fraudulent conveyances
Where a taxpayer is alleged to have fraudulently disposed of his property prior to the existence of federal tax liens, the United States may seek relief under the applicable fraudulent conveyance laws of the particular state in which the property is located. Commissioner v. Stern [ 58-2 USTC ¶9594], 357 U.S. 39, 45 (1958); Citizens Bank of Clearwater v. Hunt, 927 F.2d 707, 710 (2d Cir. 1991); United States v. Fernon [ 81-1 USTC ¶9287], 640 F.2d 609, 611-12 (5th Cir. 1981).
Ronald Smith, et al., Defendants

U.S. District Court, So. Dist. Ohio, West. Div., C-1-99-974 , 8/22/2002


The government's fraudulent conveyance claim was not barred by the state (Ohio) four-year statute of limitations on actions to set aside fraudulent transfers. In the absence of legislation imposing a limitations period, an action brought on behalf of the United States in its governmental capacity is not subject to any time limitation.

This matter is before the Court on motions for partial summary judgment and for summary judgment (Docs. 13, 14), and the parties' responsive memoranda. (Docs. 15, 17, 18, 19). The matter has been referred to the undersigned for initial consideration and a report and recommendation pursuant to 28 U.S.C. §636(b). (Doc. 20).

Plaintiff, the United States of America ("United States" or "government") brought this tax action pursuant to 26 U.S.C. §§7401, 7403. The government seeks to reduce to judgment unpaid federal tax assessments against defendant Ronald E. Smith ("Smith") and to foreclose on federal tax liens on two parcels of real property located at 4311 Tylersville Road, Hamilton, Butler County, Ohio. The government also seeks to set aside an allegedly fraudulent conveyance of an interest in the property made by Smith to his parents, Barney Smith (now deceased) and Naoma Smith, and to declare that Naoma Smith and Gregory Smith, Smith's brother, hold interests in the property as nominees of Smith. The government also named Smith's alleged common law wife, Donna Schaller, as a party defendant on the ground that she may seek to claim an interest in the property in her own right.



I. FACTUAL AND PROCEDURAL HISTORY
In January 1991, Smith pleaded guilty to charges of wilful failure to file income tax returns for tax years 1983, 1984, and 1985. Pursuant to a plea agreement, Smith agreed to file tax returns for the years in question. The plea agreement provided in part that "this agreement does not address or compromise in anyway any tax liability of Mr. Smith for the tax years 1982-1989." (Doc. 14, Ex. C). Smith later submitted "nonresident returns," forms 1040NR, for the years 1983 through 1990.

At that time he entered his plea, Smith was the owner of the Tylersville Road property, which he had acquired by warranty deed in 1986. On or about May 22, 1991, Smith sold an undivided one-half interest in the property to his parents, Barney Smith and Naoma Smith, for $85,000.00. In April 1995, in alleged contemplation of Barney Smith's final illness, Barney Smith and Naoma Smith transferred an undivided one-fourth interest in the real estate to Gregory Smith. Smith continues to reside at the Tylersville Road address; Naoma Smith resides in Cincinnati, Ohio; and Gregory Smith resides in Maineville, Ohio.

In January 1995, a delegate of the Secretary of the Treasury made assessments against Mr. Smith for unpaid taxes for the years 1982-1991. Notices of the assessments were filed with the Butler County Recorder's Office on June 16, 1995 and June 11, 1996.

On November 18, 1999, the United States filed its complaint against Smith, Naoma Smith, Gregory Smith, and Donna Schaller. (Doc. 1). The government alleges that Smith is liable for the assessed and accrued taxes, penalties, and interest, which totaled $3,464,751.82 as of August 2, 1999. ( Id.) The government seeks a judgment against Smith in that amount, plus additions and interest as allowed by law. ( Id.) The government asks this Court to set aside the conveyance to Barney and Naoma Smith as fraudulent with respect to the United States, to declare that Naoma Smith and Gregory Smith hold their interests in the Tylersville Road property as nominees of Smith, and to adjudge that the United States has valid liens on all property and rights to property of Ronald Smith. ( Id.) Finally, the government asks this Court to order that the federal tax liens be foreclosed upon the real property and that the property be sold at a judicial sale.

Naoma Smith, Gregory Smith, and Donna Schaller, by counsel, filed a motion for partial summary judgment in their favor. (Doc. 13). These three defendants request this Court to find, as a matter of law, (1) that their interests in the real property are not subject to federal tax liens, (2) that the conveyance of a one-half interest to Barney and Naoma Smith was not fraudulent, (3) that Naoma Smith and Gregory Smith do not hold their interests in the property as alter egos or nominees for Smith; and (4) that Donna Schaller is the lawful spouse of Smith and is entitled to a dower interest in his property under the laws of the State of Ohio. ( Id.)

Smith filed a separate pro se response to the government's motion for summary judgment alleging, in part, that he is not a taxpayer and is not liable to the United States for any tax. (Doc. 16). Smith maintains that he is a citizen only of the State of Ohio and that he is not a citizen or resident of the United States. ( Id.) He contends that the nonresident returns were filed in compliance with a provision in his plea agreement that he would file "true, correct and accurate income tax returns for the calendar years 1982 to 1989" and were accepted as such at his sentencing proceeding. ( Id.) Smith also argues that the income tax is an excise tax and claims not be subject to any excise tax. ( Id.) Finally, Smith challenges the authority of the United States Attorney, Lydia D. Bottome, to prosecute this case. ( Id.)



II. STANDARD OF REVIEW
A motion for summary judgment should be granted if the evidence submitted to the court demonstrates that there is no genuine issue as to any material fact and that the movant is entitled to summary judgment as a matter of law. Fed. R. Civ. P. 56. See also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). The moving party has the burden of showing the absence of genuine disputes over facts which, under the substantive law governing the issue, might affect the outcome of the action. Celotex, 477 U.S. at 323.

A party may move for summary judgment on the basis that the opposing party will not be able to produce sufficient evidence at trial to withstand a motion for judgment as a matter of law. In response to a summary judgment motion properly supported by evidence, the non-moving party is required to present some significant probative evidence which makes it necessary to resolve the parties' differing versions of the dispute at trial. Sixty Ivy Street Corp. v. Alexander, 822 F.2d 1432, 1435 (6th Cir. 1987); Harris v. Adams, 873 F.2d 929, 931 (6th Cir. 1989). Conclusory allegations, however, are not sufficient to defeat a properly supported summary judgment motion. McDonald v. Union Camp Corp., 898 F.2d 1155, 1162 (6th Cir. 1990). The non-moving party must designate those portions of the record with enough specificity that the Court can readily identify those facts upon which the non-moving party relies. Karnes v. Runyon, 912 F.Supp. 280, 283 (S.D. Ohio 1995) (Spiegel, J.).

The trial judge's function is not to weigh the evidence and determine the truth of the matter, but to determine whether there is a genuine factual issue for trial. Anderson, 477 U.S. at 249-50. In so doing, the trial court does not have a duty to search the entire record to establish that there is no material issue of fact. Karnes, 912 F.Supp. at 283. See also Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479-80 (6th Cir. 1989); Frito-Lay, Inc. v. Willoughby, 863 F.2d 1029, 1034 (D.C. Cir. 1988). The inquiry is whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law. Anderson, 477 U.S. at 249-50.

If, after an appropriate time for discovery, the opposing party is unable to demonstrate a prima facie case, summary judgment is warranted. Street, 886 F.2d at 1478 (citing Celotex and Anderson). "Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no 'genuine issue for trial.' " Matsushita Electric Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).



III. ANALYSIS



A. Authority of the United States Attorney
As a threshold matter, Smith challenges the authority of the United States Attorney to prosecute his case on the grounds that Lydia Bottome, the attorney assigned to this case, has not been admitted to practice before this Court. His argument is unavailing.

Pursuant to 28 U.S.C. §§516, 517, the Attorney General may send any officer of the Department of Justice to attend to the interests of the United States in a suit pending in a court in the United States. Huff v. United States [ 93-2 USTC ¶50,633], 10 F.3d 1440, 1444 (9th Cir. 1993), cert. denied, 512 U.S. 1219 (1994). Section 516 provides that "the conduct of litigation in which the United States, an agency, or officer thereof is a party, or is interested ... is reserved to officers of the Department of Justice." 28 U.S.C. §516; Huff [ 93-2 USTC ¶50,633], 10 F.3d at 1444. See also United States v. Plesinski, 912 F.2d 1033, 1038 (9th Cir. 1990) (indicating that either the Department of Justice or United States Attorneys can represent the United States in litigation), cert. denied, 499 U.S. 919 (1991). Moreover, §517 states that "any officer of the Department of Justice ... may be sent by the Attorney General to any State or district in the United States to attend to the interests of the United States in a suit pending in a court of the United States." 28 U.S.C. §517; Huff [ 93-2 USTC ¶50,633], 10 F.3d at 1444.

The government has established that Lydia Bottome, an attorney in the tax division of Department of Justice, is an officer of the Department of Justice and that she was is authorized to represent the interests of the United States in this matter. ( See Doc. 18, Exs. A, B).



B. Fraudulent Conveyance
Where a taxpayer is alleged to have fraudulently disposed of his property prior to the existence of federal tax liens, the United States may seek relief under the applicable fraudulent conveyance laws of the particular state in which the property is located. Commissioner v. Stern [ 58-2 USTC ¶9594], 357 U.S. 39, 45 (1958); Citizens Bank of Clearwater v. Hunt, 927 F.2d 707, 710 (2d Cir. 1991); United States v. Fernon [ 81-1 USTC ¶9287], 640 F.2d 609, 611-12 (5th Cir. 1981). Because the property which is the subject of this dispute is located in Ohio, Ohio law applies. The government seeks summary judgment on its claim of a fraudulent transfer under the Ohio Uniform Fraudulent Transfer Act ("OUFTA"), Ohio Rev. Code §§1336.01-1336.11, et. seq. ( See Doc. 14).

Under OUFTA, a transfer made by a debtor is fraudulent as to a creditor, whether the claim arose before or after the transfer was made, if the debtor made the transfer in either of the following ways:

(1) with actual intent to hinder, delay, or defraud any creditor of the debtor;

(2) without receiving a reasonably equivalent value in exchange for the transfer ... and if either of the following applies: (a) the debtor was engaged or was about to engage in a business or transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or (b) the debtor intended to incur, or believed or reasonably should have believed that he would incur, debts beyond his ability to pay as they became due.

Ohio Rev. Code §1336.04(A). The government contends that the facts support a finding of summary judgment in its favor under both the actual fraud theory of §1336.04(A)(1) and the constructive fraud theory of §1336.04(A)(2).



1. The Statute of Limitations
Defendants, Naoma Smith, Gregory Smith, and Donna Schaller, 1 oppose the government's motion for summary judgment in part on grounds that the extinguishment provision of OUFTA, Ohio Rev. Code Ann. §1366.09, bars the government's claim.

Section 1366.09 provides as follows:

A claim for relief with respect to a transfer or an obligation that is fraudulent under section 1336.04 or 1336.05 of the Revised Code is extinguished unless an action is brought in accordance with one of the following:

(A) If the transfer or obligation is fraudulent under division (A)(1) of section 1336.04 of the Revised Code, within four years after the transfer was made or the obligation was incurred or, if later, within one year after the transfer or obligation was or reasonably could have been discovered by the claimant;

(B) If the transfer or obligation is fraudulent under division (A)(2) of section 1336.04 or division (A) of section 1336.05 of the Revised Code, within four years after the transfer was made or the obligation was incurred;

(C) If the transfer or obligation is fraudulent under division (B) of section 1336.05 of the Revised Code, within one year after the transfer was made or the obligation was incurred.

Ohio Rev. Code Ann. §1366.09. The government filed its complaint on November 18, 1999, more than four years after Smith conveyed an undivided one-half interest in the property to his parents.
Defendants concede that, as a general rule, the United States is not bound by state statutes of limitation except where it has expressly bound itself to them. See United States v. Summerlin [ 40-2 USTC ¶9633], 310 U.S. 414, 416 (1940); United States v. Isaac, No. 91-5830, 1992 WL 159795, *2 (6th Cir. July 10, 1992). See also United States v. Fernon [ 81-1 USTC ¶9287 ], 640 F.2d 609, 611-12 (5th Cir. 1981). The Court in Summerlin held that "the United States is not bound by state statutes of limitation or subject to the defense of laches in enforcing its rights." Summerlin [ 40-2 USTC ¶9633], 310 U.S. at 416 (1940). Defendants argue that the extinguishment provision is not a traditional statute of limitations and that Summerlin should not apply.

Although the Sixth Circuit has not yet ruled on the specific question, the Ninth Circuit has determined that a similar extinguishment provision in the California Uniform Fraudulent Transfer Act ("CUFTA") could not evade the rule of Summerlin:

First, although the IRS [Internal Revenue Service] must rely on the CUFTA to establish Petitioner's transferee liability, the government's underlying right to collect money in this case clearly derives from the operation of federal law ( i.e., the Internal Revenue Code). Second, in its efforts to collect taxes, the United States unquestionably is acting in its sovereign capacity; indeed, the right to collect taxes is among the most basic attributes of sovereignty. Because the United States is here acting in its sovereign capacity in an effort to enforce rights ultimately grounded on federal law, the rule of Summerlin will not allow the "extinguishment" of a valid, fully accrued claim by the IRS brought under the CUFTA.

Bresson v. Commissioner [ 2000-1 USTC ¶50,495], 213 F.3d 1173, 1178 (9th Cir. 2000).
Defendants' reliance on the extinguishment provision is unavailing. The government's action is not barred under Ohio Rev. Code Ann. §1366.09.



2. "Badges of Fraud" --Actual Fraud Theory Under Ohio Rev. Code §1336.04(A)(1)
As set forth above, under Ohio law, a transfer made with actual intent to hinder, delay, or defraud any creditor is fraudulent as to the creditor and may be set aside. Ohio Rev. Code Ann. §1336.04(A)(1). "No effort to hinder or delay creditors is more severely condemned by the law than an attempt by a debtor to place his property where he can still enjoy it and at the same time require his creditors to remain unsatisfied." United States v. Leggett, 292 F.2d 423, 426 (6th Cir. 1961) (internal quotations omitted). The burden of proof in a fraud case rests with the party asserting the fraud. McKinley Fed. Savings & Loan v. Pizzuro Enterprises, Inc., 585 N.E.2d 496 (Ohio Ct. App. 1990). The fraud must be proven by clear and convincing evidence. Cardiovascular & Thoracic Surgery of Canton, Inc. v. DiMazzio, 37 Ohio App.3d 162, 166, 524 N.E.2d 915, 918 (Ohio Ct. App. 1987). However, direct evidence of a party's fraudulent intent is not necessary. Leggett, 292 F.2d at 426. Because it is impossible to look into a defendant's mind for the purpose of ascertaining his intent, the trier of fact must consider the circumstances surrounding the transaction and determine intent from what a party does or fails to do. Id. at 426-27.

The issue of fraud is commonly determined by certain recognized indicia, denominated 'badges of fraud,' which are circumstances so frequently attending fraudulent transfers that an inference of fraud arises from them. Long Development, Inc. v. Oak Park Village Limited Partnership, 117 F.3d 1420, (unpubl.) 1997 WL 377055, at * --(July 2, 1997) (citing Leggett, supra). Ohio Rev. Code Ann. §1336.04(B) lists several statutory factors, or the so-called "badges of fraud," that a court considers to determine if an inference of fraud exists. The relevant factors include, but are not limited to, the following:

(1) Whether the transfer or obligation was to an insider;

(2) Whether the debtor retained possession or control of the property transferred after the transfer;

(3) Whether the transfer or obligation was disclosed or concealed;

(4) Whether before the transfer was made or the obligation was incurred, the debtor had been sued or threatened with suit;

(5) Whether the transfer was of substantially all of the assets of the debtor;

(6) Whether the debtor absconded;

(7) Whether the debtor removed or concealed assets;

(8) Whether the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred;

(9) Whether the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred;

(10) Whether the transfer occurred shortly before or shortly after a substantial debt was incurred;

(11) Whether the debtor transferred the essential assets of the business to a lienholder who transferred the assets to an insider of the debtor.

Ohio Rev. Code Ann. §1336.04(B).
"Although 'badges of fraud' are not conclusive and are more or less strong or weak according to their nature and the number occurring in the same case, a concurrence of several badges will always make out a strong case." Long Development, Inc., 1997 WL 377055, at *6 (citing Leggett, supra). If the party alleging fraud is able to demonstrate a sufficient number of badges, the burden of proof then shifts to defendants to prove that the transfer was not fraudulent. Baker & Sons Equipment Co. v. GSO Leasing, Inc., 87 Ohio App.3d 644, 650, 622 N.E.2d 1113, (Ohio Ct. App. 1993) (citing Cardiovascular & Thoracic Surgery, supra).

The government alleges that the evidence is sufficient to establish at least five of the relevant badges: (1) the transfer was made to insiders, i.e., Smith's parents; (2) Smith has retained full possession and control of the property since the transfer; (3) Smith made the transfer knowing that he was subject to potential civil tax liability for tax years 1982 through 1989, and knowing that pursuant to his plea agreement in the criminal case he was liable for up to $225,000.00 in criminal fines; (4) the subject property represented substantially all of Smith's assets at the time of the transfer; and (5) the value of the consideration allegedly received for his parents' one-half interest was not reasonably equivalent to the value of the transferred property.

In response, defendants Naoma Smith, Gregory Smith and Donna Schaller claim that the May 1991 conveyance was not fraudulent. They oppose the government's motion for summary judgment, in part, on the ground that the government has not shown sufficient "badges of fraud" to satisfy the fraudulent transfer statute. According to these defendants, the evidence establishes only one badge --that Smith transferred the property to insiders. Defendants further argue that: (1) the transfer of the property was properly recorded and never concealed; (2) Smith had neither been sued nor threatened with suit by the IRS at the time of the transfer; (3) because Smith transferred only one-half of the property, such a transfer does not constitute "substantially all of the asset"; (4) Smith has not absconded; (5) an $85,000.00 payment by Naoma and Barney Smith for their undivided one-half interest constituted fair market price for the property and therefore was reasonably equivalent to the value of the asset transferred. In support of their motion, defendants submitted an expert appraisal which valued the Tylersville Road property at $206,940.00, as of May 22, 1991, (Doc. 13, App. 1, Affidavit of Thomas A. Devitt, attached), and affidavits in which they attest that the $85,000.00 payment was considered a fair price for the sale of half the property. ( See Doc. 13, Apps. 3,5,6, Affidavits of Naoma Smith, Donna Schaller, and Ronald Smith, respectively).

It is undisputed that Smith transferred the property to insiders when he allegedly sold a one-half undivided interest in the Tylersville Road residence to his parents, Barney and Naoma Smith. Furthermore, defendants do not dispute the government's assertion that Ronald Smith retained possession of the property following the transfer. Rather, defendants Naoma and Gregory Smith argue that at all times they retained their right to possess and control the real estate or otherwise dispose of their interest in the property. (Doc. 13, App. 3, Naoma Smith Aff., ¶8; App. 4, Gregory Smith Aff., ¶8). Ohio Rev. Code Ann. §1336.04(B)(2). In addition, there is unrebutted evidence that Smith made the transfer shortly before or shortly after a substantial debt was incurred, as the transfer took place four months after the plea agreement and six months before he was fined in excess of $100,000.00 in the criminal case. Ohio Rev. Code Ann. §1336.04(B)(10). Thus, it appears that these three badges favor the government. However, as defendants noted, the transfer was never concealed and Smith has not absconded. Ohio Rev. Code Ann. §1336.04(B)(3) & (6). Moreover, questions of fact remain as to whether the transfer of a one-half interest was substantially all of Smith's assets, whether Smith was or became insolvent following the transfer, and whether the $85,000.00 allegedly received by the Smith was reasonably equivalent to the value of the property interest transferred. Smith admits that he was forced to sell an interest in the property to pay debts incurred defending against the criminal case. While defendants Naoma and Gregory Smith and Donna Schaller submitted evidence that the Tylersville Road property was valued at $206,940.00, as of May 22, 1991, there is no evidence other than the parties' affidavits that the purchase price of $85,000.00 was paid to Smith. Therefore it is recommended that defendants' motion for partial summary judgment be denied, and that the plaintiff's motion for summary judgment be denied in part. Genuine issues of material fact remain as to whether sufficient badges of fraud have been shown to support a finding that the conveyance of a one-half interest in the property to Barney and Naoma Smith was fraudulent.



3. Constructive Fraud Theory Under Ohio Rev. Code §1336.04(A)(2)
The government also contends that evidence supports a finding of a fraudulent conveyance under a constructive fraud theory. In support of its motion for summary judgment on this issue, the government argues that Smith did not receive reasonably equivalent value in exchange for the transfer and that at the time of the transfer, he should have believed that he would incur debts beyond his ability to pay as they came due.

Pursuant to Ohio Rev. Code §1336.04(A)(2)(b), a transfer is fraudulent if a debtor transfers property without receiving a reasonably equivalent value in exchange for the transfer, and the debtor intended to incur, or believed or reasonably should have believed that he would incur, debts beyond his ability to pay as they became due. The government asserts that the $85,000.00 purchase price allegedly paid by Smith's parent's for their one half interest is not reasonably equivalent to the value of half the property transferred. The government also claims that in the wake of his plea agreement, Smith knew or should have known that he was liable for a maximum criminal fine of $225,050.00 and that he would be subject to civil tax liabilities for at least 8 years of unpaid taxes. Defendants counter that the $85,000.00 purchase price was roughly equivalent to the property's value at the time of the transfer ( See Doc. 13, App. 1, expert appraisal, attached). Defendants further argue that plaintiff's evidence to the contrary is an uncertified document and therefore inadmissible. Defendants also note that at the time of the transfer, Smith had not been sued, nor had he been threatened with suit by the IRS. Plaintiff replies that there is no evidence that the $85,000.00 payment was ever made to Smith.

A question of fact clearly exists as to the value of the property at the time of the transfer and whether the payment changed hands. Furthermore, while Smith was subject to a maximum criminal penalty at the time of the transfer, the District Court had not assessed a fine at the time of the transfer. Accordingly, issues of fact preclude summary judgment for both plaintiff and defendants on the question of constructive fraud, and both motions should be denied in part on this basis.



C. Donna Schaller's Dower Interest
Defendant Donna Schaller seeks partial summary judgment declaring that she is the Smith's common law spouse and that she is entitled to a dower interest in the property. In response, the government maintains that Schaller is not entitled to summary judgment because that there remains a genuine issue of material fact as to sufficiency of indicia that she is the spouse of defendant Smith.

Under current Ohio law, common law marriages are prohibited. Ohio Rev. Code Ann. §3105.12(B)(1). However, the statute provides an exception for common law marriages that occurred prior to the effective date of the statute, October 10, 1991, and that have not been terminated by death, divorce, dissolution of marriage or annulment. Ohio Rev. Code Ann. §3105.12(B)(2); Lyon v. Lyon, 621 N.E.2d 718, 720 (Ohio Ct. App. 1993).

Prior to October 10, 1991, a common law marriage could be established in Ohio by a showing of certain required elements: (1) an agreement of marriage in praesenti; (2) cohabitation as husband and wife; and (3) a holding out by the parties to those with whom they normally come into contact, resulting in a reputation as a married couple in the community. State v. DePew, 528 N.E.2d 542, 549 (Ohio 1988).

In support of her motion for partial summary judgment, Schaller presents her own affidavit and the affidavits of Smith, Gregory Smith, Naoma Smith, and Robert J. Doss, a long-time friend. ( See Doc. 13, Exs. 2-6). Each affidavit recites the same conclusory language that as early as 1988, Smith and Schaller have lived together as husband and wife, have always considered themselves married, and have held themselves out as husband and wife, resulting in a long reputation as a married couple in the community. No other evidence in support of Schaller's claim has been presented.

The government opposes the motion on the ground that Schaller has failed to present evidence of an agreement to marry in praesenti. The government's argument is well taken.

The agreement to marry in praesenti is an essential element of a common-law marriage and its absence precludes the establishment of such a relationship even though the parties lived together and openly engaged in cohabitation. Brooks v. Brooks, No. CA2000-08-079, 2001 WL 433376, *2 (Ohio Ct. App. April 30, 2001) (citing Nestor v. Nestor, 472 N.E.2d 1091, 1094 (Ohio 1984)). Even if a party proves cohabitation and reputation, the lack of an agreement in praesenti will be fatal to any claim that there is a common-law marriage. Brooks, 20001 WL 43376 at *2; Nestor, 1472 N.E.2d at 1094; In re Estate of Hall, 588 N.E.2d 203, 206 (Ohio Ct. App. 1990). An agreement to marry in praesenti must be proved by clear and convincing evidence, either direct evidence which establishes agreement or by proof of cohabitation, acts, declarations, and conduct of the parties and their recognized status in the community in which they reside. Brooks, 20001 WL 43376 at *2; Nestor, 472 N.E. 2d at 1094. See also Lynch v. Romas, 139 N.E.2d 352, 359 (Ohio Ct. App. 1956) (citing Markley v. Hudson, 54 N.E.2d 304 (Ohio 1944)).

The affidavits in support of the motion for partial summary judgment are insufficient to establish an agreement to marry in praesenti as a matter of law. Therefore, it is recommended that the motion for partial summary judgment declaring Donna Schaller the common-law wife of defendant Ronald Smith should be denied.



D. Ronald Smith's Tax Liability
The government seeks summary judgment in part on its claim that Smith is liable for the taxes, interest, and penalties claimed. In support of its motion, the government presented certificates of assessment and payment for the tax years 1982 through 1991. (Doc. 14, Exs. F-O). Certificates of assessments are presumptively correct and enable the government to establish a prima facie case of tax liability. Gentry v. United States [ 92-1 USTC ¶50,225], 962 F.2d 555, 557 (6th Cir. 1992); United States v. Walton [ 90-2 USTC ¶50,429], 909 F.2d 915, 918-19 (6th Cir. 1990). The burden is on the taxpayer to produce evidence to the contrary. Walton [ 90-2 USTC ¶50,429], 909 F.2d at 918-19.

Smith has submitted no evidence to refute the government's position. Instead he asserted various arguments as to why he is not liable for payment of the taxes allegedly owed. Smith maintains that he is only a common law citizen of Ohio and is not a citizen or resident of the United States. He further contends that the income tax is an "excise" tax from which he is exempt. All of Smith's arguments are frivolous.

The Sixth Circuit, as well as other courts, has rejected as frivolous the argument that a person who claims to be a resident or citizen only of a state is not subject to federal income taxes. See United States v. Mundt [ 94-2 USTC ¶50.366], 29 F.3d 233, 237 (6th Cir. 1997); United States v. Gosnell [ 92-2 USTC ¶50,368], 961 F.2d 1518, 1520 (10th Cir. 1992); United States v. Collins [ 91-2 USTC ¶50,554], 920 F.2d 619, 629 (10th Cir. 1990), cert. denied, 500 U.S. 920 (1991). See also United States v. O'Brien [ 2000-2 USTC ¶50,679], No. 99-4314, 2000 WL 1175278, *1 (6th Cir. Aug. 11, 2000).

His contention that income tax is an unauthorized excise tax is also frivolous. See Martin v. Commissioner [ 85-1 USTC ¶9238 ], 756 F.2d 38, 40-41 (6th Cir. 1985) (concluding that the "not a taxpayer" and "unlawful excise tax" contentions are meritless and grounds for assessing sanctions); Coleman v. Commissioner [ 86-1 USTC ¶9401], 791 F.2d 68, 72 (7th Cir. 1986) (describing the "unlawful excise tax" argument as "objectively frivolous"); Parker v. Commissioner [ 84-1 USTC ¶9209], 724 F.2d 469, 472 (5th Cir. 1984) (stating that the "excise tax" argument is frivolous, stale, and long "put to rest"). See also Everett v. United States, No. 00-2159, 2001 WL 549457 (6th Cir. May 18, 2001) (imposing sanctions for a frivolous appeal based on the "not a taxpayer" and "unlawful excise tax" contentions) cert. denied, 122 S.Ct. 1174 (2002).

Smith also claims that he has no tax liability because the 1040NR nonresident returns that he filed pursuant to his plea agreement were accepted by the trial court as "true, correct and accurate." The plea agreement required Smith to file "true, correct and accurate income tax returns for the calendar years 1982 to 1989" and to make a good faith effort to settle any and all civil liability he faces with the Internal Revenue Service. ( See Doc. 14, Ex. C). In an apparent attempt to comply with the agreement, Smith filed the 1040NR nonresident returns stating that he was not a resident and that he had no income.

Smith's reliance on the plea agreement is misplaced. Contrary to Smith's assertions, the trial judge did not rule that the 1040NR returns were in fact "true, correct and accurate," but only that he recognized that Smith believed them to be so:

The Court finds that Smith has filed according to his view true, correct, accurate federal income tax returns for these years and from his point of view that he has complied with his good faith effort to settle.

(Doc. 14, Ex. D, p. 0237). Moreover, the plea agreement expressly states that it "does not address or compromise in any way any civil liability Mr. Smith may be subject to in connection with the tax years 1982 through 1989." (Doc. 14, Ex. C).
Smith has failed to come forward with any evidence to show that a genuine issue of material fact exists with respect to his tax liability or to the imposition of a federal tax lien on his property and interests in property. Therefore it is recommended that the government's motion for summary judgment should be granted in part and that judgment be entered in favor of the United States in the amount claimed.



E. Lien and Foreclosure
The government contends that the federal tax liens on the Tylersville Road property should be foreclosed by means of a forced judicial sale. Plaintiff argues that even if the Court were to find in favor of defendants Naoma and Gregory Smith that the transfer was not fraudulent, and find that Donna Schaller has a dower interest in the property, the government is still entitled to foreclose. According to the government, under 26 U.S.C. §7403(c), it would simply distribute the proceeds of the sale to those third parties found to have a legally enforceable interest, proportionally according to each parties' interest.

Smith has failed to come forward with any evidence to show that genuine issues of fact exist with respect to the government's claim for foreclosure. While Defendants Naoma and Gregory Smith and Donna Schaller argue that they retain legally enforceable interests in the property by virtue of the transfer of a one-half interest and Schaller's alleged dower rights as Smith's common law wife, these defendants do not assert any arguments in opposition to the government's motion with respect to foreclosure and a forced sale of the property.

Pursuant to 26 U.S.C. §7403(a), the government is authorized to file suit in the United States district courts in order to enforce a tax lien. See Bank of Fraser v. United States [ 88-2 USTC ¶9592 ], 861 F.2d 954, 958 (6th Cir. 1988). The statutory language authorizing the tax lien "is broad and reveals on its face that Congress meant to reach every interest in property that a taxpayer might have." United States v. National Bank of Commerce [ 85-2 USTC ¶9482], 472 U.S. 713, 719-720 (1985). "Stronger language could hardly have been selected to reveal a purpose to assure the collection of taxes." Bank of Fraser [ 88-2 USTC ¶9592], 861 F.2d at 958 (citing Glass City Bank v. United States [ 45-2 USTC ¶9449], 326 U.S. 265, 267 (1945)).

Section 7403 provides in full as follows:

(a) Filing. --In any case where there has been a refusal or neglect to pay any tax, or to discharge any liability in respect thereof, whether or not levy has been made, the Attorney General or his delegate, at the request of the Secretary [of the Treasury], may direct a civil action to be filed in a district court of the United States to enforce the lien of the United States under this title with respect to such tax or liability or to subject any property, [of] whatever nature, of the delinquent, or in which he has any right, title, or interest, to the payment of such tax or liability. For purposes of the preceding sentence, any acceleration of payment under section 6166(g) or 6166A(h) shall be treated as a neglect to pay tax. (b) Parties. --All persons having liens upon or claiming any interest in the property involved in such action shall be made parties thereto. (c) Adjudication and decree. --The court shall, after the parties have been duly notified of the action, proceed to adjudicate all matters involved therein and finally determine the merits of all claims to and liens upon the property, and, in all cases where a claim or interest of the United States therein is established, may decree a sale of such property, by the proper officer of the court, and a distribution of the proceeds of such sale according to the findings of the court in respect to the interests of the parties and of the United States. If the property is sold to satisfy a first lien held by the United States, the United States may bid at the sale such sum, not exceeding the amount of such lien with expenses of sale, as the Secretary directs. (d) Receivership. --In any such proceeding, at the instance of the United States, the court may appoint a receiver to enforce the lien, or, upon certification by the Secretary during the pendency of such proceedings that it is in the public interest, may appoint a receiver with all the powers of a receiver in equity.

As a general matter, the "lien of the United States" referred to in §7403(a) is that created by 26 U.S.C. §6321, which provides: "If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) 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." Thus, the federal tax lien under 26 U.S.C. §6321 attaches to all of a taxpayer's property. See United States v. Big Value Supermarkets, Inc. [ 90-1 USTC ¶50,160], 898 F.2d 493, 496 (6th Cir. 1990).
The Supreme Court has clearly held that courts may order the judicial sale of an entire property, not just a delinquent taxpayer's interest in the property, to satisfy the taxpayer's tax indebtedness. United States v. Rodgers [ 83-1 USTC ¶9374], 461 U.S. 677, 693-97 (1982). Section 7403 protects those third parties with vested interests in the property and ensures that the government receives no more from the proceeds of the sale than that to which it is entitled. Id. at 699. See also Kingman v. United States, 2000 WL 1566280, at *3 (S.D. Ohio Sept. 13, 2000) (Beckwith, J.) ("There is no controversy over the power of this Court to require a sale of the [...] properties due to [defendant's] federal tax indebtedness.... This is so even though [defendant's wife] also has a one-half interest in the [...] properties."). However, the Court's power to require a judicial sale is "limited to some degree by equitable discretion." Rodgers [ 83-1 USTC ¶9374], 461 U.S. at 680; Kingman, 2000 WL 1566280 at *3.

Because the federal government has a paramount interest in the "prompt and certain" collection of delinquent taxes, the Court's exercise of its discretion not to order a sale must be applied "rigorously and sparingly." Rodgers [ 83-1 USTC ¶9374], 461 U.S. at 711. There are "virtually no circumstances, for example, in which it would be permissible to refuse to authorize a sale simply to protect the interests of the delinquent taxpayer himself or herself." Rodgers [ 83-1 USTC ¶9374], 461 U.S. at 709. Yet, when a third party has an interest in property that may be subject to a judicial sale, the Court must evaluate the following equitable considerations: (1) the extent of prejudice to the Government's financial interest if the Court orders a sale of only the delinquent taxpayer's interest; (2) whether the interested third parties would, under normal circumstances, hold a legally recognizable expectation that their interests would not be sold by the delinquent taxpayer or his creditors; (3) what, if any, prejudice the third parties will incur "both in personal dislocation costs and in undercompensation from the forced sale...."; and (4) the differences between the interests held by the delinquent taxpayer and the third parties, and whether any differences weigh against a compelled sale. Kingman, 2000 WL 1566280 at *3-4 (citing Rodgers [ 83-1 USTC ¶9374], 461 U.S. at 710-11).

Because genuine issues of material fact exist with respect to whether Smith's transfer of a one-half interest in the Tylersville Road property was fraudulent and whether Donna Schaller is Smith's common law wife and therefore entitled to a dower interest in his property, no determination has been made as to whether Naoma and Gregory Smith and or Donna Schaller have a legally enforceable interest in the subject property. Consequently, the Court is unable evaluate those equitable factors set forth in Rodgers until these underlying factual questions are resolved. Therefore, even though there is no question of fact as to Smith's liability for the amount claimed by the government, it is recommended that the Court decline to order a forced sale of the property until findings of fact have been made with regard to whether the transfer was fraudulent, and whether defendant Schaller is entitled to a dower interest in Smith's portion of the property as his common law wife.

IT IS THEREFORE RECOMMENDED THAT:

1. The motion for partial summary judgment filed by defendants Naoma Smith, Gregory Smith, and Donna Schaller (Doc. 13) should be DENIED;

2. Plaintiff's motion for summary judgment (Doc. 14) should be GRANTED in part and DENIED in part.

1 Ronald E. Smith did not oppose the government's motion for summary judgment on its claim that the conveyance to Barney and Naoma Smith was fraudulent. ( See Doc. 16).

Fraudulent conveyances. --Tax 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.

Similarly.

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.

The government could not seize assets of an irrevocable trust created by an individual in order to help satisfy the individual's tax liability. Although the individual had mixed motives when establishing and funding the trust, the government did not establish that he was insolvent at the time. Thus, it failed to meet its burden of proving actual or constructive fraud under state (New York) law. Moreover, the trust was not the individual's alter ego. It was set up primarily to aid the individual in his estate planning; the individual apparently had sufficient funds at the time to satisfy the amount owed; and, ever since, he respected the rental agreement with the trust and left the trust money untouched. Although the individual may have been partially motivated by concerns about tax collection, that, alone, was not a sufficient reason to pierce the trust to satisfy the individual's tax debts.

J. Evseroff, DC N.Y., 2007-1 USTC ¶50,222. Vac'd and rem'd, CA-2 (unpublished opinion), 2008-1 USTC ¶50,240.

The government was entitled to summary judgment reducing a married couple's tax liability to judgment and foreclosing on federal tax liens. Although the government failed to prove that the couple's transfer of their residence to their son was fraudulent under state (California) law, the evidence indicated that the son was their nominee. The government's nominee theory was supported by the fact that the son paid no consideration for the property, the parties had a close relationship and the couple retained possession of the property and continued to enjoy its benefits even after the transfer.

A.B. Secapure, DC Calif., 2008-1 USTC ¶50,277.

An individual's bankruptcy discharge of debt was revoked; consequently, federal tax liens filed against his property were valid, and the government was entitled to foreclose on the properties subject to the liens. The discharge of debt was revoked because the individual fraudulently failed to disclose the full extent of his assets, intentionally made numerous false statements and attempted to transfer and/or conceal assets by means of several nominees. The properties were ordered sold, subject to his wife's valid homestead interest in one of those properties.

A.R. Harrison, DC Texas, 2008-1 USTC ¶50,274. Aff'd, per curiam, CA-5 (unpublished opinion), 2008-1 USTC ¶50,279.

Federal tax liens attached to properties an individual had transferred because the transfers were made with the intent to defraud the government and to evade his tax liability. Under state (Arkansas) law, his conveyances were fraudulent because inadequate consideration was paid for the transfers, he continued to control the property after the transfers, subsequent transfers were made to entities that were under his control and all transfers were made after he became aware of his tax liabilities. Even if the transfers were not fraudulent, the government could levy against the properties held by the entities because they were his alter egos.

L. Muncy, DC Ark., 2008-1 USTC ¶50,341.