462 B.R. 539
Bankr. M.D.N.C.2011Background
- IRS filed lien and levy to satisfy Sammy Johnson's tax liability; Sammy's wife Victoria is Schofield-Johnson's controlling shareholder; Sammy has no ownership in Schofield-Johnson.
- Sammy received about $1,000,000 judgment proceeds from Colonial Life suit and directed deposit into Victoria's checking account; funds were used for house, investments, car, and gifts.
- Victoria formed Schofield-Johnson on February 26, 2008, funded by her assets and family contributions; Sammy contributed nothing.
- IRS filed a lien on Schofield-Johnson's assets July 15, 2009 and levied on its RBC Wealth Management account; Schofield-Johnson filed Chapter 11 on August 10, 2009.
- IRS contends Sammy's transfers to Victoria were fraudulent and Schofield-Johnson is a nominee; Schofield-Johnson contends the transfers were legitimate asset protection.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Schofield-Johnson is Sammy's nominee | Schofield-Johnson is Sammy's nominee. | IRS seeks to disregard ownership through fraud/alter ego. | Schofield-Johnson is Sammy's nominee (fraudulent transfers). |
| Whether Sammy's transfer to Victoria was fraudulent | Transfer was fraudulent under NC 39-23.4(a). | No fraudulent intent; legitimate family/estate planning. | Yes, fraudulent transfer under NC law. |
| Whether Schofield-Johnson is a good-faith transferee for value | Schofield-Johnson acted in good faith and for value. | Knowledge of voidability and insider control defeat good-faith status. | Not a good-faith transferee for value. |
| What remedies apply if not a good-faith transferee | IRSwould be limited to recover against first transferee or value transferees. | If not good-faith, IRS may reach Schofield-Johnson. | IRS may proceed against Schofield-Johnson as nominee; judgment for IRS. |
Key Cases Cited
- G.M. Leasing Corp. v. United States, 429 U.S. 338 (U.S. 1977) (authorized enforcement of tax liens against third-party property (nominee/alter ego))
- United States v. Scherping, 187 F.3d 796 (8th Cir. 1999) (nominee/alter ego theory applied to tax liens)
- Shades Ridge Holding Co., Inc. v. United States, 888 F.2d 725 (11th Cir. 1989) (application of nominee/alter ego concepts to liens)
- Lemaster v. United States, 891 F.2d 115 (6th Cir. 1989) (fraudulent conveyance principles in tax context)
- Murphy v. IRS, 493 F.3d 170 (D.C. Cir. 2007) (case governing taxability of proceeds and timing of payments)
- Drye v. United States, 528 U.S. 49 (U.S. 1999) (determine taxpayer rights in property under state law for lien purposes)
- U.S. v. Thornton, 859 F.2d 151 (4th Cir. 1988) (law of resulting trusts in determining ownership under Maryland law)
- Triangle Bank v. Eatmon, 143 N.C.App. 521, 547 S.E.2d 92 (N.C. App. 2001) (insiders and fraudulent transfer considerations under NC law)
- Chorost v. Grand Rapids Factory Showrooms, Inc., 77 F.Supp. 276 (D.N.J. 1948) (knowledge of voidability and good-faith transferee concepts under NC guidance)