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United States v. Booth

United States District Court, Ninth Circuit

January 10, 2014



ANTHONY W. ISHII, Senior District Judge.

I. Findings of Fact

1. The parties in this case are the United States of America ("United States"), State of California Franchise Tax Board ("FTB"), Vincent Steven and Louise Q. Booth ("Booths"), Michael Scott Ioane ("Ioane"), Alpha Enterprise LLC, Acacia Corporate Management LLC ("Acacia") and Mariposa Holdings Inc. ("Mariposa"). The United States is the plaintiff; all other parties are defendants. This case concerns the ownership of three properties: 5705 Muirfield Drive, Bakersfield, CA ("Muirfield"); 5717 Roundup Way, Bakersfield, CA ("Roundup"); and 1927 21st Street, Bakersfield, CA ("21st Street") (collectively the "Subject Properties"). This case, Civ. Case. No. 09-1689, is related to two other cases, Civ. Case Nos. 07-1129 and 12-0171. The present case is the first to come to trial.

2. Vincent Booth has been a chiropractor for over thirty years. Vincent and Louise Booth have been married since 1989; they have four children together. Trial Transcript, 42:18-43:7.

3. Vincent Booth purchased Muirfield, a townhouse/condominium, in 1986 with a mortgage. The Booths fully paid off the loan in 1992. The Booths lived at Muirfield until December 1994. Thereafter, the Booths leased out Muirfield, receiving proceeds from the rent. In addition, Vincent Booth's mother lived at Muirfield for a short while. Trial Transcript, 47:12-52:1. Joint Exhibits 301, 302, and 304.

4. The Booths purchased Roundup, a single family residence, on December 29, 1994 with mortgage from World Savings and Loan Association. The Booths fully paid off the loan using proceeds of Vincent Booth's chiropractic practice in 2002. The Booths have lived at Roundup from December 1994 through the present. Trial Transcript, 43:8-47:11 and 279:23-280:12; Joint Exhibits 305, 206, and 325.

5. The Booths attended a seminar held by the National Trust Services in San Jose, California in 1995. The purpose of attending the seminar was to learn how to avoid paying taxes. Trial Transcript, 58:17-60:10 and 282:10-283:19.

6. The Booths did not pay federal income taxes for 1995-1997. The Booths and the United States have come to a settlement as to those liabilities (tax, interest, and penalties): the Booths agree to pay the United States $653, 314.71 plus interest from February 28, 2013. Doc. 154.

7. The Booths did not pay state income taxes for 2000-2002. The FTB claims the Booths owe $153, 573.50 as of May 15, 2013 for the tax years 2001-2002. The amount owed for tax year 2000 has been resolved. Joint Exhibit 407.

8. At the National Trust Services seminar, the Booths formed the Alpha Omega Trust, Aligned Enterprises Trust, and Agape Trust with the assistance of James Baker, a person affiliated with the seminar organizers. The Booths were trustees of these three trusts. Any monies put into them came from Vincent Booth's chiropractic practice. The Booth children were the beneficiaries of Alpha Omega Trust; the Alpha Omega Trust was the beneficiary of the Aligned Enterprises Trust and the Agape Trust. Trial Transcript, 58:17-60:19, 61:22-62:25, and 282:10-283:19; Joint Exhibit 406.

9. Louise Booth quitclaimed her interest in Roundup to Vincent Booth on July 16, 1996. Vincent Booth then quitclaimed his interest in both Roundup and Muirfield to the Alpha Omega Trust on July 22, 1996. Trial Transcript, 69:12-22 and 283:24-284:1; Joint Exhibits 307 and 308.

10. The Booths received nothing from Alpha Omega Trust in exchange for Roundup and Muirfield. Trial Transcript, 284:2-8.

11. In through the mid-1990s, Vincent Booth's chiropractic practice was located in rented office space at 21st Street, a commercial building. In July 1996, Vincent Booth as trustee of the Aligned Enterprises Trust, purchased 21st Street with a loan from Reinhilde Schwartz, the seller. The Booths paid off the loan with proceeds from the chiropractic practice. Louise Booth said she thought of the Aligned Enterprises Trust as just another means by which the Booths could own property. Vincent Booth's chiropractic practice remained at 21st Street until 2006. Trial Transcript, 55:1-58:16, 137:13-17, 188:16-189:25, 280:22-281:1, and 286:15-17; Joint Exhibit 309.

12. The United States contacted the Booths concerning their income tax obligations in 1998. The Booths then contacted Ioane on the recommendation of James Baker. Trial Transcript, 71:15-72:13.

13. Ioane worked for the Booths for several years. Ioane characterizes their relationship as: "we had a retainer agreement....if they have documents they want me to prepare, I would prepare them, and it also has in that agreement that they were required to speak to their attorneys and CPA to confirm that the documents were correct. So whatever documents Mr. Booth or Mrs. Booth asked me to prepare for them, I would prepare for them in accordance with our retainer ...

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