U.S. v. Jepsen
| Decision Date | 17 May 2000 |
| Docket Number | No. CIV. 98-3066.,CIV. 98-3066. |
| Court | U.S. District Court — Western District of Arkansas |
| Parties | UNITED STATES of America, Plaintiff v. Jack JEPSEN, Kris Jepsen, Karen Jepsen Makutenas, First Federal Savings & Loan of Harrison, Arkansas Department of Finance & Administration, and Baxter County Assessor, Defendants. |
Andrew T. Pribe, U.S. Dept. of Justice, Tax Division, Washington, DC, P. K. Holmes, III, U.S. Attorney's Office, Fort Smith, AR, for Plaintiff.
David Grant Bercaw, Ball & Mourton, Ltd., Fayetteville, AR, Mark S. Ferguson, Little Rock, AR, for Defendants.
This case is before the court on the plaintiff's motion for partial summary judgment on count one of the complaint and the motion for summary judgment on counts one and two of the complaint filed by defendants, Jack Jepsen, Kris Jepsen, and Karen Jepsen Makutenas. In count one, the United States seeks to foreclose a federal tax lien. In count two, the United States seeks to set aside as a fraudulent conveyance a release of a mortgage on property located in Arkansas.
The court previously granted the United States' motion for partial summary judgment on count three. Count three concerned the United States' assessment pursuant to 26 U.S.C. § 6672 of a 100% penalty in the amount of $214,263.08 against Jack Jepsen. In granting the government's motion for partial summary judgment on count three, we found as a matter of law that Jack Jepsen was a responsible person who willfully failed to pay federal withholding taxes. The withholding taxes at issue cover the four quarters of 1992 and the first quarter of 1993.
The opinion issued in connection with the United States' first motion for summary judgment set forth the facts concerning the operation of Jepsen of Illinois, Inc., and Jack Jepsen's role in the same. Familiarity with that opinion is assumed.
On August 15, 1989, Jack Jepsen executed a warranty deed conveying Lot 2 of Mallard Point Home Sites, in Baxter County, Arkansas, to his son and daughter, Kris Jepsen and Karen Jepsen Makutenas.1 The property consists of a two acre parcel of land with a 1200 to 1400 square foot house on it. Jack and his family had used the house as a vacation home.
Kris and Karen executed a promissory note dated August 15, 1989, in the amount of $95,000 in favor of Jack. The note bore interest at the rate of 9½% with the interest payable on each anniversary date and the entire principal due and payable on August 15, 1992. Currently only a photostatic copy of the promissory note is known to exist.
The note was secured by a real estate mortgage on the property. The mortgage was also dated August 15, 1989.
The documents indicate they were prepared by George Carberry. Carberry is a corporate attorney who did work for Jepsen of Illinois, Inc. Deposition of Jack Jepsen at 12. Jack believed Bob Bailie, the chief financial officer of Jepsen of Illinois, probably handled the paper work. Id. at 25. This belief was based on the fact that Bailie frequently handled personal business for Jack because he traveled frequently. Id.
Kris gave Jack a check dated August 15, 1989, in the amount of $10,000 with the notation "deposit Arkansas" on it. Similarly, Karen gave Jack a check for $10,000 as a down payment on the property.
On October 12, 1989, the deed and mortgage were recorded with the Baxter County Recorder of Deeds. On December 26, 1989, Jack by letter returned Kris' $10,000. Jack stated he had decided to give Kris the "down payment required on the purchase of the Arkansas property." Jack also returned Karen's check indicating he was giving her the down payment required on the purchase of the Arkansas property.
After he transferred the property to his son and daughter, Jack continued to use the property. Deposition of Jack Jepsen at 31. Sometimes he would call ahead of time and other times he would just show up. Id. He testified he used the property only if his use did not interfere with Kris' plans.
On April 25, 1994, the Internal Revenue Service (IRS) made an assessment against Jack in the amount of $214,263.08. The assessment concerned the failure of Jepsen of Illinois, Inc., to pay the trust fund portion of federal withholding taxes for the four quarters of 1992 and the first quarter of 1993.
On March 21, 1995, Jack executed a release of mortgage regarding the Arkansas property. On April 17, 1995, Karen executed a quitclaim deed conveying all her interest in the Arkansas property to Kris. On April 25, 1995, the release of mortgage and the quitclaim deed were recorded with the Baxter County Recorder of Deeds.
Jack never received any payments on the note, or for the property, from his children. Jack received no consideration for his release of the mortgage.
During his deposition, Jack testified that he gave the property to Kris and Karen. Deposition of Jack Jepsen at 17. He indicated he began thinking of conveying the property to them at the time of his divorce in 1983. Id. at 16-17.
When questioned about the note and mortgage, Jack testified he could not recall seeing the documents before this lawsuit. Deposition of Jack Jepsen at 17. The only explanation he could offer to explain the existence of the note and mortgage was that he must have been going to sell it to his son and daughter but that the only plan ever carried out was his "gifting it to them in 1989." Id. at 19. See also page 22 ( ). Jack testified he did not have any documents reflecting that he had made a gift of the property to his son and daughter. Id.
Jack also testified he had no recollection of receiving the promissory note but believed that if he did receive one "it would have been torn up when I gifted them the property." Deposition of Jack Jepsen at 19. In fact, he testified everything having to do with the sale should have been torn up because his intention, from the point he returned the checks on, was to convey the property through gifting. Id. at 42.
In responding to discovery, specifically interrogatory 11, Jack indicated he gave his children the property on August 15, 1989. However, in the response to interrogatory 26, he indicated the property was given to Kris and Karen on December 26, 1989.
In his deposition testimony, Jack indicated that prior to getting the checks from Kris and Karen he had been thinking about selling them the Arkansas place but changed his mind when he gave the checks back. Id. at 24. With respect to the release, Jack testified that the release was prepared and signed after Kris found out there was a mortgage on the property when he was attempting to borrow money on it. Deposition of Jack Jepsen at 32.
Kris testified he had no recollection of executing either the note or the mortgage although he indicated the signatures thereon were his. Deposition of Kris Jepsen at 14-15. With respect to his $10,000 check, Kris testified it was to purchase the property but that it was returned to him because his father wanted to give the property to them. Id. at 19-20. With respect to the release, Kris testified he was attempting to get a loan and he needed a release of the "mortgage that never happened, so that [he] could own the property clearly." Deposition of Kris Jepsen at 34.
The question before the court is whether the record, when viewed in the light most favorable to the non-moving party, shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). See e.g., Celotex v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Johnson v. Baptist Medical Center, 97 F.3d 1070, 1072 (8th Cir.1996). Where the unresolved issues are primarily legal rather than factual, summary judgment is particularly appropriate. Crain v. Board of Police Comm'rs, 920 F.2d 1402, 1405-06 (8th Cir.1990).
As we noted above, both sides seek summary judgment on count one. Defendants also seek summary judgment on count two.
On April 25, 1994, the IRS made an assessment against Jack of the trust fund recovery penalty in the amount of $214,263.08. A lien in favor of the United States arises with respect to all property and rights to property of a taxpayer on the date of the assessment if that assessment is not paid. See 26 U.S.C. §§ 6321, 6322. "When Congress so broadly uses the term `property' ... the Legislature aims to reach `every species of right or interest protected by law and having an exchangeable value.'" Drye v. United States, 528 U.S. 49, 120 S.Ct. 474, 480, 145 L.Ed.2d 466 (1999) (internal quotations and citations omitted). See also United States v. McDermott, 507 U.S. 447, 448, 113 S.Ct. 1526, 123 L.Ed.2d 128 (1993); United States v. National Bank of Commerce, 472 U.S. 713, 719-20, 105 S.Ct. 2919, 2924, 86 L.Ed.2d 565 (1985) (); Thomson v. United States, 66 F.3d 160 (8th Cir.1995).
The lien continues until the liability is satisfied or becomes unenforceable by lapse of time. 26 U.S.C. § 6322. Collection of the tax may occur through levy or by bringing an action in court. A collection action must be brought within ten years from assessment. 26 U.S.C. § 6502(a).
By virtue of its April of 1994 assessment, the government obtained a tax lien against all of Jack's property, including any interest he had in the note and mortgage on the Mallard Point property. As a matter of law, Jack claims he had no property interest in the Mallard Point property to which the federal tax lien could attach.
State law governs the initial inquiry into "what rights the taxpayer has in the property the...
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