U.S. v. Boyce
| Decision Date | 15 February 2001 |
| Docket Number | No. 99CV0003-L (POR).,99CV0003-L (POR). |
| Citation | 148 F.Supp.2d 1069 |
| Court | U.S. District Court — Southern District of California |
| Parties | UNITED STATES of America, Plaintiff, v. James M. BOYCE, Jr., a.k.a. James M. Boyce et al., Defendants. |
Larry G. Lushanko, Law Offices of Larry G. Lushanko, Bonsall, CA, Richard Shepard, Shepard Law Office, Inc., Tacoma, WA, for James M. Boyce, Jr., Shelley A. Boyce.
Leslie Branman Smith, State of California, Office of the Attorney General, San Diego, CA, for Franchise Tax Bd. of State of California.
ORDER: (1) GRANTING THE GOVERNMENT'S RENEWED MOTION FOR SUMMARY JUDGMENT AND ENTRY OF JUDGMENT ON THIRD CAUSE OF ACTION; (2) DENYING THE BOYCES' MOTIONS FOR SUMMARY JUDGMENT AND QUIET TITLE, TO AMEND THE ANSWER, TO STRIKE EXHIBITS AND REOPEN DISCOVERY; AND (3) GRANTING THE BOYCES' EX PARTE APPLICATION
This matter came on regularly for a hearing on the: (1) Government's renewed motion for partial summary judgment; (2) Government's motion for default judgment and judgment by stipulation on its third cause of action for foreclosure of federal tax liens; (3) Defendants' James M. Boyce, Jr. a.k.a. James M. Boyce ("James Boyce") and Shelley A. Boyce ("Shelley Boyce") (collectively referred to as "the Boyces") motion for summary judgment and quiet title; and (4) the Boyces' motion to amend the answer. Henry C. Darmstadter, of the U.S. Department of Justice Tax Division appeared for Plaintiff United States, and Richard Shepard of the Shepard Law Offices appeared for Defendants.
For the years 1979 to 1981, James Boyce and Shelley Boyce filed Forms 1040 that purported to be joint federal income tax returns as husband and wife, but did not disclose any financial information. 1 Instead, the Boyces wrote "none" or "object" in all the appropriate lines. Id. Also, for the years 1982 to 1984, the Boyces failed to file any federal tax returns. (Darmstadter (12/23/99) Decl. Exhs. M, N. P.)
The Internal Revenue Service ("IRS") issued Notices of Jeopardy Assessments and Rights of Appeal to the Boyces on January 19, 1989 regarding jeopardy assessments made against them for income taxes for the years 1979 to 1984. (Darmstadter (12/23/99) Decl. Exhs. F, G.) The IRS also issued Statutory Notices of Deficiency on March 17, 1989, regarding income tax deficiencies for the years 1979 to 1984. (Darmstadter (12/23/99) Decl. Exhs. D, E.) In the Statutory Notices of Deficiency, the IRS determined separate deficiencies and additions in the following amounts:
(Darmstadter (12/23/99) Decl. Exhs. D, I at 3.)
Shelley A. Boyce
Year Deficiency Section 6653(b) Section 6661(a) Section 6654(a)
1979 $ 2,052 $1,046 -0- -0-
1980 $ 2,785 $1,395 -0- $178
1981 $ 9,943 $4,972 -0- $762
Year Deficiency Section 6653(b)(1) Section 6653(b)(2) Section 6661(a) Section 6654(a)
1982 $12,442 $6,221 * $3,111 $1,211
1983 $11,516 $5,728 ** $2,879 $ 705
1984 $10,220 $5,110 *** $2,555 $ 643
(Darmstadter (12/23/99) Decl. Exhs. E, I at 3-4.)
On April 10, 1989, the Boyces jointly petitioned the United States Tax Court (the "Tax Court") for a redetermination of the IRS's income tax deficiencies against them for the years 1979 to 1984 based on various constitutional and jurisdictional challenges. (Darmstadter (12/23/99) Decl. Exh. H.) When the IRS filed a motion for summary judgment, the Boyces failed to file any objections to the pending motion on the merits. (See Darmstadter (12/23/99) Decl. Exh. I at 3.) After reviewing the evidence presented, the Tax Court issued a Memorandum Opinion (T.C. Memo 1990-658) "sustaining [the IRS's] determinations contained in the notices of deficiency, including the additions to tax for fraud" and held that the IRS was entitled to summary adjudication on the merits of the case as a matter of law. (Darmstadter (12/23/99) Decl. Exh. I at 17.) On January 4, 1991, the Tax Court issued an "Order and Decision" ordering that the Boyces' deficiencies in, and additions to, their federal income tax are as follows:
James M. Boyce
Year Deficiency Section 6653(b) Section 6661(a) Section 6654(a)
1979 $ 3,947 $1,974 -0- -0-
1980 $ 4,887 $2,444 -0- $311
1981 $12,705 $6,353 -0- $973
Year Deficiency Section 6653(b)(1) Section 6653(b)(2) Section 6661(a) Section 6654(a)
1982 $15,471 $7,736 * $3,868 $1,506
1983 $14,854 $7,427 ** $3,714 $ 908
1984 $14,491 $7,246 *** $3,623 $ 912
(See Darmstadter (12/23/99) Decl. Exh. J at 2.)
Shelley A. Boyce
Year Deficiency Section 6653(b) Section 6661(a) Section 6654(a)
1979 $ 2,092 $1,046 -0- -0-
1980 $ 2,789 $1,395 -0- $178
1981 $ 9,943 $4,972 -0- $762
Year Deficiency Section 6653(b)(1) Section 6653(b)(2) Section 6661(a) Section 6654(a)
1982 $12,442 $6,221 * $3,111 $1,211
1983 $11,516 $5,728 ** $2,879 $ 705
1984 $10,220 $5,110 *** $2,555 $ 643
Id. at 3. The Tax Court also assessed a $5,000 penalty against each of the Boyces under 26 U.S.C. § 6673 for instituting the Tax Court proceeding for frivolous or groundless reasons or to cause delay. Id.
The Boyces appealed the Tax Court's decision to the United States Court of Appeals for the Ninth Circuit. (Darmstadter (12/23/99) Decl. Exh. Q.) The Ninth Circuit issued an unpublished Memorandum Decision on February 19, 1992, affirming the Tax Court's decision. Id. The Ninth Circuit stated that in their appeal the Boyces did "not challenge the merits of the deficiencies, additions, or penalties" but rather contended that: (1) the Tax Court failed to follow the Administrative Procedures Act; (2) the district counsel was required to sign the notice of deficiency; (3) the notices of deficiency were invalid because no returns were filed; (4) they were denied discovery; (5) and they were denied due process. Id. at 2. The Court rejected each of the Boyces arguments, and imposed a $1,500 sanction against the Boyces for bringing a frivolous appeal. Id. at 2-4.
Over seven years later and several months after this action was filed, on October 20, 1999, the IRS recalculated deficiencies against the Boyces for the years 1979 to 1984 in Official Certificates of Assessments and Payments (hereinafter referred to interchangeably as "Forms 4340" and "Certificates"). (Darmstadter (12/23/99) Decl. Exhs. K-P.) The IRS Forms 4340 incorporate the additions for fraud and penalties per the Tax Court's Order and Decision, and credit partial abatements to Shelley Boyce's jeopardy assessments for the years 1980 to 1984. (See Maloney Decl. ¶¶ 5-19.)
In 1972, the Boyces purchased real property located at 577 Sleeping Indian Road in San Luis Rey, California ("the Property"). 2 James Boyce's parents were added to the title to aid with securing financing on the purchase. (James Boyce Depo. at 40:5-14.) James Boyce's parents transferred their interest in the Property to James and Shelley Boyce by quitclaim deed in December 1975. From 1975 to the present, the Boyces have continuously resided on the Property. (James Boyce Depo. at 7:7-22; Shelley Boyce Depo. at 6:9-15.)
In March 1985, the Boyces created Defendant Jacob Family Preservation Trust, a.k.a, the Jacob Family Trust ("the Trust") for estate planning and asset management purposes. Under the terms of the Trust, James Boyce acted as the trustor, and Shelley Boyce and Defendant Rob Tanner, a friend and neighbor, acted as trustees. The Boyces and their two children were designated as the original beneficiaries. Id. To effect transfer of the Property to the Trust, on January 23, 1985, and then on March 8, 1985, Shelley Boyce deeded her interest in the Property by quitclaim deed to James Boyce. Then by grant deed dated March 29, 1985, James Boyce transferred the Property to the Trust. Subsequently, on September 4, 1985, the Trust, through its trustees, transferred the Property to Defendant White Rail Company ("White Rail") by grant deed. White Rail was created by the Nassau Life Insurance...
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