Thursday, June 25, 2009

Fraudulent transfer

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.; Civ.06-5146, September 13, 2007.


Validity of Tax Assessments

4. 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 [ 91-1 USTC ¶50,068], 924 F.2d 785, 787 (8 Cir. 1991); Kiesel v. United States [ 77-1 USTC ¶9101], 545 F.2d 1144, 1146 (8 Cir. 1976); Meisner, 2007 W.L. 203950, * 2. th

5. 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. In an affidavit attached to the forms, Mr. Tolbert explains:
arly meritless. Mr. Tolbert has submitted nothing of substance to challenge the accuracy of the
Attachment of Tax Liens to the Property and Fraudulent Transfer

8. 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.

9. The Government may collect the tax debts of a taxpayer from property that has been fraudulently transferred to another. See United States v. Scherping [ 99-2 USTC ¶50,758], 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).

10. In the present case, the Tolberts transferred title to the subject property to A & R Equity approximately two months after the IRS sent its first notice to Mr. Tolbert regarding his failure to pay taxes. While the value of the property is in excess of $100,000.00, A & R Equity paid only $10.00 to acquire title to the property. Further, Mr. and Mrs. Tolbert are the sole beneficiaries of the A & R (which stands for Alvin and Roberta Tolbert) Equity trust, the trustee is unknown, and the address for the entity is the Tolberts' residential address. Even more significant is the fact that the Tolberts have continued to reside at the property, have continued to pay the mortgage, taxes, and other bills on the property, and they do not have a lease agreement or pay rent on the property to A & R Equity.

These circumstances clearly demonstrate that title to the subject property was fraudulently conveyed to A & R Equity in an attempt to avoid tax liens attaching to the property. Accordingly, the Court concludes that the transfer should be set aside and that the property is subject to the tax liens. 3

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