A Norfolk U.S. District Court says the federal government may enforce liens against a delinquent taxpayer’s home and foreclose upon the home to collect $179,727.84 for unpaid income tax assessments, penalties and statutory interest.
In 2004, defendant transferred his interest in the property to himself and to his wife, who was his fiancée at the time of the transfer, through a deed of gift. He argues the federal tax liens are invalid because his wife is protected, under a statutory exemption, as a “purchaser” who paid adequate and full consideration for her interest in the real property and had no knowledge of the federal tax liens at the time she acquired that interest.
Defendant also presents evidence of an earlier arrangement prior to his marriage to his present wife.
Under that arrangement, he and his present wife, prior to their marriage, entered into an agreement in March 2001 in which she was required to pay $1,000 per month to defendant and provide food and other household products while she and her son lived at the property. Despite defendant’s contentions to the contrary, there is no evidence to suggest this agreement represented a bargain for or exchange of something of value in return for an interest in the property. Instead, the undisputed facts show that the monthly $1,000 payments were mere payments in the nature of rent rather than any consideration for any interest in the property. Defendant did not convey and she did not obtain an interest in the property until 2004, only after defendant and his previous wife divorced. There is no evidence that at the time of the transfer, defendant and his present wife bargained for or exchanged anything of value in consideration for defendant giving an interest in the property to his present wife.
Based on the undisputed evidence, the weight of the factors in iiiU.S. v. Rodgers,iii 461 U.S. 677 (1983), militates toward ordering foreclosure. Although defendant’s wife will surely face some hardship as a result of a foreclosure, such hardship is not outweighed by the government’s paramount interest in collecting taxes, particularly in light of defendant’s persistent failure to concede to collection. Following payment of all outstanding liabilities, she will receive a portion of any remaining funds as a holder of interest in the property. While such funds may not equal the $40,000 paid by wife to defendant between the time she moved to the property and the transfer of the interest to her, the evidence demonstrates such payments were in the nature of rent rather than payments for an equity interest in the property.
Summary judgment for the government.
U.S. v. Register (Davis, J.) No. 2:09cv161, June 11, 2010; USDC at Norfolk, Va.; Allie C. Yang-Green for plaintiff; Michael P. Cotter for defendants. VLW 010-3-446, 25 pp.