United States of America v. Lehmann et al

Motion for Summary Judgment .

D. Or.September 23, 2016

CAROLINE D. CIRAOLO Principal Deputy Assistant Attorney General GOUD P. MARAGANI Trial Attorney, Tax Division U.S. Department of Justice P.O. Box 683 Washington, D.C. 20044 202-616-2904 202-307-0054 (Fax) goud.p.maragani@usdoj.gov Of Counsel: BILLY J. WILLIAMS Acting United States Attorney IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON UNITED STATES OF AMERICA, ) ) Plaintiff, ) ) v. ) ) ALLAN LEHMANN, JAN LEHMANN, ) OREGON DEPARTMENT OF ) REVENUE, OREGON DEPARTMENT ) OF JUSTICE, WASHINGTON COUNTY ) TAX COLLECTOR, VELOCITY, ) INVESTMENTS, INC., ALLAN LEHMANN ) AS TRUSTEE OF ALLAN LEHMANN ) AND JAN LEHMANN JOINT REVOCABLE ) LIVING TRUST, and JAN LEHMANN AS ) TRUSTEE OF ALLAN LEHMANN AND ) JAN LEHMANN JOINT REVOCABLE ) LIVING TRUST, ) ) Defendants. ) _______________________________________) Case No. 14-cv-1894-HZ UNITED STATES’ MOTION FOR SUMMARY JUDGMENTAGAINST ALLAN LEHMANN, JAN LEHMANN, THE ALLAN LEHMANN AND JAN LEHMANN JOINT REVOCABLE TRUST, AND VELOCITY INVESTMENTS Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 1 of 32 i Local Rule 7-1 Certification LR 7-1 provides that “the first paragraph of every motion must certify that . . . the parties made a good faith effort through personal or telephone conferences to resolve the dispute and have been unable to do so.” Undersigned counsel left messages on Mr. Lehmann’s phone multiple times over the past two weeks to discuss this motion. Mr. Lehmann never returned those calls. Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 2 of 32 i TABLE OF CONTENTS Pages I. FACTS .......................................................................................................................................2 A. Mr. Lehmann’s Tax Liabilities ...........................................................................................3 B. Mr. Lehmann’s Property .....................................................................................................9 C. Notice of Federal Tax Liens .............................................................................................12 D. Velocity Investments ........................................................................................................12 II. ANALYSIS ..............................................................................................................................13 1. Mr. Lehmann is liable for federal income taxes, interest and penalties for 1997 through 2006, 2008 and 2009. .............................................................................13 a. Mr. Lehmann’s income tax liabilities for 2004 and 2005 are based on the income tax liabilities he reported in tax returns (Form 1040) he submitted for those years. .......................................................................................................15 b. Mr. Lehmann has admitted that he owes income tax for 1997 through 2003, 2006, 2008 and 2009. ...................................................................................15 c. Mr. Lehmann is liable for interest and penalties accruing on his tax liabilities for 1997 through 2006, 2008 and 2009. .................................................16 2. 2004 and 2005 tax return ...................................................................................................19 3. 1997 through 2003, 2006, 2008 and 2009 tax returns .......................................................20 2. The Allan Lehmann and Jan Lehmann Joint Revocable Living Trust is a nominee of Mr. Lehmann with respect to the property at issue in this lawsuit. ...............................20 a. The Trust is a nominee of Mr. Lehmann. ..............................................................21 b. In the alternative, the transfer of the property to the Trust was fraudulent with respect to the United States. ...........................................................................24 3. The Court should also find that Velocity Investments has no interest in the 7150 SW Hoodview Place property. ...........................................................................................25 III. CONCLUSION ........................................................................................................................25 Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 3 of 32 ii TABLE OF AUTHORITIES Pages Cases: 911 Mgmt. v. U.S., 657 F. Supp. 2d 1186 (D. Or. 2011) .............................................................. 20 Colby B. Found. v. United States, No. 96-cv-3073-CO, 1997 WL 1046002 (D. Or. Oct. 22, 1997) ................................................................................................................... 21 Estate of Charania v. Shulman, 608 F.3d 67 (1st Cir. 2010) ........................................................ 19 Fourth Investment LP v. United States, 720 F.3d 1058 ................................................................ 21 Hansen v. United States, 7 F.3d 137 (9th Cir. 1993) .................................................................... 13 Hardy v. Commissioner, 181 F.3d 1002 (9th Cir. 1999) .............................................................. 14 Higbee v. Commissioner, 116 T.C. 438 (2001) ...................................................................... 17, 18 Hughes v. United States, 953 F.2d 531 (9th Cir. 1992) ................................................................ 13 In re Olshan, 356 F.3d 1078 (9th Cir. 2004) ................................................................................ 14 Johnson v. Commercial Bank, 284 Or. 675 (Or. 1978) ................................................................ 20 Oliver v. United States, 921 F.2d 916 (9th Cir. 1990) .................................................................. 13 Palmer v. U.S. Internal Rev. Serv., 116 F.3d 1309 (9th Cir. 1997) .............................................. 14 Perez v. United States, 312 F.3d 191 (5th Cir. 2002) ............................................................. 15, 16 Purcell v. United States, 1 F.3d 932 (9th Cir. 1993) .................................................................... 17 Robson v. C.I.R., T.C. Memo 2000-201 (T.C. 2000) .............................................................. 15, 16 Spotts v. United States, 429 F.3d 248 (6th Cir. 2005) .................................................................. 21 Towe Antique Ford, 791 F. Supp. 2d ............................................................................................ 21 Towe Antique Ford, 791 F. Supp. ................................................................................................. 20 United States v. Boyle, 469 U.S. 241 (1985) ................................................................................ 19 United States v. Jones, 33 F.3d 1137 (9th Cir. 1994) ................................................................... 14 United States v. Stonehill, 702 F.2d 1288 (9th Cir. 1983) ............................................................ 14 United States v. Wheeler, 403 Fed. Appx. 301 (9th Cir. 2010) .................................................... 21 Weimerskirch v. Commissioner, 596 F.2d 358 (9th Cir. 1979) .................................................... 14 Statutes: 26 U.S.C. § 6601(a) ................................................................................................................ 16, 17 26 U.S.C. § 6651(a)(1) .................................................................................................................. 18 26 U.S.C. § 6651(a)(2) .................................................................................................................. 18 26 U.S.C. § 6654(c) ...................................................................................................................... 17 26 U.S.C. § 7491(c) ...................................................................................................................... 17 26 U.S.C. §§ 6201-6203 ............................................................................................................... 13 26 U.S.C. §§ 6303(a) & 6321 ....................................................................................................... 13 26 U.S.C. §§ 6601 ......................................................................................................................... 26 28 U.S.C. § 1961(c) ...................................................................................................................... 26 Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 4 of 32 iii Miscellaneous: Or. Rev. Stat. § 95.230(1)(a)......................................................................................................... 24 Or. Rev. Stat. § 95.230(2) ............................................................................................................. 24 Or. Rev. Stat. § 95.230(2)(a)......................................................................................................... 24 Or. Rev. Stat. § 95.230(2)(b) ........................................................................................................ 24 Or. Rev. Stat. § 95.230(2)(h) ........................................................................................................ 25 Or. Rev. Stat. § 95.230(2)(j) ......................................................................................................... 25 Or. Rev. Stat. § 95.260 .................................................................................................................. 25 Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 5 of 32 2 The United States filed this lawsuit to reduce to judgment its tax assessments against Allan Lehmann and foreclose its tax liens against real property owned by him located at 7150 SW Hoodview Place in Washington County, Oregon. The United States asks the Court to enter summary judgment against Mr. Lehmann for his tax liabilities for 1997 through 2006, 2008 and 2009. The United States also asks the Court to find that the transfer of the 7150 SW Hoodview Property from Mr. Lehmann to The Allan Lehmann and Jan Lehmann Joint Revocable Living Trust is voided, that the IRS’s liens attach to the property and that the United States may enforce and foreclose its liens. The United States also asks the Court to enter summary judgment against Jan Lehmann because her only interest in the property at issue in this lawsuit is as a trustee of Mr. Lehmann’s nominee, The Allan Lehmann and Jan Lehmann Joint Revocable Living Trust. Finally, the United States asks the Court to enter judgment against Velocity Investments because it does not have any interest in the property at issue in this case. FACTS 1. On November 25, 2014, the United States filed this lawsuit seeking to reduce to judgment certain tax assessments against Mr. Lehmann and foreclose federal tax liens against a parcel of real property owned by Mr. Lehmann (and currently held by his nominee or alter-ego The Allan Lehmann and Jan Lehmann Joint Revocable Living Trust) located at 7150 SW Hoodview Place in Washington County, Oregon. See Docket Entry No. 1. 2. In its Complaint, the United States asked the Court to reduce to judgment Mr. Lehmann’s tax liabilities for 1997 through 2006, and 2008 through 2009. Docket Entry No. 1 at ¶¶ 20 & 26. Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 6 of 32 3 3. Since 1986, Mr. Lehmann has been an independent contractor for Allied Van Lines. Deposition of Allan Lehmann (Lehmann Depo.) at 15 (line 22)-16 (line 14).1 He drives a truck transporting household goods from point A to point B. Id. at 17 (line 25)-18 (line 6). As an independent contractor, Mr. Lehmann is responsible for paying all of his employment and income taxes. Id. at 16 (line 11)-17 (line 7). 4. At the time this lawsuit was filed, Mr. Lehmann had only filed tax returns for two of the years involved in this lawsuit, 2004 and 2005. See Lehmann Depo. at 53 (lines 20-25) (Mr. Lehmann says that he has not filed any returns for the years involved in this lawsuit except for 2004 and 2005). Mr. Lehmann had not filed tax returns for 1997 through 2003, 2006, 2008 or 2009. Id. Mr. Lehmann’s Tax Liabilities 5. On May 16, 2003, the IRS issued Notices of Deficiency to Mr. Lehmann for 1997, 1998, 1999 and 2000. Exhibits KK, LL, MM, and NN2; Lehmann Depo. at 52 (line 21)-53 (line 12), 60 (lines 3-19), 64 (lines 17-25), and 68 (lines 1-15). Mr. Lehmann did not challenge any of those Notices in Tax Court. See Lehmann Depo. at 54 (lines 8-12), 60 (lines 20-22), 65 (lines 3-5), and 68 (lines 16-17). Based on those Notices, the IRS made the following assessments against Mr. Lehmann for 1997, 1998, 1999 and 2000. Exhibits Y, Z, AA, BB attached to the Declaration of Denise L. Armstrong (Armstrong Decl.). 1 Relevant excerpts from the Lehmann Depo. are attached as Exhibit TT to the Declaration of Goud P. Maragani (Maragani Decl.). 2 All exhibits referenced in this motion are attached to the Maragani Decl. unless stated otherwise. Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 7 of 32 4 Tax Type Tax Year Assessment Date Assessment Amount 1040 1997 9/29/2003 11/7/2011 5/12/2014 T: $39,399.00 I: $22,216.24 ETP: $2,117.19 LFP: $8,381.03 FTP: $9,312.25 FCC: $20.00 FCC: $50.00 1040 1998 9/29/2003 ETP: $1,862.18 LFP: $9,231.53 T: $41,029.00 I: $18,896.01 FTP: $10,257.25 1040 1999 9/29/2003 9/5/2005 ETP: $2,028.53 LFP: $9,504.00 T: $42,240.00 I: $13,943.21 FTP: $8,870.40 FTP: $1,689.60 1040 2000 9/29/2003 9/5/2005 ETP: $1,830.22 LFP: $7,656.53 T: $34,029.00 I: $6,707.08 FTP: $5,104.35 FTP: $3,402.90 Key: T: Tax Assessed ETP: Estimate Tax Penalty I: Interest FTP: Failure to Pay Tax Penalty FCC: Fees and Collection Costs 6. On December 6, 2004, the IRS issued a Notice of Deficiency to Mr. Lehmann for 2001. Armstrong Decl., Exhibit CC at 2 (“90 day letter undeliverable”); Lehmann Depo. at 71 (line 18)-72 (line 20). On April 13, 2006, the IRS issued a Notice of Deficiency to Mr. Lehmann for 2002. Exhibit OO; see Lehmann Depo. at 73 (lines 11-15); 75 (lines 4-7). On June 12, 2006, the IRS issued a Notice of Deficiency to Mr. Lehmann for 2003. Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 8 of 32 5 Exhibit PP. On November 19, 2012, the IRS issued a Notice of Deficiency to Mr. Lehmann for 2006. Exhibit QQ. On November 19, 2012, the IRS issued a Notice of Deficiency to Mr. Lehmann for 2008. Exhibit RR; see Lehmann Depo. at 77 (lines 11- 25). On November 19, 2012, the IRS issued a Notice of Deficiency to Mr. Lehmann for 2009. Exhibit SS; see Lehmann Depo. at 80 (lines 2-6). Mr. Lehmann did not challenge any of these Notices in Tax Court. See Lehmann Depo. at 72 (lines 21-23), 75 (lines 10- 12), 60 (line 23)-61 (line 1), 78 (lines 3-5), and 80 (lines 15-17). Based on these Notices, the IRS made the following assessments against Mr. Lehmann for 2001, 2002, 2003, 2006, 2008 and 2009. Armstrong Decl., Exhibits CC, DD, EE, FF, HH, II and JJ. Tax Type Tax Year Assessment Date Assessment Amount 1040 2001 12/6/2004 9/5/2005 9/4/2006 ETP: $1,761.08 LFP: $10,012.95 T: $44,502.00 I: $7,679.73 FTP: $7,120.32 FTP: $3,782.67 FTP: $222.51 1040 2002 8/28/2006 10/16/2006 ETP: $1,471.39 LFP: $9,906.98 T: $44,031.00 I: $11,011.83 FTP: $5,283.72 FTP: $3,962.79 1040 2003 10/30/2006 12/18/2006 ETP: $955.02 LFP: $8,210.70 T: $36,492.00 I: $7,468.62 FTP: $4,379.04 FTP: $1,459.68 1040 2006 4/1/2013 ETP: $1,079.89 LFP: $5,134.28 T: $22,819.00 Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 9 of 32 6 5/20/2013 I: $8,734.12 FTP: $5,704.75 FCC: $50.00 1040 2008 4/1/2013 ETP: $1,353.28 LFP: $9,474.98 T: $42,111.00 I: $7,810.14 FTP: $10,106.64 1040 2009 4/1/2013 ETP: $789.00 LFP: $7,414.00 T: $32,954.00 I: $4,298.42 FTP: $5,931.72 Key: T: Tax Assessed ETP: Estimate Tax Penalty I: Interest FTP: Failure to Pay Tax Penalty FCC: Fees and Collection Costs 7. At the time the United States filed its Complaint, Mr. Lehmann had not filed tax returns for 1997 through 2003, 2006, 2008 or 2009. See Facts at ¶ 4 supra. The assessments against Mr. Lehmann for those years were based on examinations conducted by the IRS. See Armstrong Decl., Y, Z, AA through JJ. During the pendency of this lawsuit, Mr. Lehmann submitted returns to the United States for each of those years. See Exhibits K though T. The United States requests that the Court reduce to judgment the income tax liabilities Mr. Lehmann admitted to owing in the returns he provided to the United States for 1997 through 2003, 2006, 2008 and 2009, plus interest and penalties. Id. The tables below reflect the income tax liabilities reported in the returns Mr. Lehmann submitted during the pendency of this lawsuit. See Exhibits K though T. The IRS also recalculated the interest and penalties owed by Mr. Lehmann for each of those years based on the Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 10 of 32 7 returns filed by Mr. Lehmann. Declaration of Erika Gutierrez (Gutierrez Decl.) at ¶¶ 2 & 4. Those updated penalty and interest liabilities are also listed in the table below. Tax Type Tax Year Tax Liability Reported on Return Outstanding Balance Including Accrued but Unassessed Interest, Penalties and Credits through May 7, 2016 1040 1997 T: $28,500.00 FTP: $6,412.00 LFP: $7,125.00 ETP: $1,535.29 I: $69,512.01 $113,084.30 1040 1998 T: $23,780.00 FTP: $5,945.00 LFP: $5,350.00 ETP: $1,079.33 I: $51,056.68 $87,211.01 1040 1999 T: $24,925.00 FTP: $6,231.25 LFP: $5,608.13 ETP: $1,197.07 I: $46,527.68 $84,489.13 1040 2000 T: $6,385.00 FTP: $1,596.25 LFP: $1,436.63 ETP: $343.40 I: $10,094.18 $19,855.46 1040 2001 T: $21,156.00 FTP: $5,214.00 LFP: $4,692.60 ETP: $833.49 I: $28,710.38 $60,606.47 1040 2002 T: $24,121.00 FTP: $5,955.25 LFP: $5,359.73 ETP: $796.05 I: $29,020.68 $65,252.71 1040 2003 T: $11,941.00 FTP: $2,988.25 LFP: $2,689.43 ETP: $308.43 I: $10,915.28 $28,842.39 1040 2006 T: $8,513.00 FTP: $2,128.25 $17,568.68 Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 11 of 32 8 LFP: $1,915.43 ETP: $404.31 I: $4,607.69 1040 2008 T: $11,123.00 FTP: $2,780.75 LFP: $2,502.68 ETP: $357.46 I: $3,609.51 $20,373.40 1040 2009 T: $10,471.00 FTP: $2,617.75 LFP: $2,355.98 ETP: $250.68 I: $2,671.79 $18,367.20 Key: T: Tax Assessed LFP: Late Filing Penalty ETP: Estimate Tax Penalty I: Interest FTP: Failure to Pay Tax Penalty 8. The IRS made the following assessments against Mr. Lehmann for 2004 and 2005 based on examinations it conducted. See Armstrong Decl., Exhibits FF & GG. Tax Type Tax Year Assessment Date Assessment Amount 1040 2004 10/30/2006 12/18/2006 ETP: $348.78 LFP: $9,618.53 T: $42,749.00 I: $5,986.73 FTP: $2,778.69 ETP: $892.09 FTP: $1,496.21 1040 2005 5/19/2008 9/6/2010 ETP: $655.11 LFP: $9,535.73 T: $42,381.00 I: $9,027.87 FTP: $5,509.53 ETP: $1,044.86 FTP: $5,085.71 9. On May 2, 2013, Mr. Lehmann filed his 2004 return with the IRS. Exhibit U. On March 25, 2013, Mr. Lehmann filed his 2005 return with the IRS. Exhibit W. At his deposition, Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 12 of 32 9 Mr. Lehmann authenticated both of these returns and verified their accuracy. Lehmann Depo. at 85 (line 12)-91 (line 20). For these two years, the United States requests that the Court reduce to judgment the income tax liabilities Mr. Lehmann admitted to owing in the returns he provided to the IRS. The tables below reflect the income tax liabilities Mr. Lehmann reported in the returns he filed for 2004 and 2005 with the IRS. See Exhibits U & W. The IRS also recalculated the interest and penalties owed by Mr. Lehmann for each of those years based on the returns filed by Mr. Lehmann. Gutierrez Decl. at ¶¶ 2 & 4. Those updated penalty and interest liabilities are also listed in the table below. Tax Type Tax Year Tax Liability Reported on Return Outstanding Balance Including Accrued but Unassessed Interest, Penalties and Credits through May 7, 2016 1040 2003 T: $11,941.00 FTP: $2,988.25 LFP: $2,689.43 ETP: $308.43 I: $10,915.28 $28,842.39 1040 2004 T: $12,171.00 FTP: $3,042.75 LFP: $2,738.48 ETP: $348.78 I: $9,899.77 $28,200.78 Key: T: Tax Assessed LFP: Late Filing Penalty ETP: Estimate Tax Penalty I: Interest FTP: Failure to Pay Tax Penalty Mr. Lehmann’s Property 10. On May 7, 2003, Richard Lehmann, the taxpayer’s father, purchased a home at 7150 SW Hoodview Place, Beaverton, Oregon. Exhibit E; Lehmann Depo. at 33 (line 6)-35 (line 6). The legal description of this property is: Lot 5, ORCHARD HEIGHTS, in the City of Beaverton, County of Washington and State of Oregon. See Exhibit E. On December 1, Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 13 of 32 10 2004, Richard Lehmann transferred the 7150 SW Hoodview property (along with two other properties) to the Richard E. Lehmann Trust. Exhibit F; Lehmann Depo. at 35 (lines 8)-36 (line 3). According to Mr. Lehmann, his father placed the properties in a trust so that his children “wouldn’t have to pay any inheritance tax.” Lehmann Depo. at 36 (lines 4-8). 11. Mr. Lehmann’s father died in June of 2006. Lehmann Depo. at 41 (lines 10-21). On June 21, 2006, Mr. Lehmann and his sister, Nancy Lehmann, as trustees of their father’s trust (The Richard E. Lehmann Trust) transferred the 7150 SW Hoodview property to Mr. Lehmann. Exhibit G; Lehmann Depo. at 40 (lines 7-23). 12. On June 21, 2006 (the same day the property was transferred to him), Mr. Lehmann and his wife, Jan Lehmann, created The Allan Lehmann and Jan Lehmann Joint Revocable Living Trust (Trust), an entity that is nothing more than a nominee or alter-ego of Mr. Lehmann set up to shield Mr. Lehmann’s assets from the IRS. See Exhibit I; Lehmann Depo. at 48 (line 8)-49 (line 1). On the same day, Mr. Lehmann transferred the 7150 SW Hoodview property to himself and his wife (Jan Lehmann) as co-trustees of the Trust. Exhibit H; Lehmann Depo. at 43 (lines 3-22). The Trust did not pay any money for the property. See Exhibit H (“The trust consideration for this conveyance is: $-ZERO-.”); Lehmann Depo. at 43 (lines 23)-44 (line 1) &104 (line 24)-105 (line 6). After the house was transferred to the Trust, Mr. Lehmann and his wife continued (and continue to this day) to live in the house. Lehmann Depo. at 44 (lines 18-20). Mr. Lehmann and his wife do not pay the Trust rent to live in the house. Deposition of Jan Lehmann at 28 (line 22)- Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 14 of 32 11 19 (line 3).3 Mr. Lehmann continues to be responsible for paying the property taxes on the house. See Lehmann Depo. at 44 (lines 9-14) & 105 (lines 7-20). He also continues to be responsible to maintaining the house. Lehmann Depo. at 44 (line 21)-45 (line 3). In sum, after the transfer of the 7150 SW Hoodview property from Mr. Lehmann to the Trust, nothing changed besides the putative owner of the house. 13. The Trust has only two trustees—the taxpayer and his wife. See Exhibit I. The only real property owned by the Trust is the taxpayer’s residence, 7150 SW Hoodview property. Id. Mr. Lehmann also gave six vehicles to the Trust, including a Kawasaki Motorcycle. Id. at Schedule A. Mr. Lehmann testified that, although he gave the motorcycle to the Trust, he never transferred title to the motorcycle from himself to the Trust. Lehmann Depo. at 49 (line 21)-50 (line 14). Ultimately, Mr. Lehmann sold the motorcycle to a private party without notifying anyone else related to the Trust. Id. at 49 (line 21)-50 (line 6). Both Mr. and Mrs. Lehmann testified that the Trust does not have any income. Deposition of Jan Lehmann at 29 (lines 6-7); Lehmann Depo. at 49 (lines 2-3). Mr. Lehmann testified that he transferred the 7150 SW Hoodview property to the Trust on the same day he received it because “[i]f my dad did it . . . I thought it was a good idea.” Lehmann Depo. at 47 (lines 2-5). As previously discussed, Mr. Lehmann’s dad used a trust to evade taxes. See supra ¶ 7. Mrs. Lehmann testified that Mr. Lehmann “wanted a trust for his kids . . . [p]robably just because he didn’t want them to pay taxes . . . .” Deposition of Jan Lehmann at 26 (lines 16-21). 3 Relevant excerpts from the Deposition of Jan Lehmann are attached as Exhibit UU to the Maragani Decl. Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 15 of 32 12 Notice of Federal Tax Liens 14. On October 17, 2011, the IRS filed a Notice of Federal Tax Lien in Washington County, Oregon that listed Mr. Lehmann’s federal income tax liabilities for 1997 through 2005. Exhibit A at 2. The Notice indicates that the IRS needed to refile a Notice of Federal Tax Lien for 1997 through 2000 by October 29, 2013. Id. 15. On May 2, 2013, the IRS filed a Notice of Federal Tax Lien in Washington County, Oregon that listed Mr. Lehmann’s federal income tax liabilities for 2006, 2008 and 2009. Exhibit B. 16. On November 20, 2013, the IRS filed a Revocation of Certificate of Release of Federal Tax Lien indicating that “[t]he automatic release of federal tax lien is revoked only as it relates to the tax liabilities [of Allan Lehmann] listed in this revocation [i.e., 1997, 1998, 1999, 2000].” Exhibit C at 2. The IRS filed this Revocation because a “Notice of Federal Tax Lien was not refiled timely.” Id. at 3. 17. On April 22, 2014, the IRS filed a Notice of Federal Tax Lien in Washington County, Oregon that listed Mr. Lehmann’s federal income tax liabilities for 1997 through 2000. Exhibit D. Velocity Investments 18. The government named Velocity Investments as a defendant because it may claim an interest in the 7150 SW Hoodview property. Docket Entry No. 1 at ¶ 9. 19. Velocity Investments has a judgment against Jan Lehmann for $5,430.00. Lehmann Depo. at 29 (line 24)-30 (line 11). Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 16 of 32 13 20. On June 26, 2015, the Clerk of the Court entered default against Velocity Investments because it was properly served but failed to file a response to the United States’ Complaint. Docket Entry No. 20. 21. Mr. Lehmann testified that neither he nor his wife know anything about Velocity Investments or its judgment against Jan Lehmann. See Lehmann Depo. at 29 (line 24)-30 (line 11). 22. Mrs. Lehmann testified that she does not know anything about Velocity Investments or the judgment against her. Deposition of Jan Lehmann at 15 (line 13)-16 (line 3). ANALYSIS 1. Mr. Lehmann is liable for federal income taxes, interest and penalties for 1997 through 2006, 2008 and 2009. “In an action to collect tax, the government bears the initial burden of proof. The United States, however, may satisfy this initial burden by introducing into evidence its assessment of taxes due. Normally, introduction of the assessment establishes a prima facie case.” Oliver v. United States, 921 F.2d 916, 919 (9th Cir. 1990) (internal citations omitted). Certificates of Assessments, Payments and Other Specified Matters for the federal income taxes at issue in this case with regard to Mr. Lehmann are attached as Exhibits Y through JJ to the Armstrong Declaration filed herewith. These Form 4340s are probative evidence. They establish that the tax liabilities were properly assessed against Mr. Lehmann by a duly authorized delegate of the Secretary of Treasury, 26 U.S.C. §§ 6201-6203, and that the notices and demand for payment of the liabilities were properly sent. 26 U.S.C. §§ 6303(a) & 6321. See, e.g., Hansen v. United States, 7 F.3d 137, 138 (9th Cir. 1993) (per curiam); Hughes v. United States, 953 F.2d 531, 535 (9th Cir. 1992). Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 17 of 32 14 Furthermore, tax assessments are presumed to be correct when they are supported by a minimal evidentiary foundation.4 See, e.g., In re Olshan, 356 F.3d 1078, 1084 (9th Cir. 2004). The factual foundation and the assessment establish a prima facie case for the government. See, e.g., United States v. Stonehill, 702 F.2d 1288, 1293-94 (9th Cir. 1983); see also United States v. Jones, 33 F.3d 1137, 1139 (9th Cir. 1994). The returns can be sorted into two groups. The first group consists of Mr. Lehmann’s 2004 and 2005 tax liabilities. The United States seeks judgment based on the returns Mr. Lehmann filed with the IRS for 2004 and 2005. See Facts at ¶ 9 supra. At his deposition, he admitted that the liabilities he presented in his 2004 and 2005 tax returns were correct. The second group consists of his liabilities for 1997 through 2003, 2006, 2008 and 2009. The IRS made assessments against Mr. Lehmann for these years after he failed to respond to any of the Notices of Deficiency that were sent regarding these liabilities. Id. at ¶¶ 5-6 supra. During this litigation, Mr. Lehmann submitted returns for all of these years. Id. at ¶ 7. Those returns are admissions by Mr. Lehmann that he owes the amount of income tax reported in those returns. 4 Ninth Circuit precedent is uncertain as to whether the minimal evidentiary foundation is only required in cases not involving illegal income. Compare Palmer v. U.S. Internal Rev. Serv., 116 F.3d 1309, 1312 (9th Cir. 1997) (suggesting minimal evidentiary foundation is required in all cases), with Hardy v. Commissioner, 181 F.3d 1002, 1005 (9th Cir. 1999) (discussing Weimerskirch v. Commissioner, 596 F.2d 358 (9th Cir. 1979), and suggesting that its requirement of a minimal evidentiary foundation had not been extended beyond illegal income cases). Regardless of whether a minimal evidentiary foundation is required in every case, the United States has provided one here, so the tax assessments should be presumed correct. Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 18 of 32 15 a. Mr. Lehmann’s income tax liabilities for 2004 and 2005 are based on the income tax liabilities he reported in tax returns (Form 1040) he submitted for those years. The United States seeks judgment against Mr. Lehmann for 2004 and 2005 based on tax returns he filed with the IRS. See Exhibits U & W. Mr. Lehmann admitted that these returns are an accurate reflection of his tax liabilities for those years in his deposition. Lehmann Depo. at 85 (line 12)-91 (line 20). The United States’ proof exceeds the minimal factual foundation necessary to entitle its assessment of tax to the presumption of validity. See Perez v. United States, 312 F.3d 191, 195 (5th Cir. 2002) (“IRS Forms 4340 and 4549 are appropriate sources evidencing the IRS’s assessment and notice of tax arrears”); United States v. Molen, 113 A.F.T.R.2d (RIA) 2166, *23- *24 (“[D]efendants’ signed tax returns are not hearsay because they are statements made by defendants being offered as evidence against defendants.”); Robson v. C.I.R., T.C. Memo 2000- 201 (T.C. 2000) (“Statements on federal tax returns are admissions under rule 801(d)(2) of the Federal Rules of Evidence and will not be overcome without cogent evidence that they are wrong.”). Thus, Mr. Lehmann is liable for $12,171.00 in tax for 2004 and $16,332.00 for 2005. Exhibits U & W. b. Mr. Lehmann has admitted that he owes income tax for 1997 through 2003, 2006, 2008 and 2009. The income tax assessments against the Mr. Lehmann for 1997 through 2003, 2006, 2008 and 2009 are based on examinations conducted by the IRS. See Exhibits Y through JJ attached to the Armstrong Decl. At the time the assessments were made, Mr. Lehmann had not filed tax returns for any of these years. Facts at ¶ 4. During the pendency of this case, Mr. Lehmann provided the United States returns for each of those years that he had prepared after this litigation began. See Exhibits K through T (the returns were signed by Mr. Lehmann on December 18, Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 19 of 32 16 2015 which is after this lawsuit was filed). Those returns show income tax liabilities that are lower than the assessments made by the IRS. Compare ¶ 7 (income tax liabilities reported in returns filed by Mr. Lehmann) supra with ¶¶ 5 & 6 supra (original assessments based on examinations conducted by the IRS). Those returns are admissions by Mr. Lehmann that he owes the amount of income tax listed in the tax return for that year. United States v. Molen, 113 A.F.T.R.2d (RIA) 2166, *23-*24 (“[D]efendants’ signed tax returns are not hearsay because they are statements made by defendants being offered as evidence against defendants.”). The United States seeks judgment for income tax deficiencies reflected on these newly-submitted returns, and for interest and penalties owed on those new tax deficiencies. Therefore, the United States’ proof exceeds the minimal factual foundation necessary to entitle its assessment of tax to the presumption of validity. See Perez v. United States, 312 F.3d 191, 195 (5th Cir. 2002) (“IRS Forms 4340 and 4549 are appropriate sources evidencing the IRS’s assessment and notice of tax arrears”); Robson v. C.I.R., T.C. Memo 2000-201 (T.C. 2000) (“Statements on federal tax returns are admissions under rule 801(d)(2) of the Federal Rules of Evidence and will not be overcome without cogent evidence that they are wrong.”). Thus, Mr. Lehmann is liable for the following amounts of tax for each year: $28,500 for 1997, $23,780 for 1998, $24,925 for 1999, $6,385 for 2000, $21,156 for 2001, $24,121 for 2002, $11,941 for 2003, $8,513 for 2006, $11,123 for 2008 and $10,471 for 2009. See Gutierrez Decl. at ¶ 4; Exhibits T through Z. c. Mr. Lehmann is liable for interest and penalties accruing on his tax liabilities for 1997 through 2006, 2008 and 2009. Statutory interest begins to accrue on federal income tax liabilities on the date the return is due, April 15 of the following year. See 26 U.S.C. § 6601(a), (b); id. § 6072(a) (setting filing deadline for individual income tax returns); see also id. §§ 6621(b), 6622 (setting parameters of Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 20 of 32 17 interest); id. § 6601(e)(1) (requiring interest to be treated as tax). Interest continues to accrue until the liability is paid in full. See id. § 6601(a). Interest also accrues on penalties from the date notice and demand is made for the penalties. Id. § 6601(e)(2)(A). Interest is mandatory: once the taxpayer’s liability for the assessment is established, the taxpayer cannot contest the legality of the interest. See Purcell v. United States, 1 F.3d 932, 942-43 (9th Cir. 1993). In addition to interest, penalties have accrued in connection with the Mr. Lehmann’s 1997 through 2006, 2008 and 2009 federal income tax liabilities. The government bears the burden of production to establish liability for a penalty, 26 U.S.C. § 7491(c), but if that burden is met, the taxpayer bears the ultimate burden of proof, e.g., Higbee v. Commissioner, 116 T.C. 438, 446-47 (2001) (discussing § 7491(c) and its legislative history). Penalties have been imposed on Mr. Lehmann for following types of behavior: (1) failing to make estimated tax payments, (2) failing to pay the tax on time, and (3) failing to timely file his income tax returns. As discussed below, the Court should find that Mr. Lehmann owes the penalties that have accrued against him because the government has met its burden of production. Mr. Lehmann is liable for a penalty for failing to make estimated tax payments for 1997 through 2003, 2006, 2008 and 2009. Mr. Lehmann was required to remit four estimated income tax payments each year. See 26 U.S.C. § 6654(c), (d). Federal law imposes a penalty when the payments are not made. See id. § 6654(a). For 1997 through 2006, 2008 and 2009, Mr. Lehmann did not make any estimated income tax payments to the IRS. See page 2 of Exhibits U & W (payment section of Mr. Lehmann’s 2004 and 2005 returns show that Mr. Lehmann did not pay the IRS any money toward his 2004 and 2005 tax liabilities); Exhibits K through T at 2 (the payments section of Mr. Lehmann’s tax returns show that he did not pay any money toward his 1997 through 2003, 2006, 2008 or 2009 tax liabilities). Because Mr. Lehmann did not make any Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 21 of 32 18 estimated income tax payments, the IRS properly imposed the following penalties: $1,535.29 for 1997; $1,079.33 for 1998; $1,197.07 for 1999; $343.40 for 2000; $833.49 for 2001; $796.05 for 2002; $308.43 for 2003; $348.78 for 2004; $655.11 for 2005; $404.31 for 2006; $357.46 for 2008; and $250.68 for 2009. Gutierrez Decl. at ¶ 4. Mr. Lehmann also accrued a penalty for failing to pay his 1997 through 2006, 2008 and 2009 income taxes on time. Federal law imposes a monthly penalty of 0.5% of the tax due if it is not paid following notice and demand. 26 U.S.C. § 6651(a)(2). The penalty cannot exceed 25% of the tax due. Id. Mr. Lehmann is liable for this penalty for 1997 through 2006, 2008 and 2009 because he did not timely pay his liabilities for these years or demonstrate that his failure to timely pay was due to reasonable cause. See page 2 of Exhibits U & W (payment section of Mr. Lehmann’s 2004 and 2005 returns show that Mr. Lehmann did not pay any money toward his 2004 and 2005 tax liabilities); Exhibits K through T at 2 (the payments section of Mr. Lehmann’s 1997 through 2003, 2006, 2008 or 2009 tax returns show that he did not pay any money toward his tax liabilities for any of these years). Thus, the IRS properly imposed this penalty in the following amounts: $6,412.00 for 1997; $5,945.00 for 1998; $1,197.07 for 1999; $343.40 for 2000; $833.49 for 2001; $796.05 for 2002; $308.43 for 2003; $2,778.69 for 2004; $5,509.53 for 2005; $404.31 for 2006; $357.46 for 2008; and $250.68 for 2009. Gutierrez Decl. at ¶ 4. Mr. Joling also accrued another penalty for failing to file his 1997 through 2003, 2006, 2008 and 2009 income tax returns on time. See page 1 of Exhibit U (showing the 2004 return was filed on May 2, 2013); Exhibit W (showing that the 2005 return was filed on March 25, 2013); Exhibits K through T at 2 (showing that Mr. Lehmann signed the tax returns on December 18, 2015). Under 26 U.S.C. § 6651(a)(1), a taxpayer who fails to file a return on time Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 22 of 32 19 is liable for a penalty of 5% of the unpaid tax for each month (or fraction of a month) the return is filed late, up to a maximum of 25%. The penalty is reduced, however, by the amount of failure-to-pay penalty that accrues the same month. See § 6651(c)(1). The deadline for filing a return is determined by including “any extension of time for filing.” See § 6651(a)(1). Income tax returns made on the basis of a calendar year must be filed on or before April 15th of the following year. See § 6072(a). The IRS is authorized to extend the deadline for filing an income tax return by six months. See § 6081(a). Thus, the latest a taxpayer can timely file a return is October 15th of the year following the calendar year for which the return is being filed. The penalty does not apply if the failure to file was “due to reasonable cause and not due to willful neglect.” Id. Once the government meets its burden of production, the taxpayer bears the “heavy burden” of showing both reasonable cause and lack of willful neglect. United States v. Boyle, 469 U.S. 241, 245 (1985). Under the applicable Treasury Regulations, a taxpayer shows “reasonable cause” if he “exercised ordinary business care and prudence and was nevertheless unable to file the return within the prescribed time.” 26 C.F.R. § 301.6651-1(c)(1). Unless the taxpayer establishes both elements, imposition of the penalties is mandatory. See, e.g., Estate of Charania v. Shulman, 608 F.3d 67 (1st Cir. 2010). Reliance on an agent – such as a tax preparer – to file the return on time does not constitute reasonable cause. See Boyle, supra, 469 U.S. at 249-52. 2004 and 2005 tax return The latest Mr. Lehmann could have timely filed his 2004 tax return was in October 2005, and the latest he could have filed his 2005 tax return was in October 2006. Mr. Lehmann filed both of these returns in 2013, years after they were due. See Facts at ¶ 9 supra. Mr. Lehmann is liable for this penalty because he did not file his 2004 or 2005 tax returns within the time Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 23 of 32 20 prescribed by law and did not show that the failure to timely file was due to reasonable cause. See Exhibits U & W. Thus, the IRS properly imposed a penalty of $9,618.53 against Mr. Lehmann for 2004 and $9,535.73 for 2005. See Gutierrez Decl. at ¶ 4. 1997 through 2003, 2006, 2008 and 2009 tax returns Of this batch, the most recent return (2009) has the latest filing deadline (October 2010). Mr. Lehmann provided all the returns in this batch to the United States after he signed them on December 18, 2015, which is more than five years after the return for 2009 could have been timely filed. See Exhibits K through T at 2 (showing that Mr. Lehmann signed the tax returns on December 18, 2015). Accordingly, Mr. Lehmann is liable for this penalty because he did not file his 1997 through 2003, 2006, 2008 and 2009 tax returns within the time prescribed by law and did not show that the failure to timely file was due to reasonable cause. Thus, the IRS properly imposed this penalty in the following amounts: $7,125.00 for 1997; $5,350.00 for 1998; $5,608.13 for 1999; $1,436.63 for 2000; $4,692.60 for 2001; $5,359.73 for 2002; $2,689.43 for 2003; $1,915.43 for 2006; $2,502.68 for 2008; and $2,355.98 for 2009. See Gutierrez Decl. at ¶ 4. 2. The Allan Lehmann and Jan Lehmann Joint Revocable Living Trust is a nominee of Mr. Lehmann with respect to the property at issue in this lawsuit. Although the Supreme Court of Oregon has recognized that a debtor cannot shield property from collection by transferring nominal title to another, it has not set out a list of factors to determine whether beneficial ownership continues to rest with the debtor. See Johnson v. Commercial Bank, 284 Or. 675, 680-83 (Or. 1978); 911 Mgmt. v. U.S., 657 F. Supp. 2d 1186, 1193 (D. Or. 2011). In the absence of specific guidance from state courts, the federal courts in this Circuit have developed ten factors to test whether a person is a taxpayer’s nominee. See 911 Mgmt., 657 F. Supp. 2d at 1193-94 (citing Towe Antique Ford, 791 F. Supp. at 1454, and The Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 24 of 32 21 Colby B. Found. v. United States, No. 96-cv-3073-CO, 1997 WL 1046002 (D. Or. Oct. 22, 1997)); see also Fourth Investment LP v. United States, 720 F.3d 1058 9th Cir. 2013); United States v. Wheeler, 403 Fed. Appx. 301 (9th Cir. 2010). The factors are flexible and should be tailored to the facts of the particular case. See id. at 1195. No single factor is dispositive. Id. The factors are: (1) whether the nominee paid adequate consideration; (2) whether the transferor made the transfer in anticipation of litigation or liabilities; (3) the nature of the relationship between the transferor and the nominee; (4) whether the transferor or nominee recorded the conveyance; (5) whether the transferor maintained possession; (6) whether the transferor continued to possess the property; (7) the source of the funds by which the nominee acquired the property; (8) the transferor’s use of the property without paying fair value; (9) whether the transferor continued to bear the burdens of ownership; and (10) whether the transferor held himself out as the owner. 911 Mgmt., 657 F. Supp. 2d at 1193-94 (quoting Towe Antique Ford, 791 F. Supp. 2d at 1454, and citing The Colby B. Found., 1997 WL 1046002, at *20); See Fourth Investment LP, 720 F.3d at 1069 n.6 (citing Spotts v. United States, 429 F.3d 248, 253 n.2 (6th Cir. 2005)). As discussed below, the factors plainly weigh in favor of a finding that The Allan Lehmann and Jan Lehmann Joint Revocable Living Trust (Trust), the entity that currently holds nominal title to Mr. Lehmann’s home, is his nominee. a. The Trust is a nominee of Mr. Lehmann. Mr. Lehmann transferred the 7150 SW Hoodview Place to the Trust on the same day it was transferred to him from his father’s trust. As of the filing of this motion, the Trust still has nominal title of the 7150 SW Hoodview Place property. For the reasons discussed below, the Towe factors weigh in favor of finding that the Trust is a nominee of Mr. Lehmann. Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 25 of 32 22 First, the Trust paid no consideration for the 7150 SW Hoodview Place property. See 911 Mgmt., 657 F. Supp. 2d at 1193 (first Towe factor). Mr. Lehmann testified that the Trust did not pay him anything for the 7150 SW Hoodview Place property. Lehmann Depo. at 43 (line 23)-44 (line 1) & 104 (line 24)-105 (line 6). In addition, the Statutory Warranty Deed transferring the property from Mr. Lehmann to the Trust says that “[t]he trust consideration for this conveyance is: $-ZERO-.” Exhibit H. Second, it is clear that Mr. Lehmann transferred title to the Trust to try to avoid federal tax liabilities that had already been assessed and in anticipation of federal tax liabilities that would be assessed in the future. See 911 Mgmt., 657 F. Supp. 2d at 1193 (second Towe factor). Mr. Lehmann transferred the property to the Trust on June 21, 2006, immediately after the property was transferred to him. Facts at ¶ 12 supra. At the time he transferred the property to the Trust, the IRS had issued Mr. Lehmann Notices of Deficiency for 1997, 1998, 1999, 2000, 2001, 2002 and 2003. See id. at ¶¶ 5 & 6. Mr. Lehmann would not admit during his deposition that he set up the Trust to protect his home from the IRS and other creditors. See Lehmann Depo. Mr. Lehmann testified that he set up a trust because “if my dad had the idea, . . . it wasn’t a bad idea.” Lehmann Depo. at 37 (lines 5-7). Mr. Lehmann also testified that his father set up a trust so that Mr. Lehmann and his sister would not “have to pay any inheritance tax.” Facts at ¶ 10 supra. In other words, Mr. Lehmann recognized that his father was using a trust to retain control over property without such property being subject to tax collection. In addition, Mrs. Lehmann testified that she thinks Mr. Lehmann set up the Trust because he did not want his children to pay taxes. Id. at ¶ 13. Under these circumstances, the Court can infer that Mr. Lehmann set up the Trust to avoid his federal tax liabilities (the ones already existing at the time he set up the Trust and new ones he was accruing by failing to pay his taxes). Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 26 of 32 23 Third, Mr. Lehmann has a close relationship with the trustees of the Trust—namely, himself and his wife. See 911 Mgmt., 657 F. Supp. 2d at 1193 (third Towe factor). Mr. Lehmann and his wife are the only trustees of the Trust. Facts at ¶ 13 supra. Fourth, Mr. Lehmann did not record his conveyance of a motorcycle to the Trust. See 911 Mgmt., 657 F. Supp. 2d at 1193 (fourth Towe factor). According to Schedule A of Exhibit I, the Trust owns a Kawasaki motorcycle. Facts at ¶ 13 supra. Mr. Lehmann testified that, although he gave the Kawasaki motorcycle to the Trust, he never transferred title to the motorcycle to the Trust. See id. at ¶ 12. Ultimately, he sold the motorcycle without informing the Trust. See id. at ¶ 12. Fifth, Mr. and Mrs. Lehmann maintained possession of the property after Mr. Lehmann transferred the property to the Trust. See 911 Mgmt., 657 F. Supp. 2d at 1193 (fifth and sixth Towe factors). For example, they continued to live (and continue to live to this day) in the property after it was transferred to the Trust. Facts at ¶ 20 supra. In addition, they do not pay the Trust any compensation for living in the property. Id. They also continue to be responsible for performing maintenance on the property even though it was transferred to the Trust. Id. Finally, the Trust was revocable at his or his wife’s discretion. Sixth, the Mr. Lehmann continues to bear the benefits and burdens of the properties that were transferred to the Trust. See 911 Mgmt., 657 F. Supp. 2d at 1193-94 (fifth and sixth Towe factors and all four The Colby B. Found. factors). For example, as previously discussed, Mr. Lehmann and his wife continued to live (and continue to live presently) in the property after it was transferred to the Trust. Facts at ¶ 20 supra. Mr. Lehmann continues to be responsible for paying the property taxes on the property. Id. Mr. and Mrs. Lehmann also continue to be responsible for maintaining the house. Id. In addition, the Court can infer that Mr. Lehmann Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 27 of 32 24 personally kept the money from the motorcycle that he sold, discussed in the Fourth factor above, rather than give the proceeds to the Trust because he did not inform anyone associated with the Trust that he sold it and the Trust has never had any income. Id. at ¶ 12. Seventh, Mr. Lehmann and his wife use the property without paying fair value. See 911 Mgmt., 657 F. Supp. 2d at 1193 (second The Colby B. Found. factor). Mr. and Mrs. Lehmann have never paid the Trust rent to live in the property. Facts at ¶ 20 supra. b. In the alternative, the transfer of the property to the Trust was fraudulent with respect to the United States. In the alternative, the Court should hold that the transfer the property to the Trust was fraudulent with respect to the United States. Under Oregon law, a transfer of real property is fraudulent if the transfer was made with the actual intent to hinder, delay, or defraud any creditor. Or. Rev. Stat. § 95.230(1)(a). As discussed below, the United States has provided substantial evidence from which the Court can conclude that the transfer was fraudulent with respect to the United States. The Oregon fraudulent transfer statute sets out a number of criteria that may be considered in determining the actual intent of the transferor. Or. Rev. Stat. § 95.230(2). Most of them apply here. First, the transfer was to an insider. Or. Rev. Stat. § 95.230(2)(a); see also id. § 95.200(7)(a)(A) (defining “insider” to include a “relative of the debtor”); id. § 95.200(11) (defining “relative” to include “an individual related within the third degree”). The taxpayer transferred the property from himself to his wife and himself, as trustees of the Trust. Facts at ¶ 21 supra. Other badges of fraud, explained above, apply equally here. Mr. Lehmann has retained possession and control of the property after the transfer to the Trust. Or. Rev. Stat. § 95.230(2)(b). The Trust did not pay reasonably equivalent value for any of the properties. See Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 28 of 32 25 Or. Rev. Stat. § 95.230(2)(h). Finally, Mr. Lehmann knew he had outstanding tax liabilities when he transferred the property because he has not paid taxes since at least 1997, and had received Notices of Deficiency for multiple years by the time he transferred the house from himself to the Trust. Under these circumstances, it is reasonable for the Court to find that the properties were transferred by Mr. Lehmann “shortly before [and] shortly after a substantial debt was incurred.” Or. Rev. Stat. § 95.230(2)(j). Mr. Lehmann clearly transferred his property to the Trust with the actual intent of hindering the United States from collecting his federal tax liabilities. The Court should hold that the transfer was fraudulent as to the United States. Considering Mr. Lehmann’s substantial tax liabilities and the equities of the case, the Court should further hold that the transfer is avoided; that the United States’ federal tax liens attach to the property at issue in this case; and that the United States may enforce and foreclose its liens. See Or. Rev. Stat. § 95.260. 3. The Court should also find that Velocity Investments has no interest in the 7150 SW Hoodview Place property. Velocity Investments was named as a defendant in this case because it has a judgment against Mrs. Lehmann for $5,430.00. See Facts at ¶ 18 supra. On June 26, 2015, the Clerk of the Court entered default against Velocity Investments because it was properly served but failed to file a response to the United States’ Complaint. See id. at ¶ 19. Both Mr. and Mrs. Lehmann testified that they do not know anything about Velocity Investments or its judgment against Mrs. Lehmann. Id. at ¶¶ 20-21. More importantly, Mrs. Lehmann has no interest in the property except as a trustee of the nominee set up by Mr. Lehmann. Because Velocity failed to answer the Complaint and Mrs. Lehmann has no legitimate interest in the property, the Court should enter summary judgment against Velocity Investments. Conclusion Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 29 of 32 26 For the foregoing reasons, Mr. Lehmann is personally liable for income tax, interest and penalties for the following years in the stated amounts which reflect the balance due through May 7, 2016 (plus interest continuing to accrue thereupon pursuant to 28 U.S.C. § 1961(c) and 26 U.S.C. §§ 6601, 6621 and 6622): $113,084.30 for 1997, $87,211.01 for 1998, 84,489.13 for 2000, 19,855.46 for 2001, $65,353.71 for 2002, $28,842.39 for 2003, $28,200.78 for 2004, $35,921.79 for 2005, $17,568.68 for 2006, $20,373.40 for 2008, and $18,367.20 for 2009. See Gutierrez Decl. at ¶ 4. The Court should enter judgment against Velocity Investments because it does not have an interest in the 7150 SW Hoodview Place Property. The Court should determine that the Trust is a nominee with respect to the 7150 SW Hoodview Place Property, or, in the alternative, that the transfer of the property to the Trust was fraudulent as to the United States. The Court should order that the United States’ tax liens are enforced and foreclosed. The Court also should enter judgment against Jan Lehmann because her only interest in the 7150 SW Hoodview Place Property was as a trustee of the Trust. Once the Court determines that the Trust is a nominee and sets aside the transfer of the property to it, Mrs. Lehmann will have no remaining interest in the property. A [Proposed] Order and [Proposed] Judgment are submitted herewith. Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 30 of 32 27 Respectfully submitted this 23rd day of September 2016. Respectfully submitted, CAROLINE D. CIRAOLO Principal Deputy Assistant Attorney General /s/ Goud Maragani GOUD P. MARAGANI Trial Attorney, Tax Division U.S. Department of Justice P.O. Box 683 Washington, D.C. 20044 202-616-2904 202-307-0054 (Fax) goud.p.maragani@usdoj.gov Of Counsel: BILLY J. WILLIAMS Acting United States Attorney Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 31 of 32 28 CERTIFICATE OF SERVICE IT IS CERTIFIED that service of the foregoing UNITED STATES’ MOTION FOR SUMMARY JUDGMENTAGAINST ALLAN LEHMANN, JAN LEHMANN, THE ALLAN LEHMANN AND JAN LEHMANN JOINT REVOCABLE TRUST, AND VELOCITY INVESTMENTS has been made this 23rd day of September, 2016, by depositing copies of it in the U.S. mail, postage prepaid to: Allan Lehmann 7150 SW Hoodview Place Beaverton, OR 97008 Allan Lehmann and Jan Lehmann Joint Revocable Living Trust Allan Lehman as trustee 7150 SW Hoodview Place Beaverton, OR 97008 Jan Lehmann 7150 SW Hoodview Place Beaverton, OR 97008 Jan Lehmann as trustee for Allan Lehmann and Jan Lehmann Joint Revocable Living Trust 7150 SW Hoodview Place Beaverton, OR 97008 Oregon Department of Justice 1162 Court Street NE Salem, OR 97401 Oregon Department of Revenue 955 Center Street NE Salem, OR 97301-2555 Washington County Tax Collector 155 N. First Avenue, Suite 130 Hillsboro, OR 97124-3072 /s/ Goud P. Maragani GOUD P. MARAGANI Trial Attorney, Tax Division U.S. Department of Justice Case 3:14-cv-01894-HZ Document 39 Filed 09/23/16 Page 32 of 32 1 CAROLINE D. CIRAOLO Principal Deputy Assistant Attorney General GOUD P. MARAGANI Trial Attorney, Tax Division U.S. Department of Justice P.O. Box 683 Washington, D.C. 20044 202-616-2904 202-307-0054 (Fax) goud.p.maragani@usdoj.gov Of Counsel: BILLY J. WILLIAMS Acting United States Attorney IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON UNITED STATES OF AMERICA, ) ) Plaintiff, ) ) v. ) ) ALLAN LEHMANN, JAN LEHMANN, ) OREGON DEPARTMENT OF ) REVENUE, OREGON DEPARTMENT ) OF JUSTICE, WASHINGTON COUNTY ) TAX COLLECTOR, VELOCITY, ) INVESTMENTS, INC., ALLAN LEHMANN ) AS TRUSTEE OF ALLAN LEHMANN ) AND JAN LEHMANN JOINT REVOCABLE ) LIVING TRUST, and JAN LEHMANN AS ) TRUSTEE OF ALLAN LEHMANN AND ) JAN LEHMANN JOINT REVOCABLE ) LIVING TRUST, ) ) Defendants. ) _______________________________________) Case No. 14-cv-1894-HZ [PROPOSED] ORDER Case 3:14-cv-01894-HZ Document 39-1 Filed 09/23/16 Page 1 of 5 2 This matter comes before the Court on the United States’ Motion for Summary Judgment. In its Motion, the United States seeks summary judgment against Allan Lehmann, Jan Lehmann, The Allan and Jan Lehmann Joint Revocable Trust and Velocity Investment. As to the amount of the tax liabilities, the United States has submitted evidence that the tax assessments against Mr. Lehmann alleged in the Complaint were duly and timely made. The United States has submitted sufficient evidence showing that Mr. Joling is personally liable for $579,773.32 in federal income tax and interest as of May 7, 2016, with interest continuing to accrue on that amount. The United States’ has demonstrated that it has a federal tax lien upon all of Mr. Lehmann’s property in those amounts, pursuant to 26 U.S.C. § 6321. The United States has further alleged in its Complaint that The Allan and Jan Lehmann Joint Revocable Trust is Mr. Lehmann’s nominee with respect the parcel of real property at issue in this lawsuit. The United States has submitted substantial evidence supporting these allegations. Accordingly, the Court finds that The Allan and Jan Lehmann Joint Revocable Trust is Mr. Lehmann’s nominee with respect to the real property, and that Mr. Lehmann is the true and beneficial owner of the property at issue in this lawsuit. See 911 Mgmt., LLC v. United States, 657 F.supp. 2d 1186, 1193-94 (D. Or. 2009). The United States has further alleged that the transfer of the properties at issue in this lawsuit, to The Allan and Jan Lehmann Joint Revocable Trust, was fraudulent with respect to the United States. The United States has submitted substantial evidence supporting these allegations. Accordingly, the Court finds that the transfer was fraudulent, that the United States may avoid the transfer, and that the United States’ federal income tax liens attach to the property at issue in this lawsuit. See Or. Rev. Stat. § 95.200 et seq. Case 3:14-cv-01894-HZ Document 39-1 Filed 09/23/16 Page 2 of 5 3 The United States has further shown that Jan Lehmann’s only interest in the property at issue in this lawsuit was as a nominee of The Allan and Jan Lehmann Joint Revocable Trust. Because The Allan and Jan Lehmann Joint Revocable Trust, Jan Lehmann no longer has an interest in this property. The United States has further shown that Velocity Investments has no interest in the property at issue in this lawsuit. Furthermore, the United States has demonstrated that all of the criteria necessary to foreclose its federal tax liens under 26 U.S.C. § 7403 have been met. The United States has demonstrated that it is entitled to an Order of Sale upon all of the real property at issue in this lawsuit. It shall submit a proposed Order of Sale within fourteen days of the entry of judgment in this case. Pursuant to Fed. R. Civ. P. 56, and for good cause shown, the United States’ Motion for Summary Judgment is GRANTED, and summary judgment shall enter against Allan Lehmann, Jan Lehmann, The Allan and Jan Lehmann Joint Revocable Trust and Velocity Investments. A separate judgment shall be entered. IT IS SO ORDERED. Dated this __________ day of __________, 2016. ___________________________________ UNITED STATES DISTRICT JUDGE Case 3:14-cv-01894-HZ Document 39-1 Filed 09/23/16 Page 3 of 5 4 Respectfully submitted this 23rd day of September 2016, CAROLINE D. CIRAOLO Principal Deputy Assistant Attorney General /s/ Goud Maragani GOUD P. MARAGANI Trial Attorney, Tax Division U.S. Department of Justice P.O. Box 683 Washington, D.C. 20044 202-616-2904 202-307-0054 (Fax) goud.p.maragani@usdoj.gov Of Counsel: BILLY J. WILLIAMS Acting United States Attorney Case 3:14-cv-01894-HZ Document 39-1 Filed 09/23/16 Page 4 of 5 5 CERTIFICATE OF SERVICE IT IS CERTIFIED that service of the foregoing [PROPOSED] ORDER has been made this 23rd day of September, 2016, by depositing copies of it in the U.S. mail, postage prepaid to: Allan Lehmann 7150 SW Hoodview Place Beaverton, OR 97008 Allan Lehmann and Jan Lehmann Joint Revocable Living Trust Allan Lehman as trustee 7150 SW Hoodview Place Beaverton, OR 97008 Jan Lehmann 7150 SW Hoodview Place Beaverton, OR 97008 Jan Lehmann as trustee for Allan Lehmann and Jan Lehmann Joint Revocable Living Trust 7150 SW Hoodview Place Beaverton, OR 97008 Oregon Department of Justice 1162 Court Street NE Salem, OR 97401 Oregon Department of Revenue 955 Center Street NE Salem, OR 97301-2555 Washington County Tax Collector 155 N. First Avenue, Suite 130 Hillsboro, OR 97124-3072 /s/ Goud P. Maragani GOUD P. MARAGANI Trial Attorney, Tax Division U.S. Department of Justice Case 3:14-cv-01894-HZ Document 39-1 Filed 09/23/16 Page 5 of 5 1 CAROLINE D. CIRAOLO Principal Deputy Assistant Attorney General GOUD P. MARAGANI Trial Attorney, Tax Division U.S. Department of Justice P.O. Box 683 Washington, D.C. 20044 202-616-2904 202-307-0054 (Fax) goud.p.maragani@usdoj.gov Of Counsel: BILLY J. WILLIAMS Acting United States Attorney IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON UNITED STATES OF AMERICA, ) ) Plaintiff, ) ) v. ) ) ALLAN LEHMANN, JAN LEHMANN, ) OREGON DEPARTMENT OF ) REVENUE, OREGON DEPARTMENT ) OF JUSTICE, WASHINGTON COUNTY ) TAX COLLECTOR, VELOCITY, ) INVESTMENTS, INC., ALLAN LEHMANN ) AS TRUSTEE OF ALLAN LEHMANN ) AND JAN LEHMANN JOINT REVOCABLE ) LIVING TRUST, and JAN LEHMANN AS ) TRUSTEE OF ALLAN LEHMANN AND ) JAN LEHMANN JOINT REVOCABLE ) LIVING TRUST, ) ) Defendants. ) _______________________________________) Case No. 14-cv-1894-HZ [PROPOSED] JUDGMENT IT IS HEREBY ORDERED AND ADJUDGED as follows: Case 3:14-cv-01894-HZ Document 39-2 Filed 09/23/16 Page 1 of 5 2 1. Judgment is entered in favor of the United States and against Allan Lehmann in the amount of $579,773.32 as of May 7, 2016 plus interest continuing to accrue thereupon pursuant to 28 U.S.C. § 1961(c) and 26 U.S.C. §§ 6601, 6621 and 6622; 2. Pursuant to 26 U.S.C. §§ 6321, 6322, and 6323, the United States has valid, subsisting, and enforceable tax liens against all property owned by Allan Lehmann, whether presently owned or afterwards acquired, in the sum of $579,773.32 as of May 7, 2016 plus interest continuing to accrue thereupon pursuant to 28 U.S.C. § 1961(c) and 26 U.S.C. §§ 6601, 6621 and 6622; 3. The Allan Lehmann and Jan Lehmann Joint Revocable Living Trust is the nominee of Allan Lehmann with respect to the property located at 7150 SW Hoodview Place, Beaverton, OR 97008 (described in paragraph 12 of the Complaint); 4. Pursuant to Oregon Revised Statutes § 95.200 et seq., the transfers by which the Allan and Jan Lehmann Joint Revocable Living Trust acquired nominal title to the property at issue in this lawsuit was fraudulent with respect to the United States; 5. Allan Lehmann is the true and beneficial owner of the property located at 7150 SW Hoodview Place, Beaverton, OR 97008 (described in paragraph 12 of the Complaint); 6. The United States may avoid the transfer of the property located at 7150 SW Hoodview Place, Beaverton, OR 97008 (described in paragraph 12 of the Complaint) to the Allan and Jan Lehmann Joing Revocable Living Trust because the transfer was fraudulent and because the transferee is a nominee of Allan Lehmann; 7. The federal tax liens in favor of the United States upon the real property described in paragraph 12 of the Complaint are hereby enforced and foreclosed, and the real Case 3:14-cv-01894-HZ Document 39-2 Filed 09/23/16 Page 2 of 5 3 property shall be sold in accordance with an Order of Sale to be submitted by the United States. 8. Jan Lehmann has no interest in the real property described in paragraph 12 of the Complaint. 9. Velocity Investments has no interest in the real property described in paragraph 12 of the Complaint. JUDGMENT TO THE PLAINTIFF AS STATED HEREIN. Dated this __________ day of __________, 2016. ___________________________________ UNITED STATES DISTRICT JUDGE Case 3:14-cv-01894-HZ Document 39-2 Filed 09/23/16 Page 3 of 5 4 Respectfully submitted this 23rd day of September 2016, CAROLINE D. CIRAOLO Principal Deputy Assistant Attorney General /s/ Goud Maragani GOUD P. MARAGANI Trial Attorney, Tax Division U.S. Department of Justice P.O. Box 683 Washington, D.C. 20044 202-616-2904 202-307-0054 (Fax) goud.p.maragani@usdoj.gov Of Counsel: BILLY J. WILLIAMS Acting United States Attorney Case 3:14-cv-01894-HZ Document 39-2 Filed 09/23/16 Page 4 of 5 5 CERTIFICATE OF SERVICE IT IS CERTIFIED that service of the foregoing [PROPOSED] JUDGMENT has been made this 23rd day of September, 2016, by depositing copies of it in the U.S. mail, postage prepaid to: Allan Lehmann 7150 SW Hoodview Place Beaverton, OR 97008 Allan Lehmann and Jan Lehmann Joint Revocable Living Trust Allan Lehman as trustee 7150 SW Hoodview Place Beaverton, OR 97008 Jan Lehmann 7150 SW Hoodview Place Beaverton, OR 97008 Jan Lehmann as trustee for Allan Lehmann and Jan Lehmann Joint Revocable Living Trust 7150 SW Hoodview Place Beaverton, OR 97008 Oregon Department of Justice 1162 Court Street NE Salem, OR 97401 Oregon Department of Revenue 955 Center Street NE Salem, OR 97301-2555 Washington County Tax Collector 155 N. First Avenue, Suite 130 Hillsboro, OR 97124-3072 /s/ Goud P. Maragani GOUD P. MARAGANI Trial Attorney, Tax Division U.S. Department of Justice Case 3:14-cv-01894-HZ Document 39-2 Filed 09/23/16 Page 5 of 5