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United States v. Salisbury

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA WESTERN DIVISION


March 23, 2009

UNITED STATES OF AMERICA, PLAINTIFF,
v.
PAUL M. SALISBURY, ET. AL. DEFENDANTS.

The opinion of the court was delivered by: Honorable John F. Walter

STATEMENT OF UNCONTROVERTED FACTS AND CONCLUSIONS OF LAW

Motion Hearing: Date: March 30, 2009

Ctrm: 16

United States Courthouse 312 N. Spring Street Los Angeles, CA 90012

STATEMENT OF UNCONTROVERTED FACTS

1. Pursuant to the provisions of the Internal Revenue Code, Title 26 U.S.C., on the following dates, a delegate of the Secretary of the Treasury made income tax assessments jointly against defendants SALISBURY for the identified tax years and in the amounts*fn1 as follows:

Tax YearDate of Amount of AssessmentAssessment 199411/20/1995$44,016.01 199509/23/1996$33,562.88 199611/24/1997$27,751.61 199711/23/1998$50,019.45 199811/29/1999$19,852.12 199911/27/2000$28,459.31 200011/26/2001$26,741.32 200111/18/2002$45,782.13 200212/01/2003$59,158.65 200410/31/2005$51,947.58 200511/06/2006$80,035.78 200611/05/2007$50,851.98

(Declaration of Phillip Conrad, paragraph 2, and Exhibit 1).

2. In addition to the income taxes assessed jointly and severally against defendants SALISBURY for the 1994, 1995, 1996, 1997, 1998, 1999, 2000, 2001, 2002, 2004, 2005, and 2006 tax years, as set forth in the paragraph above, statutory interest, penalties, other debits and collections costs have been assessed and have accrued on such income tax liabilities, and certain payments, credits and other reversals have been made against such liabilities, so that the total amounts owing for each tax year as of December 31, 2008, including assessed and accrued interest, penalties, other debits and collection costs, and taking into account all payments, credits and reversals, are as follows:

Tax yearUnpaid Assessed BalanceAccrued Penalties and Interest to December 31, 2008Total Liability as of December 31, 2008 1994$32,745.12$45,249.11$77,994.23 1995$39,575.29$45,712.28$85,287.57 1996$25,242.67$24,366.27$49,608.94 1997$59,406.57$48,642.00$108,048.57 1998$23,554.81$16,324.35$39,879.16 1999$28,448.31$24,438.05$52,886.36 2000$26,177.24$19,054.11$45,231.35 2001$30,782.13$20,030.08$50,812.21 2002$43,158.65$24,292.49$67,451.14 2004$21,947.58$9,833.40$31,780.98 2005$65,535.78$23,500.42$89,036.20 2006$50,791.98$9,433.03$60,225.01 Total  $758,241.72

(Declaration of Phillip Conrad, paragraph 3, and Exhibit 2).

3. Despite timely notice and demand, in accordance with the applicable provisions of the Internal Revenue Code, Title 26, United States Code, for payment of the assessments described above, defendants SALISBURY have neglected, failed, or refused to pay said assessments, and there remains due and owing, jointly and severally from defendants SALISBURY, on the assessments, as of December 31, 2008, the sum of $758,241.72, plus accrued interest, penalties, collection costs and other statutory additions as provided by law, including all lien fees and collection costs incurred before or after the filing of this Complaint, minus any payments, credits or reversals made after December 31, 2008. (Declaration of Phillip Conrad, paragraph 4, and Exhibit 2).

4. Defendants SALISBURY filed bankruptcy under Chapter 7 on December 27, 1996, and received a discharge on April 15, 1997. None of the tax liabilities in question were discharged. (Declaration of Phillip Conrad, paragraph 5 and Exhibit 1).

5. Defendants SALISBURY filed an administrative offer in compromise ("OIC") with the IRS that included taxable years 1994 through 2002. Defendants' OIC became processable on March 12, 2003. The Collection division of the IRS rejected the OIC on January 2, 2004. Defendants timely appealed the rejection on February 2, 2004. The OIC was rejected by the Appeals division on July 28, 2005. (Declaration of Phillip Conrad, paragraph 6 and Exhibit 1).

6. The assessments set forth above were subsequently perfected against all property and rights to property belonging to defendants SALISBURY, including all property interests defendants SALISBURY had in the subject property, by the recording of five (5) Notices of Federal Tax Liens ("NFTL"), as follows:

(1) The lien for the income tax assessed jointly and severally against defendants SALISBURY for the 1994 tax year, was perfected by the filing of a NFTL in the office of the county recorder for Los Angeles County, California, on July 11, 1996, as Instrument No. 96-1107104;*fn2

(2) The liens for the income taxes assessed jointly and severally against defendants SALISBURY for the 1995 and 1996 tax years was perfected by the filing of a NFTL in the office of the country recorder for Los Angeles County, California, on May 12, 1998, as instrument No. 98-800740;*fn3

(3) The liens for the income taxes assessed jointly and severally against defendants SALISBURY for the 1997, 1998, 1999 and 2000 years, were perfected by the filing of a NFTL in the office of the county recorder for Los Angeles County, California, on December 18, 2002, as Instrument No. 02-3108872;*fn4

(4) The liens for the income taxes assessed jointly and severally against defendants SALISBURY for the 2001, 2002, 2004, and 2005 years, were perfected by the filing of a NFTL in the office of the county recorder for Los Angeles County, California, on April 13, 2007, as Instrument No. 07-0892747; and,

(5) The lien for the income tax assessed jointly and severally against defendants SALISBURY for the 2006 year, was perfected by the filing of a NFTL in the office of the county recorder for Los Angeles County, California, on July 21, 2008, as Instrument No. 20081295633. (Declaration of Phillip Conrad, paragraph 5, and Exhibit 3).

7. Defendants SALISBURY are married. Defendants SALISBURY are the owners of the property against which plaintiff now seeks to foreclose its tax liens. The real property against which plaintiff seeks to foreclose its tax liens in this action (the "subject property") consists of a parcel of real property located in Agoura Hills, California, and is legally described as follows:

THE REAL PROPERTY IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, DESCRIBED AS:

PARCEL 1 OF PARCEL MAP NO. 6632, IN THE CITY OF AGOURA HILLS, IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP FILED IN BOOK 110 PAGES 80 AND 81 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. (Declaration of Phillip Conrad, paragraph 6, and Exhibit 4).

8. By virtue of a Grant Deed recorded on October 31, 1989, with the Official Records of the Recorder's Office, Los Angeles County, California as Instrument No. 89-1753230, defendants SALISBURY acquired title to the subject property as "Paul M. Salisbury, an unmarried man and Noreen L. Holborn, a single woman, as joint tenants." (Declaration of Phillip Conrad, paragraph 7, and Exhibit 4).

9. Defendant WASHINGTON MUTUAL BANK, has an interest in, and a lien against, the subject property under a Deed of Trust, recorded as Instrument No. 89-1753231, in the Official Records of the Recorder's Office, Los Angeles County, California, on October 31, 1989, pursuant to said Deed of Trust. (Docket Nos. 24, 25). On January 30, 2009, plaintiff and defendant WASHINGTON MUTUAL BANK filed a Stipulation for Non-Monetary Judgment, which was approved by the Court on February 3, 2009. (Docket No. 24). The parties agreed that the federal income tax liens against the subject property are subordinate and junior to defendant WASHINGTON MUTUAL BANK'S Deed of Trust on the subject property. (Docket No. 24).

10. Defendant STATE OF CALIFORNIA, FRANCHISE TAX BOARD (hereinafter "FTB") has liens against the subject property pursuant to 3 Notices of State Tax Lien filed in the name of defendants SALISBURY for the taxable years 1995, 1996, 1997, 1998, 1999, 2000, 2001, 2002, and 2003. (Docket Nos. 20, 21). On January 20, 2009, plaintiff and defendant FTB filed a Stipulation, which was approved by the Court on January 21, 2009, wherein the parties agreed to the lien priorities between the IRS and FTB. (Docket Nos. 20, 21).

CONCLUSIONS OF LAW

1. The government may reduce its tax assessments to judgment by bringing suit within the period provided by I.R.C. § 6502, and demonstrating that the assessments were made and remain unpaid. 26 U.S.C. § 7401; United States v. Silverman, 621 F.2d 961 (9th Cir. 1980); United States v. Prince, 348 F.2d 746, 748 (2d Cir. 1965); 14 Mertens, Law of Federal Income Taxation, § 54A.64, p. 155 (Rev. 1987).

2. Under 26 U.S.C. § 6203, an assessment is made "by recording the liability of the taxpayer in the office of the Secretary in accordance with rules or regulations prescribed by the Secretary." Section 301.6203-1 of the Treasury Regulations provides that an assessment is made when an Internal Revenue Service assessment officer signs a summary record of assessment (Form 23C Assessment Certificate), with supporting records describing (1) the taxpayer's name and address, (2) the character of the assessed liability, (3) the taxable period (if any), and (4) the amount of the assessment.

3. Once the government demonstrates that it has made the assessments in question, the tax assessments are presumed to be correct, and the taxpayer bears the burden of showing that assessments are arbitrary or erroneous. Welch v. Helvering, 290 U.S. 111, 115 (1933); United States v. Chila, 871 F.2d 1015, 1018 (11th Cir. 1989), cert. denied, 493 U.S. 975 (1989). See also Kappas v. United States, 578 F. Supp. 1435, 1439 (C.D. Cal. 1983); United States v. Molitor, 337 F.2d 917, 922 (9th Cir. 1964); United States v. Rexach, 482 F.2d 10, 15-17 (1st Cir. 1973), cert. denied, 414 U.S. 1039 (1973); Psaty v. United States, 442 F.2d 1154, 1161 (3rd Cir. 1971).

4. In addition to the presumption of correctness, the federal tax assessments enjoy a presumption of official regularity, which establishes that the assessments were in fact duly made by the Internal Revenue Service in accordance with its regular procedures for the making of tax assessments, in the absence of clear evidence to the contrary. Lewis v. United States, 279 U.S. 63, 73 (1929); United States v. Chemical Foundation, Inc., 272 U.S. 1, 14-15 (1926); Hughes v. United States, 953 F.2d 531 (9th Cir. 1992); Parkinson v. Commissioner, 647 F.2d 875, 876 (9th Cir. 1981).

5. The IRS must collect assessed taxes by levy or court proceedings within 10 years of the date of assessment. 26 U.S.C. § 6502(a)(1). This period may be extended under certain circumstances, including bankruptcy and the pendency of offers in compromise.

6. With respect to a bankruptcy proceeding, the running of the statute of limitations on collection is suspended for the period during which the Secretary of the Treasury is prohibited from collection plus 6 months thereafter in proceedings under Title 11. 26 U.S.C. § 6503(h). Defendants SALISBURY filed bankruptcy under Chapter 7 on December 27, 1996, and received a discharge on April 15, 1997. None of the tax liabilities in question were discharged. The Secretary was prohibited from collecting the 1994 and 1995 income tax liabilities assessed prior to the date of bankruptcy petition until the date of discharge. 11 U.S.C. §§ 362(a) and (c)(2). The statute of limitations on collection of the 1994 and 1995 tax liabilities was therefore suspended for 292 days, from December 27, 1996, through October 15, 1997 (which time includes the 6 months after discharge).

7. With respect to offers in compromise (OIC), the period of limitations under 26 U.S.C. § 6502 shall be suspended for the period during which the IRS is prohibited under this subjection from making a levy. 26 U.S.C. § 6503(a)(1). The statute of limitation is suspended while an OIC is pending. Treas. Reg. §§ 301.7122-1(g) and (I). Defendants SALISBURY filed an OIC that included taxable years 1994 through 2002. Defendants' OIC became processable on March 12, 2003. The Collection division of the IRS rejected the OIC on January 2, 2004. Defendants timely appealed the rejection on February 2, 2004. The OIC was rejected by the Appeals division on July 28, 2005. Therefore, the statute of limitations for collection for taxable years 1994 through 2002, inclusive, was extended for 869 days, from March 12, 2003 to July 28, 2005 (the period that the OIC was being considered by both the Collections and Appeals divisions).

8. In the instant case, plaintiff has submitted evidence of the making of the assessments against defendants SALISBURY. The assessments are proved through the certificates of assessments and payments, submitted with the attached declaration of Phillip Conrad, and the amounts due on the assessments is likewise established by the declaration of Phillip Conrad. Plaintiff has therefore established its prima facie case for the debts owing to the Internal Revenue Service by defendants SALISBURY.

9. Having established the interest of defendants SALISBURY in the subject property, and that the tax liens of the United States attached to such property interest, it is well settled that the United States may foreclose its liens against the subject property. See e.g., United States v. Rodgers, 461 U.S. 677, 103 S.Ct. 2132, 461 L.Ed.2d 236 (1983).

10. There are no disputed issues of fact, and plaintiff is entitled to a judgment in its favor as a matter of law.

11. Any uncontroverted fact deemed more appropriately designated as a conclusion of law is incorporated here as a conclusion of law.

JOHN F. WALTER UNITED STATES DISTRICT JUDGE


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