2 USTC ¶50,632.

S.J. Tracy, DC Mo., 2000-2 USTC ¶50,708.

J.W. Marsh, DC Hawaii, 2000-2 USTC ¶50,726, 114 FSupp2d 1036.

M.K. Turner, DC Hawaii, 2000-2 USTC ¶50,815.

P. LaMontagne, DC N.Y., 2000-2 USTC ¶50,821.

A.C. Reid, DC Wash., 2001-1 USTC ¶50,250. Aff'd on other issues, CA-9 (unpublished opinion), 2002-1 USTC ¶50,333.

C.D. Schaut, DC Ill., 2002-1 USTC ¶50,184.

L.D. Wight, DC Calif., 2002-1 USTC ¶50,287.

D. Parkinson, DC Ida., 2001-2 USTC ¶50,462.

A. Patej, DC Mich., 2002-2 USTC ¶50,792. Motion for reconsideration denied, DC Mich., 2003-1 USTC ¶50,250.

P. Labato, DC Fla., 2002-2 USTC ¶50,541.

Audio Investments, DC S.C., 2002-2 USTC ¶50,757, 203 FSupp2d 555. Aff'd, per curiam, CA-4 (unpublished opinion), 2003-1 USTC ¶50,531

Sequoia Property and Equipment Ltd., DC Calif., 2002-2 USTC ¶50,773.

S.B. Doyle, DC Pa., 2003-2 USTC ¶50,619.

H. Engh, CA-7, 2003-1 USTC ¶50,500.

M. Dieter, DC Minn., 2003-1 USTC ¶50,439

T.L. Nipper, DC Okla., 2003-1 USTC ¶50,408.

T.D. Davenport, DC Okla., 2006-1 USTC ¶50,167.

Cal Fruit International, Inc., DC Calif., 2006-2 USTC ¶50,600.

The IRS was denied summary judgment on its motion to set aside certain transfers of property as fraudulent conveyances. The IRS had not established that, as a matter of law, actual fraud or constructive fraud had taken place because the taxpayer had introduced issues of fact that could only have been resolved at trial.

G.S. Sitka, DC Conn., 94-1 USTC ¶50,283.

The testimony in a taxpayer's deposition was insufficient to reopen a case in which it was decided that the IRS failed to establish that the taxpayer fraudulently conveyed property. Although the taxpayer testified that he was aware of his failure to file taxes for the years at issue, he was unaware at the time he transferred the property of his tax liability. Accordingly, the taxpayer did not have the intent to avoid a tax liability. Additionally, the taxpayer's testimony did not establish that the transfer of the property rendered the taxpayer insolvent.

R.A. Ward, DC Vt., 93-2 USTC ¶50,553.

The imposition of liens and wage garnishment on a married couple could not be challenged on the basis of the failure of the IRS to promulgate regulations. The Internal Revenue Code constitutes enforceable law even without specific regulations. Moreover, regulations exist governing the authority of the IRS to impose levies. These regulations detail the means of enforcement to be used to create and release liens. Therefore, the taxpayers' arguments were without merit, and the liens and wage garnishment were not released.

R. Reid, DC Colo., 94-1 USTC ¶50,088.

A real estate conveyance between an individual taxpayer (against whom the IRS assessed tax deficiencies) and his wife after the deficiencies arose was not valid under state (Pennsylvania) law. The taxpayer did not show that he was solvent at the time of the transfer or that the transfer was made for fair consideration. As such, the transfer was set aside as fraudulent even without an intent to defraud. Alternatively, the court held that the transfer was also fraudulent with an actual intent to defraud.

T.W. Purcell, DC Pa., 93-2 USTC ¶50,648.

Individuals who received real property by deed of gift from their tax-delinquent parents failed to show that the IRS could not establish its claim that a lien could attach to the property because the parents had fraudulently conveyed it under state (North Carolina) law to the individuals or that the lien attached prior to the transfer.

M.D. Ross, DC N.C., 94-2 USTC ¶50,372.

A husband's fraudulent conveyance to his wife of a principal residence held with his wife as tenants by the entirety was set aside. However, the IRS could not force a sale of the property. Instead, the wife was required to make monthly payments in satisfaction of her husband's outstanding tax liability. Each payment was equal to one-half of the monthly rental value of the property.

H.C. Jones, DC N.J., 95-1 USTC ¶50,190, 877 FSupp 907. Aff'd, CA-3, 96-1 USTC ¶50,056.

The IRS properly filed notices of federal tax liens on a farm that was owned by an individual who was assessed with deficiencies, penalties and interest even though he transferred his interest in the farm to his son. Under the Uniform Fraudulent Conveyance Act, which was adopted by the state (Wyoming) where the property is located, the transfer was set aside as fraudulent. The taxpayer received no consideration for the transfer and he continued to live on and farm the property after the transfer. His son had no input or control over the farm's operations. Since the transferee was the taxpayer's son, the taxpayer had a close relationship with him. The taxpayer admitted that he transferred the property to his son after he learned that a creditor planned to sue him. Moreover, the transfer rendered him insolvent. The taxpayer's son was also his nominee.

D.L. Jessen, DC Wyo., 96-2 USTC ¶50,449.

Although the IRS's cause of action under state (California) law for fraudulent conveyance had been extinguished by expiration of the statute of limitations, it was not precluded from asserting that a partnership was the alter ego and/or the nominee of its partners. The fraudulent conveyance, nominee and alter ego theories were discrete, despite the similar factual basis necessary to establish each theory. The partnership had transferred real property, which was subject to a federal nominee tax lien, to its general partners.

Sequoia Property & Equipment Ltd. Partnership, DC Calif., 98-1 USTC ¶50,460.

A corporation's transfer of assets to its officers without consideration, and the officers' subsequent contribution of those assets to a partnership that continued the corporation's business, was void as a fraudulent conveyance under state (Tennessee) law. Although no deficiencies had been assessed at the time of the transfer, the government qualified as the corporation's creditor because the tax liabilities had accrued, the corporation was under examination, and its officers expected significant assessments. The transfer liquidated and dissolved the corporation and, thus, rendered it insolvent and incapable of paying its assessments, despite the partnership's purported assumption of its liabilities. The evidence also indicated that the transfer was intended to hinder, delay or defraud the government.

L.A. Westley, DC Tenn., 98-2 USTC ¶50,545. Aff'd, CA-6 (unpublished opinion), 2001-1 USTC ¶50,340.

Genuine issues of material fact remained regarding whether the conveyance of a residence from an individual to his former wife was fraudulent; therefore, the IRS's motion for summary judgment was denied. Affidavits by the husband and wife stated that the conveyance was made in recognition of the husband's obligation to support his wife and minor children, which qualified as fair consideration under state (New York) law. Moreover, the burden of proving fair consideration did not shift to the husband since there was no showing that the transaction was clandestine or designed to conceal the nature and value of the consideration. Finally, despite the existence of an intrafamily transfer, there was no determination as a matter of law that the couple acted with actual intent to hinder, delay or defraud creditors since they did not have notice of the tax claims at the time of the conveyance.

D. Laronga, DC N.Y., 98-1 USTC ¶50,154.

The issue of whether the taxpayer was insolvent when he conveyed the property to his former wife was a question of material fact that precluded summary judgment that the conveyance was fraudulent. The taxpayer testified that, at the time he made the conveyance, the value of his assets exceeded his tax obligations; and, under state (Illinois) law, a property owner is competent to render an opinion as to the value of his property.

J.C. Dunkel, DC Ill., 98-2 USTC ¶50,610.

The IRS was denied summary judgment on the issue of whether a delinquent taxpayer fraudulently conveyed his interest in real estate to a church. It failed to establish that the transfer of the property rendered him insolvent or that he intended to defraud his creditors.

J.W. Noble, DC Mich., 98-2 USTC ¶50,642. Appeal dism'd, CA-6 (unpublished opinion), 99-1 USTC ¶50,173.

In a case related to J.W. Noble, above, proceeds from the sale of levied real property, after expenses, were to be divided equally between the government and a church to whom the taxpayer had conveyed his interest. Because the government sought to collect unpaid federal income taxes from the taxpayer's interest in the property, the government and the church were equally entitled to the proceeds from the sale of the property, as the third party still held title to the property subject to the rights of the government, as the taxpayer's creditor.

J.W. Noble, CA-6 (unpublished opinion), 2001-1 USTC ¶50,226, aff'g an unreported District Court decision.

Conveyances of real property by married taxpayers to trusts that qualified, under state (California) law, as alter ego and nominee trusts were set aside as fraudulent. As a result, the properties were subject to federal tax liens. The trusts paid no consideration for the transfers, and the taxpayers maintained possession and control of the properties after the conveyances. Moreover, a trustee of three of the four trusts at issue was a sibling of one taxpayer, and another trustee admitted to having no trust duties.

E.S. Dubey, DC Calif., 98-2 USTC ¶50,851.

Married taxpayers, through their failure to respond to the IRS's requests for admissions, were deemed to have fraudulently conveyed under state (Washington) law real property to their alter ego for the purpose of preventing the IRS from seizing and selling the property. Accordingly, the mortgage on the property was set aside as a fraudulent conveyance.

E. Butts, DC Wash., 98-2 USTC ¶50,896.

The existence of material issues of fact precluded entry of summary judgment for an individual in the government's action to set aside a fraudulent conveyance and foreclose on federal tax liens. Although the individual's previously executed prenuptial agreement required him to promptly convey the property at issue to his new wife, he did not make the conveyance until years later, after his net worth declined and his tax liabilities skyrocketed. Thus, a genuine issue of fact existed as to whether, at the time of the transfer, he knew or should have known that he was about to incur debts beyond his ability to pay. The four-year state (Florida) statute of limitations on fraudulent transfer actions did not bar the government's suit because, absent a congressional enactment, a government action is not subject to any time limitation.

S.J. Dellaquila, DC Fla., 99-1 USTC ¶50,196.

The government was not entitled to summary judgment that federal tax liens attached to property transferred by married taxpayers to a family trust. Genuine issues of material fact existed as to whether the taxpayers' transfers were fraudulent under state (New Hampshire) law.

G.T. Kattar, DC N.H., 99-2 USTC ¶50,834.

The primary transferee of real property rebutted the presumption of fraud with her allegation that the transfers were made in consideration of the dissolution of her common-law marriage to the taxpayer and pursuant to a related decree.

J.E. Kaiser, DC Ohio, 99-2 USTC ¶50,861.

The government was entitled to foreclose a tax lien on real property that a corporate officer fraudulently conveyed to his corporation. Under state (Illinois) law, the transfer was a sham because the taxpayer resided at the property before and after the conveyance, the corporation paid obviously inadequate consideration, and the transfer occurred shortly after the Tax Court ruled that the taxpayer owed a substantial tax liability.

P. Stout, DC Ill., 2000-1 USTC ¶50,294.

The existence of genuine issues of material fact precluded summary judgment regarding whether tax liens attached to real property and funds that were transferred by a delinquent taxpayer to his wife before the liens arose. Although the taxpayer conveyed the assets to his wife without fair consideration, it was not clear that he was insolvent at the time.

M. Mazzeo, DC N.Y., 99-2 USTC ¶50,901.

Tax liens attached to a taxpayer's interest in funds and property that he fraudulently transferred to a trust that qualified as his alter ego under state (New York) law. He used the trust to pay his personal expenses, he continued to act as the owner of real property that he purportedly transferred to the trust, and there was no documentation that the transfers were loans, as he alleged.

J. Letscher, DC N.Y., 99-2 USTC ¶50,947.

A valid IRS tax lien attached to two parcels of property that a debtor fraudulently conveyed to family members prior to filing for bankruptcy protection. The lien arose at the time of assessment, which preceded both the recording of the deed for the first parcel and the fraudulent transfer and recording of the deed for the second parcel. Following the bankruptcy trustee's recovery of the two properties and his sale of one of the parcels, the tax lien transferred to the debtor's interest in the sale proceeds.

J. McGhee, BC-DC Ky., 2000-1 USTC ¶50,275.

An individual's property conveyances and transfers to various family members were found to be fraudulent under state (Georgia) law and were consequently set aside. However, the transfers of the taxpayer's interest in his home to his former wife and children, even though fraudulent, involved factors that prevented the transfers from being set aside.

C.A. Reid, Jr., DC Ga., 2000-2 USTC ¶50,748, 127 FSupp2d 1361.

A father-son relationship, alone, was insufficient to support foreclosure on a nominee theory. The son testified credibly that his father no longer paid the property taxes, and that he and his mother, who is no longer married to his father, exercised exclusive control over the property. Further, there was insufficient evidence to determine whether the father actually intended to defraud the IRS or merely wanted to reward or make a gift to his son.

R.L. Turk, DC Mont., 2000-2 USTC ¶50,834, 127 FSupp2d 1165.

Conveyances by married taxpayers of three parcels of real property first to a sham church that they had created for tax-evasion purposes and then to their son were properly set aside as fraudulent under state (New Mexico) law. The state limitations period did not apply to an action brought by the federal government to vindicate public rights or interests.

R.N. Spence, CA-10 (unpublished opinion), 2000-2 USTC ¶50,849, 242 F3d 392, aff'g an unreported District Court decision. Cert. denied, 5/14/2001.

The government was entitled to foreclose a tax lien on a debtor and his wife's real property in connection with the unpaid employment taxes of two corporations. Under the state (Illinois) fraudulent transfer statute, it was undisputed that the couple voluntarily conveyed the property for inadequate consideration while aware of the tax debt and retained insufficient property to satisfy the debt.

N. Paradise, DC Ill., 2001-1 USTC ¶50,113, 127 FSupp2d 951.


A. Langrehr, DC Neb., 2001-1 USTC ¶50,253.

State (Ohio) law's recognition of the alter ego doctrine and the doctrine of equitable ownership was essentially a recognition of the nominee doctrine, in which the domination and control over an entity is so complete that the entity has no separate mind, will, or existence of its own, rendering it subject to the equitable ownership of another. Thus, the government could assert tax liens on various parcels of property that were, in name, owned by different businesses

Nantucket Village Development Co., DC Ohio, 2001-1 USTC ¶50,202.

The government failed to present evidence that an individual received no consideration for a transfer of real property to a trust, or that he was insolvent at the time of, or as a result of, such transfer. It also failed to present sufficient evidence of the five alleged badges of fraud with respect to the transfer. Accordingly, the government's motion for summary judgment on its fraudulent conveyance claim was denied.

D. Billheimer, DC Ohio, 2002-1 USTC ¶50,424, 197 FSupp2d 1051.

The government failed to present evidence that a taxpayer received insufficient consideration for the transfer of real property to his parents, or that he was insolvent at the time of, or as a result of, such transfer. As such, issues of material fact remained as to whether sufficient badges of fraud existed to support a finding that the conveyance was fraudulent. Additionally, a finding of constructive fraud was denied as question of fact existed as to the value of the property at the time of the transfer and whether any payments changed hands.

R. Smith, DC Ohio, 2002-2 USTC ¶50,657.

Summary judgment to recover a taxpayer's house to satisfy trust fund recovery penalties assessed against her parents was denied. There was no proof that the conveyance of funds from the parents to the taxpayer for purchase of the house was fraudulent. A discrepancy between the taxpayer's reported income and income reported on a mortgage application failed to establish fraudulent intent. Also, there was no proof that the conveyance left the parents unable to satisfy the tax penalties. The application of the nominee theory was rejected.

S. Snyder, DC Conn., 2002-2 USTC ¶50,660, 233 FSupp2d 293.

Conveyance of real property by an individual taxpayer to his father prior to the assessment of tax liability against the taxpayer was not a fraudulent attempt to evade tax liability. There was no evidence that the conveyance was intended to defraud the IRS. Rather, the conveyance was given in consideration of the father's significant financial contribution to the purchase price of the property and in forgiveness of a loan, and neither the taxpayer nor his father had contributed to the ten-year delay in the filing of the action by the IRS.

F.O. McGuire, DC S.C., 2004-1 USTC ¶50,267.

The statute of limitations period set forth in the Federal Debt Collections Procedures Act of 1990 (FDCPA) did not bar the government's fraudulent conveyance claims against limited partnerships that were deemed nominees and alter egos of the taxpayers. The government based its claim on Code Secs. 7401 --7403, which was permissible under the FDCPA. The district court relied on state law only to set aside the fraudulent transfer of residences to the partnerships.

Sequoia Property and Equipment, Limited Partnership, DC Calif., 2002-2 USTC ¶50,773. Aff'd, CA-9 (unpublished opinion), 2005-1 USTC ¶50,182.

The government was entitled to summary judgment against an individual where he owed back taxes and fraudulently conveyed his interests in several real properties to third parties. The taxpayer failed to respond to the government's motion and, therefore, failed to demonstrate the arbitrariness or inaccuracy of the assessments against him. His wholly conclusory and facially frivolous "vow of poverty/ministerial expenses" position was insufficient to meet his burden of proof and did not create an issue of fact concerning his tax liability. In addition, the government established that it would suffer prejudice if the individual was permitted to withdraw his admissions. The court held that the case presented unusual circumstances warranting departure from the general rule proscribing "re-serving" the complaint in the form of a request for admissions.

K. Persaud, DC Fla., 2006-1 USTC ¶50,104.

Property fraudulently conveyed to an individual was subject to a tax lien for payroll taxes unpaid by her former husband. At the time of the transfer, the husband had willfully failed to collect, truthfully account for, and pay employment taxes. The transfer was fraudulent conveyance under the state's (New York) debtor and creditor law because it was made without fair consideration. In the absence of evidence that, following the couple's divorce, the individual would forego maintenance and/or child support as consideration for the transferred property, the transfer did not satisfy the husband's antecedent debt to support his wife and children.

E. Hirko, DC N.Y., 2006-1 USTC ¶50,278.

See also, ¶38,136.65 and ¶38,136.71.