United States v. Holmes
2013 U.S. App. LEXIS 17658
| 10th Cir. | 2013Background
- Colorado Gas Compression, Inc. (CGCI) owed federal corporate taxes for 1994–1996; the company was dissolved in 2005 with ceased operations.
- CGCI distributions to James Holmes as sole shareholder totaled about $3.0–3.6 million between 1995 and 2002, during winding-up.
- IRS-issued deficiency notice in 1998; Tax Court proceedings led to remand and recalculation of CGCI’s liability (ultimately $923,049 in taxes plus interest).
- IRS assessed CGCI; CGCI did not pay the assessed taxes or interest; government filed suit in 2008 against Holmes as transferee under state law provisions.
- District court granted summary judgment against Holmes on liability as transferee for CGCI’s taxes; awarded $2,533,930.94; cross-appeal related to prejudgment interest.
- Issue on appeal: whether the government’s claims against Holmes were timely under applicable state and federal limitations, and the district court’s decision on prejudgment interest.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Timeliness of transferee liability claim | Holmes argues state statute of limitations applies. | Holmes asserts transferor liability not timely under §6501/§6901; federal regime governs. | Transferor-based federal limitations governing transferee liability apply; suit timely under federal law |
| Effect of assessment on limitations | Galletti allows ten-year collection after proper assessment against transferor. | Galletti not controlling; no separate assessment of Holmes occurred. | Ten-year collection window begins after proper assessment; absence of assessment bars suit |
| Continental and Updike authority | Continental supports suit within ten-year window; Updike supports transferee timing. | Continental/Updike do not permit unassessed transferee suit post-period. | Continental/Updike do not authorize untimely suit; the government’s claim barred |
Key Cases Cited
- United States v. Galletti, 541 U.S. 114 (U.S. 2004) (assessing and collecting transferee liability; post-assessment collection rules)
- United States v. Updike, 281 U.S. 489 (U.S. 1930) (transferee liability treated as tax collection; timing tied to assessment)
- Continental Nat’l Bank & Trust Co. v. United States, 305 U.S. 398 (U.S. 1939) (time to sue unassessed transferees barred when assessment period expires)
- United States v. Summerlin, 310 U.S. 414 (U.S. 1940) (federal government not bound by state limitations when acting in sovereign capacity)
- Leighton v. United States, 289 U.S. 506 (U.S. 1933) (IRS can collect from transferees via court within timeframe for assessment)
- Goldston v. United States (In re Goldston), 104 F.3d 1198 (10th Cir. 1997) (availability of civil action despite absence of administrative collection)
- Columbia Pictures Indus., Inc. v. Comm’r, 55 T.C. 649 (Tax Court 1971) (oversight of IRS tools to prevent asset insulation via transfers)