Elizalde v. Commissioner, Docket No. 10599-79.
| Decision Date | 07 May 1984 |
| Docket Number | Docket No. 10599-79. |
| Citation | 1984 TC Memo 243,48 TCM (CCH) 28 |
| Parties | Helen Stella Elizalde v. Commissioner. |
| Court | U.S. Tax Court |
Michael A. Brush, for the petitioner. Marc J. Winter, for the respondent.
Memorandum Findings of Fact and Opinion
Respondent has determined that petitioner is liable as a transferee of assets for a deficiency in her father's 1972 Federal income tax and an addition to tax totalling $28,348.95, plus interest as provided by law. The issues for decision are (1) whether the statute of limitations, section 6901(c),1 precludes respondent's collection of taxes from petitioner as a transferee, and (2) whether and to what extent petitioner is liable as a transferee within the meaning of section 6901.
Some of the facts have been stipulated and are so found. The stipulation of facts and exhibits attached thereto are incorporated herein by this reference.
Petitioner resided in West Covina, California, at the time she filed her petition in this case. Her parents, Daniel Soto Elizalde (Daniel) and Mary Monica Elizalde (Mary), were married in 1945. Since at least 1966, Mary has suffered from a nervous disorder for which she has been receiving medical treatment and medication. As of 1970, her condition had deteriorated to such extent that she was unable to undertake any gainful employment. This condition persisted through all times relevant to this case. In 1971, after having attained her majority and having been on her own for some time, petitioner resumed living with her parents in a unit of an apartment complex in Alhambra, California, that Daniel and Mary owned (the Alhambra property).
On December 13, 1971, Daniel purchased by grant deed a house and lot on South Evanwood in West Covina, Los Angeles County, California (the Evanwood property). The grant deed was recorded, and it recited that the conveyance had been made to Daniel "a married man, as his sole and separate property." The purchase price for the Evanwood property was approximately $27,000 and was secured by a deed of trust. Until sometime in 1973, Daniel made all of the payments on the indebtedness secured by that deed of trust. The record does not establish the source of funds from which Daniel made these payments or the source of funds for the down payment on the Evanwood property. Mary herself made no payments on the Evanwood property.
Between 1971 and 1973, Daniel lived with Mary and petitioner at the Alhambra property on an off-and-on basis. When not at the Alhambra property with Mary and petitioner, he resided at the Evanwood property with another woman. Daniel came to and went from the Alhambra property as he pleased, with no regular pattern of absences. At no time did Daniel and Mary ever formally separate or divorce, and they were still married at the time of the trial of this case.
On April 8, 1972, Daniel was arrested by officers of the Los Angeles Police Department on a criminal charge of narcotics trafficking. He was subsequently tried, convicted, and sentenced to prison. Daniel began his prison term sometime in 1973, and he was released from prison shortly before Thanksgiving in 1976.
On April 10, 1972, two days after Daniel's arrest, the Internal Revenue Service (IRS) made a determination pursuant to section 6851 to terminate Daniel's taxable year 1972 for the period from January 1, 1972 through April 8, 1972, and made an assessment in the amount of $443,840. Pursuant to this jeopardy termination and assessment,2 the IRS served notices of levy on Daniel's various bank accounts, which resulted in collections and credits to Daniel's tax account in the following amounts:
Date of Levy Amount Collected
April 14, 1972 ........ $ 949.97
April 17, 1972 ........ 2,987.00
April 18, 1972 ........ 1,419.31
April 27, 1972 ........ 8,844.19
__________
Total ............. $14,200.553
On April 8, 1972, the day of Daniel's arrest, respondent had also seized $105,640.48 in cash from Daniel's safety deposit box.
The IRS also issued and filed with the Los Angeles County Recorder three Notices of Federal Tax Lien, as follows:
__________________________________________________________________________________________
Date Issued Date Filed Name Amount
__________________________________________________________________________________________
April 10, 1972 April 10, 1972 Daniel Elizalde $443,840.00
April 26, 19724 April 27, 19724 Daniel S. Elizalde 443,840.00
August 9, 19724 August 9, 19724 Daniel S. Elizalde 429,639.455
& Mary M. Elizalde
__________________________________________________________________________________________
Only the second notice of lien, dated April 26, 1972 and filed April 27, 1972, specifically identified property to which the lien was to attach. This second notice identified real property owned by Daniel and Mary, but the legal description of this property was not the same as that of either the Alhambra property or the Evanwood property. Daniel testified that he owned a third piece of realty identified as the Pico Rivera property. Daniel was aware in 1972 that these lien notices had been filed in his name.
Prior to his arrest in 1972, Daniel had provided adequate support for Mary. After his arrest and before his incarceration in 1973, Daniel tried to provide what support for Mary he could afford although it was very little. Daniel provided no support for Mary while he was in prison.
On June 27, 1972, Daniel conveyed to Mary by quitclaim deed his interest in the Alhambra property. Mary resided at the Alhambra property prior to Daniel's arrest, during Daniel's incarceration, and up until the beginning of 1977, when she was forced to move to the Evanwood property.
Daniel's arrest and Mary's discovery of Daniel's marital infidelity worsened Mary's physical and emotional health during 1972. Because Mary was unable to work and because Daniel was no longer supporting Mary, petitioner began supporting Mary. Between Daniel's arrest in April of 1972 and his release from prison in November of 1976, petitioner paid for most of Mary's support, including food, clothing, medical expenses and medication, utilities, transportation, and other expenses. Mary also received food stamps during parts of 1972 and 1973, and she received state provided medical assistance during parts of 1973 and 1974. Petitioner's younger brother and sister were married and had families and their own households to support. They did help petitioner to a very limited extent to support Mary when petitioner was unable to do so alone. Petitioner worked several different jobs and held part-time jobs in addition to any regular employment she secured. Her total payments to support Mary averaged between $3,600 and $4,000 a year from 1972 through 1976. Petitioner provided no support for Mary before Daniel's arrest in April of 1972.
While he was in prison, Daniel made no payments on the trust deed loans on the Alhambra and Evanwood properties. Petitioner collected rentals from the other units at the Alhambra property and used those rentals to make the monthly loan payments. Petitioner used all of the rentals to pay the monthly installments, and those funds were insufficient to meet the mortgage and other expenses of the property. In late 1976, the lenders foreclosed on the Alhambra property, forcing petitioner and Mary to move out in January of 1977. While Daniel was in prison, his paramour had rented the Evanwood property to third parties and had used the rentals to pay the installments on the deed of trust indebtedness on that property.
Around November 20, 1976, about a week before Thanksgiving, Daniel was released from prison and resumed living with Mary and petitioner at the Alhambra property. At this time, the Alhambra property was being foreclosed upon and Mary and petitioner were, in fact, paying rent to the lenders in order to remain there temporarily.
On November 29, 1976, respondent released to Daniel's attorneys the $105,640.48 in cash that the IRS had seized from Daniel's safety deposit box on April 8, 1972, the day Daniel was arrested.
On December 15, 1976, Daniel executed a grant deed conveying the Evanwood property to petitioner. This grant deed was recorded and recited that the conveyance was made by Daniel, "a married man as his sole and separate property." On February 25, 1977, Daniel again executed a grant deed, recorded the same day, again conveying the Evanwood property to petitioner. This grant deed did not characterize Daniel's transfer as either his sole and separate property or his interest in community property. Also on February 25, 1977, Mary executed a quitclaim deed, recorded the same day, conveying to petitioner any interest that Mary had in the Evanwood property. This quitclaim deed did not characterize the transfer as either her sole and separate property or her interest in community property. This second conveyance by both Daniel and Mary was done on advice of counsel in case Mary should be found to have a community property interest in the Evanwood property. As of December 1976, the amount of indebtedness due on the loan secured by the first deed of trust on the Evanwood property totalled $9,581.53.
In December of 1976, around the time of Daniel's first grant deed to petitioner of the Evanwood property, Daniel, Mary, and petitioner were still living at the Alhambra property. At that time, Daniel was aware of the foreclosure on the Alhambra property. Daniel also was aware that ever since his arrest, petitioner had been largely supporting Mary. He also realized the financial and emotional harm he had caused Mary through his criminal activities and his marital infidelity. Thus, Daniel had several purposes in conveying the Evanwood property to petit...
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