309 F.3d 1263 (10th Cir. 2002), 01-5133, U.S. v. Botefuhr
|Docket Nº:||01-5133, 01-5139, 01-5145.|
|Citation:||309 F.3d 1263|
|Party Name:||UNITED STATES of America, Plaintiff-Appellee, v. Charles E. BOTEFUHR, Defendant-Appellant, and The Estate of Birnie Davenport; Patricia L. Vestal, individually and as Personal Representative of the Estate of Birnie Davenport; Gordon E. Davenport, Defendants. United States of America, Plaintiff-Appellee, v. Patricia L. Vestal, individually and as Pe|
|Case Date:||October 31, 2002|
|Court:||United States Courts of Appeals, Court of Appeals for the Tenth Circuit|
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John N. Hermes, McAfee & Taft, A Professional Corporation, Oklahoma City, OK, (William R. Cook II, Oklahoma City, OK, and J. Scott Morris, Austin, Texas, with him on the reply brief), for Defendant-Appellant Charles E. Botefuhr.
Susan L. Gates, Hall, E still, Hardwick, Gable, Golden, & Nelson, P.C, Tulsa, OK, for Defendant-Appellant Patricia L. Vestal.
Gordon E. Davenport, Jr., Davenport Law Firm, Alvin, Texas (James L. Kincaid and Gary C. Clark, Crowe & Dunlevy, Tulsa, OK, with him on the briefs) for Defendant-Appellant Gordon E. Davenport.
Laurie N. Snyder, Attorney, Tax Division, United States Department of Justice, Washington, D.C. (David E. O'Meila, United States Attorney, Of Counsel, Eileen J. O'Connor, Assistant Attorney General, Jonathan S. Cohen, Attorney, Tax Division, United States Department of Justice, Washington, D.C., with her on the brief), appeared for the Plaintiff-Appellee.
Before EBEL and McKAY, Circuit Judges, and SAM,[*] Senior District Judge.
EBEL, Circuit Judge.
Defendants-Appellants Patricia A. Vestal, Gordon E. Davenport, and Charles E. Botefuhr appeal a summary judgment order by the United States District Court for the Northern District of Oklahoma granting summary judgment upholding the Internal Revenue Service's (IRS) right to collect gift taxes from them under § 6324(b) of the Internal Revenue Code (IRC). See 26 U.S.C § 6324(b). On appeal, the Appellants raise three issues: first, whether the district court had personal jurisdiction over Botefuhr and Davenport; second, whether the statute of limitations for collecting taxes under § 6324(b) has expired;1 and third, whether, based upon a stipulation in a prior, related case, the Appellants are precluded from litigating the value of the Hondo stock in the present action. Exercising jurisdiction pursuant to 28 U.S.C § 1291, we REVERSE the district court on the personal jurisdiction question, AFFIRM
on the statute of limitations question, and REVERSE on the valuation question.
In July 1980, Birnie Davenport, Botefuhr's, Davenport's, and Vestal's aunt, gave a total of 1,620 shares of Hondo Drilling Company, Inc. (Hondo) stock to Botefuhr, Davenport, and Vestal, but she effectuated these transfers in two different ways. She entered into sales agreements with Davenport and Vestal, whereby she agreed to sell Vestal 536 shares of Hondo stock and Davenport 537 shares. See Estate of Davenport v. United States, 184 F.3d 1176, 1179 (10th Cir. 1999). The sales agreements valued the shares at $804 per share. As consideration for the stock, Birnie Davenport received $1,000.00 in cash from Davenport and Vestal, and Davenport and Vestal executed promissory notes in which they agreed to pay Birnie Davenport $449,175.50 and $448,353.50, respectively, in twenty annual installments, beginning in July 1986; the agreements also required Vestal and Davenport to pay "six percent interest annually on the unpaid principal." Estate of Davenport, 184 F.3d at 1179.
Less than two years after the sale and over four years before Davenport and Vestal were to commence paying their promissory notes, Birnie Davenport forgave the balances remaining on the notes.2 Id. at 1180. On March 31, 1983, Birnie Davenport filed a United States Gift Tax Return in which she reported forgiving the promissory notes and, after applying various discount rates, reported and paid $71,911.00 in gift tax liability.
Birnie Davenport transferred the Hondo stock to Botefuhr in a different manner. Instead of entering a sales agreement, as she had with Davenport and Vestal, Birnie Davenport executed a deed of gift transferring to him 537 shares of Hondo stock. Id. In the fall 1980, Botefuhr, Davenport, and Vestal signed an agreement in which Botefuhr "agreed to file any required gift tax returns and pay any gift taxes due with respect to the Hondo stock he received from Birnie [Davenport.]" Id. Botefuhr, however, never filed a gift tax return for this gift.
In 1991, Birnie Davenport passed away. Her last will and testament were admitted to probate in Tulsa, Oklahoma, and Botefuhr, Davenport, and Vestal, "were appointed by the probate court to act as co-personal representatives" of Birnie Davenport's estate (the Estate). While preparing tax returns for the Estate, Corinne Childs, who had prepared tax returns for Birnie Davenport since 1965, uncovered Botefuhr's failure to file a gift tax return for his shares of Hondo stock. Consequently, on November 7, 1991, Childs filed a gift tax return for the 1980 gift to Botefuhr, which both Vestal and Davenport signed, but which Botefuhr did not. Id. at 1180-81. The return valued the Hondo stock at $804 per share and reported a tax liability of $95,322.00, which the Estate paid, Id.
The IRS subsequently audited this 1991 gift tax return and in the process concluded that the gift tax return underreported the value of Hondo stock. In the process, the IRS also concluded that the shares Birnie Davenport sold to Davenport and Vestal were also gifts, apparently because they were sold at a discounted price. Consequently, on September 20, 1994, the IRS sent the Estate a notice of deficiency indicating a "gift tax deficiency of $1,422,154.00 and an addition to the tax of $355,538.00." 184 F.3d at 1181. On December 12, 1994, the Estate, through Vestal, filed timely petitions in the United States Tax Court challenging this deficiency
determination. In the ensuing court proceedings, the Estate (again represented by Vestal) stipulated that "for the purposes of th[at] case[ ]" "the fair market value of the Hondo stock which was transferred by Birnie Davenport to Patricia Vestal, Gordon Davenport, and Charles Botefuhr was $2,000.00 per share." (Vestal App. at 219.) After holding a bench trial, the tax court concluded that the Estate "owed a federal gift tax deficiency in the amount of $822,653 and a penalty of $205,663." 184 F.3d at 1180. The Estate then appealed this finding to this court, and we affirmed. See id. at 1188.
On March 2, 1998, the IRS made an assessment against the Estate for the gift tax deficiency and demanded payment.3] The Estate, however, did not pay the assessment. As of 1999, the Estate owed $5,283,283.07 in gift tax liability, penalties, and interest. Prompted by the Estate's failure to pay, the IRS brought (on February 2, 2000) the present action against the Estate and also against Botefuhr, Davenport, and Vestal in their representative and individual capacities. The underlying complaint contained three counts. Count I sought to reduce to judgment the unpaid assessment levied against the Estate. The remaining counts, however, sought to collect at least some of the outstanding gift tax liability from Botefuhr, Davenport, and Vestal. Count II, for example, asserted that Botefuhr, Davenport, and Vestal could be held liable for the unpaid gift tax as donees under 26 U.S.C. § 6324(b). Similarly, Count III alleged that, as personal representatives of the Estate, Botefuhr, Davenport, and Vestal could be held responsible under 31 U.S.C. § 3713 for having distributed the Estate's assets prior to paying the gift tax liability, thereby "rendering] the Estate insolvent and unable to pay the federal gift tax liability."4
In the spring 2000, Botefuhr and Davenport, both residents of Texas, each filed motions pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure arguing that the suits against them should be dismissed because the district court lacked personal jurisdiction, an argument the court eventually rejected a year later.
On February 9, 2001, while the personal jurisdiction motion was still pending before the district court, the IRS filed a motion seeking summary judgment on Count I (estate liability) and Count II (individual donee liability under 26 U.S.C. § 6324), but declining to seek summary judgment on Count III (liability as estate representatives). In its motion, the IRS also argued that the Appellants were precluded from litigating the value of the gift. In particular, the IRS argued that Botefuhr's, Davenport's, and Vestal's individual tax liability should be determined using the $2,000.00 per share figure stipulated by the Estate (via Vestal) in the prior litigation involving the estate. Botefuhr, Davenport, and Vestal responded by filing a joint motion that sought summary judgment on Count II (donee liability) and Count III (representative liability), but that conceded liability on Count I (estate liability). They also argued that they were not bound by the Estate's $2,000.00 per share stipulation. In replying to the Appellants' joint cross motion for summary judgment, the IRS expressly abandoned
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