Bresson v. CIR
| Citation | 213 F.3d 1173 |
| Decision Date | 31 May 2000 |
| Docket Number | No. 98-71377,98-71377 |
| Parties | (9th Cir. 2000) Peter J. BRESSON (Transferee),Petitioner-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee |
| Court | United States Courts of Appeals. United States Court of Appeals (9th Circuit) |
Willard D. Horwich, Beverly Hills, California, for the petitioner-appellant.
John A. Dudeck, Jr., Tax Division, United States Department of Justice, Washington, D.C., for the respondent-appellee.
Petition to Review a Decision of the United States Tax Court. Tax Ct. No. 22824-96.
Before: A. Wallace Tashima and Susan P. Graber, Circuit Judges, and Alicemarie H. Stotler, 1 District Judge.
I.
This case involves efforts by the Internal Revenue Service (IRS) to collect taxes owed by Petitioner's corporation directly from Petitioner. The taxes arose in connection with the corporation's transfer of real property to Petitioner and Petitioner's subsequent sale of that property to an unrelated third party. The IRS's right to assess taxes directly against Petitioner derives from the transferee liability provisions of 26 U.S.C. S 6901, and from the provisions of the California Uniform Fraudulent Transfer Act (CUFTA), Cal. Civ. Code SS 3439.01-12, under which the transfer from the corporation to Petitioner was fraudulent. The sole question raised on appeal is whether the Tax Court properly held Petitioner liable under 26 U.S.C. S 6901 notwithstanding the fact that the IRS issued Petitioner its notice of deficiency after the limitations period had lapsed for a cause of action under the CUFTA. For the reasons set forth below, we conclude that the Tax Court did not err. Accordingly, we affirm the judgment of the Tax Court.
II.
The Tax Court's determination of the time limitations applicable to an action to set aside fraudulent transfers is subject to de novo review. See United States v. Bacon, 82 F.3d 822, 823 (9th Cir. 1996).
III.
Jaussaud Enterprises, Inc. (Jaussaud), owned a parcel of real property on Hidalgo Avenue, Alhambra, California (the Alhambra property), at the beginning of 1990. Petitioner, the sole owner and officer of Jaussaud, resided at the property.
On July 5, 1990, Jaussaud executed a grant deed conveying the Alhambra property to Petitioner. On the same date, Petitioner executed a grant deed conveying the Alhambra property to an unrelated third party. The net proceeds were $266,680, which Petitioner retained. Petitioner, however, did not report any corresponding capital gain on his personal income tax return for the year 1990. Instead, Jaussaud reported a $194,705 capital gain in connection with the transaction in its tax return for the fiscal year ended February 28, 1991 (filed March 5, 1993). The corresponding tax payment was not remitted.
After unsuccessful efforts to secure payment from Jaussaud (and to locate Jaussaud's assets in order to subject them to federal income tax liens), the IRS sent Petitioner a Notice of Transferee Liability dated August 2, 1996. The notice asserted that Petitioner was liable in the amount of $73,839. That figure comprised $41,965 of Jaussaud's unpaid corporate income taxes for the year ended February 28, 1991, as well as interest and penalties. The notice showed that Petitioner's liability was based on his being the transferee of the Alhambra property. On the same date, the IRS sent Petitioner a Notice of Deficiency. Petitioner challenged the assessment before the Tax Court.
The Tax Court held that the transfer of the Alhambra property was a fraudulent transfer under the CUFTA -specifically California Civil Code S 3439.04(b). Furthermore, a decisive majority3 of the judges on the Tax Court held that, because of the fraudulent transfer, 26 U.S.C. S 6901(a)(1)(A) gave the IRS authority to proceed against Petitioner in order to collect the tax liabilities of Jaussaud.4
In reaching its determination, the Tax Court acknowledged four points. First, Section 6901(a)(1)(A) does not create a new liability, but merely provides a remedy for enforcing an existing liability of the transferor.5 Second, the extent of a transferee's liability under Section 6901(a)(1)(A) for the transferor's tax obligations turns on state law6 -in this case, the CUFTA. Third, the court noted that, pursuant to California Civil Code S 3439.09(b), claims under Section 3439.04(b) of the CUFTA are ordinarily "extinguished" if they have not been brought within four years of the relevant fraudulent transfer.7 Finally, the court held that the IRS's Notice of Deficiency against Petitioner had been served beyond the four-year "extinguishment" period contemplated in the CUFTA. The Court concluded, however, that none of the foregoing points invalidated the IRS's assessment against Petitioner.
The Tax Court's conclusion was based on the view that the "extinguishment" provision of the CUFTA was in all relevant respects a statute of limitations. State statutes of limitations are inapplicable to bar the claims of the United States. In this case, what was relevant was that the IRS had made its assessment against Petitioner within the time limitations imposed by 26 U.S.C. S 6901(c) -the federal limitations period for assessments of transferee liability.8
The Tax Court's ruling, however, was not unanimous. The dissenting judges concluded that the extinguishment provision contained in the CUFTA did operate to deprive the IRS of any right to proceed against Petitioner. In articulating its view, the dissent emphasized what it regarded as an important distinction between a true statute of limitations and a limitations period that forms an inherent element of a state-law cause of action. According to the dissent, the traditional rule that state statutes of limitations do not apply to the United States only applies to true statutes of limitations; the rule does not apply where, as under the CUFTA, compliance with the relevant time requirements is an element of the claim.
IV.
The rule that the United States is not subject to state statutes of limitations is largely derived from, and limited by, two Supreme Court cases from the first half of the twentieth century: United States v. Summerlin, 310 U.S. 414 (1940), and Guaranty Trust Co. v. United States, 304 U.S. 126 (1938).9
In Summerlin, the Federal Housing Administrator, acting on behalf of the United States, had become the assignee of a claim against a decedent's estate. A state statute provided that any claim against such an estate would be "void " if filed more than eight months after the first publication of notice to creditors. The United States filed its claim against the estate beyond the eight-month period. A unanimous Court held that, to the extent that the state statute purported to render void a claim of the United States, it "transgressed the limits of state power." Id. at 417, 60 S.Ct.1019. It was well settled that the United States is neither bound by state statutes of limitations nor is subject to the defense of laches, and that the same rule applies whether the United States brings its suit in its own courts or in those of a state. See id. at 416, 60 S.Ct.1019. The Court articulated its rationale in the following terms: "When the United States becomes entitled to a claim, acting in its governmental capacity and asserts its claim in that right, it cannot be deemed to have abdicated its governmental authority so as to become subject to a state statute putting a time limit upon enforcement." Id. at 417, 60 S.Ct.1019.
Some of the limits of the seemingly broad principle announced in Summerlin are implicit in the Summerlin Court's favorable citation to the Guaranty Trust opinion, issued two years earlier. In Guaranty Trust, the Court addressed a situation in which, by executive agreement, the United States had become the assignee of all amounts owed to the Soviet Union by American nationals. The United States made demand upon the Guaranty Trust Company for monies deposited there by representatives of previous Russian governments. The action was dismissed on the ground that, at the time the United States government was assigned the rights of the Soviet government, New York's six-year statute of limitations already had run against the Soviet Union. In affirming the district court's decision to dismiss the case, the Supreme Court identified the policies underlying the United States government's traditional exemption from state statutes of limitations: " `The true reason *** is to be found in the great public policy of preserving the public rights, revenues, and property from injury and loss, by the negligence of public officers.' " Guaranty Trust, 304 U.S. at 132 (quoting United States v. Hoar, 26 F. Cas. 329, 330 (C.C.D. Mass. 1821) (No. 15,373) (Story, J.)). The Court further concluded that those policies were not implicated under the circumstances of the Guaranty Trust case.
There has been no neglect or delay by the United States or its agents, and it has lost no rights by any lapse of time after the assignment . . . . [Enforcement of the statute of limitations] deprives the United States of no right, for the proof demonstrates that the United States never acquired a right free of a pre existing infirmity, the running of limitations against its assignor, which public policy does not forbid.
Taken together, Summerlin and Guaranty Trust suggest two countervailing principles. On the one hand, if the United States comes into possession of a valid claim, that claim cannot be "cut off" later by a state statute of limitations. On the other hand, if a claim already has become infirm (for example, when a limitations period expires) by the time the United States acquires the purported right, the rule of Summerlin will not operate to revive the claim.
In a recent opinion affirming a decision of this court, the Supreme Court has signaled some...
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