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CITE: Glenda S. Scoville v. United States; 85 AFTR2d Par. 2000-355;
No. 94-0936-CV-W-6 (December 3, 1999)
IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF MISSOURI
GLENDA S. SCOVILLE,
UNITED STATES OF AMERICA,
December 3, 1999
MEMORANDUM AND ORDER
The Internal Revenue Service levied on the fire insurance payments made
by the State Farm Insurance Company under a policy that named the plaintiff,
Glenda Scoville, as the insured to satisfy tax liabilities owed by her then
husband, Dr. Joseph A. May. Plaintiff brought this wrongful levy suit under
section 7426 of the Internal Revenue Code (26 U.S.C.) alleging that the taxpayer,
Dr. May, had no interest in the insurance payments ($92,086 for structural
damage to real property and $60,688 for personal property), and that the levy
was therefore wrongful. The Government argues that Dr. May did have an interest
in the property as he was an insured by definition on the policy and the plaintiff
was simply Dr. May's nominee, holding property for him in her name to hide
assets from the IRS.
FINDINGS OF FACT
The plaintiff, Glenda Scoville, married Joseph May in 1975. At this time,
May was still in dental school. The plaintiff worked as a file clerk and an
insurance policy typist in Kansas City to help put her husband through dental
school. Scoville claims that at the time of her marriage, she and May contracted
that if she put him through school, he would see that she had a farm. No such
agreement, if any, was reduced to writing. Whatever hopes Scoville may have
had, I find no credible evidence that May committed himself to acquire a farm
Dr. May opened a dental practice in Jefferson City, Missouri, in 1979.
That same year, May became a tax protestor, questioning the authority of the
IRS and going to tax-protestor meetings. May did not file a tax return for
1979, or for several years thereafter, until 1993 when the IRS made a jeopardy
assessment against him. Scoville worked for May at his dental office, but was
not paid for her work in at least the years 1980, 1981, and 1982. When asked
how he managed to have Scoville work for him for five years without paying
her for her work, May replied, "I'm a sly devil."
On February 23, 1983, while Scoville and May were married, farm property
located in Cleveland, Missouri ("the subject real property") , was
purchased and titled in the name of Glenda S. Scoville. The real property was
purchased with a down payment of $40,000 in coins. May had obtained the coins
as a result of his suspicion of banks and paper money. Scoville testified at
trial that she did not know how much of the $40,000 was hers and how much was
May's. She did not know whether she had a bank account at the time the property
was purchased. May testified that he felt that most of the $40,000 belonged
to Scoville because she had worked for him for five years with no salary. "If
some of it was mine, I gave it to her." Scoville signed a promissory note
for the balance of the purchase price of the real property in the amount of
$60,000. Dr. May's name did not appear on the note or on the deed of trust
which secured repayment of the note. Dr. May acknowledged at trial that part
of the reason for titling the farm in the sole name of the plaintiff was to
protect against litigation. May supported the family and made the mortgage
payments from February 1983 until December 1983.
On December 23, 1983, Scoville and May were divorced. Very little about
the family's relationship changed after the divorce, however. May continued
to live at the farm when he was in town, /1/ and the couple had three more
children. May continued to keep his personal property at the farm, including
chickens used for his cockfighting hobby, gold and silver that he had hoarded,
and dental equipment. He also kept a black hearse at the farm, which he drove
when protesting abortions and had in the name of the Basic Bible Church. /2/
Scoville also continued working for May at his dental offices, at least part
time, when she wasn't out "having babies."
In the divorce agreement, Scoville was given the entire interest in the
farm, and Dr. May's dental chairs, x-ray equipment and office furnishings,
which he used in his practice at both of his office locations. This dental
equipment was then leased back to May by Scoville. When asked to identify the
property which Dr. May retained after the divorce, Scoville testified, "I
don't know if he had any other property. This is all mine." Besides the
rent on the dental equipment, Scoville received child support payments from
May and began to receive a salary for her work at his offices. Her salary was
$14,000 per year and did not seem to correlate to the amount of hours she actually
worked. Scoville never asked for and never received a raise from May. May would
often "forget" to pay her and Scoville would have to "bug him
about it" until he paid her. Finally, May would occasionally provide additional
money for Scoville to make house payments when she needed it. Scoville filed
individual tax returns. Her returns for years 1983, 1985, 1986 and 1987 describe
her present address as "P.O. Box 1563, Jefferson City, Missouri 65101." During
this time, the plaintiff lived at the Cleveland farm. At trial, she stated
that she could not remember whether she had a post office box in Jefferson
City, but admitted that it "could have been" the post office box
for May's dental practice.
Helen Chalender and Traci Stroud, a mother and daughter who both worked
for May in one of his dental offices and both of whom may have had relationships
with May, testified by deposition, they were unavailable for trial. Chalender
testified that May obtained a $10,000 money order and used it to pay off the
outstanding balance due on the mortgage of the farm. May does not recall having
done this. Chalender also testified that May told her that he divorced Scoville
so that she could be his tax shelter. Stroud testified that she was paid in
cash by May for her work. She accompanied him to various banks where he would
cash checks he received from patients. He would endorse the checks with a highlighter
marker so that his signature would not show up on microfiche. May told her
that he did this in order to hide money from the IRS. May also told Stroud
that he divorced his wife so that he could put assets in her name and the IRS
could not touch them. At the trial, May did not recall saying this to Stroud.
Scoville and May were remarried in August of 1992. They remarried because
of the pending IRS investigation into May's failure to file tax returns. Scoville
did not want to testify against May. Scoville admitted at trial that her personal
relationship with May did not change after their second marriage. On November
3, 1992, May was indicted for willful failure to file income tax returns in
violation of 26 U.S.C. section 7203, income tax evasion in violation of 26
U.S.C. section 7201, and currency structuring in violation of 31 U.S.C. sections
5324(3), 5322(a) and 18 U.S.C. section 2. That same month, Scoville and her
youngest son left for a "vacation" in Costa Rica. Scoville's other
four children joined her in Costa Rica a few weeks later. Scoville testified
that she remained in Costa Rica because she was worried that she would be called
to testify against May. After Scoville left for Costa Rica May continued to
live at the Cleveland farm.
In April of 1993, the farm property was destroyed by fire. On April 15,
May contacted State Farm insurance adjustor Jan Wagoner Combs ("Combs")
to notify her of the fire loss and to initiate the filing of a claim. Scoville
learned of the fire and contacted Combs. She would not leave a telephone number
at which she could be reached; instead, she told Combs to leave a message with
May, to whom Combs referred as "Mr. I." ("Mr. Insured")
Combs dealt with May because May told her to do so, and Scoville had asked
May to act as a go-between. Correspondence between State Farm and Scoville
was addressed to her at May's office in Jefferson City. May filled out personal
property inventory forms which were stamped with his signature and returned
to State Farm; May did not sign them or return them himself because he was
incarcerated at the time. State Farm needed additional information, so the
forms were forwarded to Scoville. She completed them and signed them herself.
Subsequently, two checks were issued to Scoville by State Farm -- one for the
subject real property and one for the personal property. The IRS levied upon
both checks to cover May's jeopardy tax assessment of $179,185.
CONCLUSIONS OF LAW
In an action for wrongful levy, the plaintiff must show that she has
standing by establishing that she has an interest in the property at issue.
Flores v. White, 551 F.2d 1169, 1171 (9th Cir. 1977). In this case, the plaintiff
showed that she had an interest in the property levied upon. The subject real
property was titled in her name, she had lived there, and was the named insured
on the insurance policy covering the property and its contents. The furnishings
and clothing in the house belonged to her and her family members. The insurance
checks had been issued to the plaintiff.
After this showing has been made, the burden shifts to the Government
to show a nexus between the property and the taxpayer whose debt causes the
levy. Flores, 551 F.2d at 1175. At this stage, the Government often relies
on a nominee or alter ego theory, claiming that the plaintiff is the taxpayer's
nominee (when the plaintiff is a natural person) or alter ego (when the plaintiff
is a corporation) and merely holds the property for the taxpayer, allowing
him or her to avoid financial obligations. Whether the plaintiff is the taxpayer's
nominee is determined by examining state law. Hill v. United States, 844 F.
Supp. 263, 270 (W.D.N.Car. 1993). Certain "badges of fraud" often
appear when the Government successfully shows that the plaintiff is the nominee
of the taxpayer. In Missouri and elsewhere, the "badges of fraud" include:
1) lack of consideration;
2) transfer of the taxpayer's entire estate;
3) relationship between the taxpayer and the plaintiff;
4) pendency or threat of litigation;
5) secrecy or hurriedness of the transfer;
6) departure from the usual method of business;
7) retention by the taxpayer of possession of the transferred
8) reservation of benefit to the taxpayer.
First Home Savings Bank v. C&L Farms, Inc., 974 S.W.2d 621, 626 (Mo.
Ct. App. 1998); Towe Antique Ford Foundation v. Internal Revenue
Svc., 791 F.Supp. 1450, 1458 (D. Mont. 1992).
In this case, several of the "badges of fraud" are present,
and the facts lead the court to conclude that the plaintiff was May's nominee.
First, Dr. May successfully transferred nearly all of his assets to the plaintiff,
or hid them in one way or another so that they could not be reached by the
IRS. He was able to title the farm in the plaintiff's name only, even though
he helped pay for it, lived there, kept his personal property there, and made
improvements to the property. The insurance policies at issue were also set
up in the plaintiff's name only. Using the divorce agreement, he was able to
disclaim any dower interest he might have had in the farm, regardless of how
it was titled. In the divorce agreement, he also gave the plaintiff his dental
chairs and equipment, agreeing to lease them back from her so that he could
continue to use them. This is not common in divorce settlements.
May also used other mechanisms to hide assets and manipulate the law
to his advantage. He had automobiles and a bank account held in the name of
the Basic Bible Church. He dealt mainly in cash, and paid employees either
with cash or second-party checks. He did not have a personal bank account and
would cash checks made to him by his patients at the patients' banks, endorsing
the checks with hi-lighter pens, so that his signature would not show up on
microfiche. While these activities do not necessarily involve the plaintiff,
they reflect May's likely intent with respect to the way he held property.
Also, May divorced his wife to help him shield assets; the divorce made little
difference in the family's day-to-day life. Although there was a brief separation,
May and the plaintiff continued to live together, she continued to work in
his office, and they had three more children during the time they were divorced.
Both May and the plaintiff have testified that they continued to consider themselves
married to each other after the divorce. May then married the plaintiff again,
not because their relationship had changed, but because he was afraid she would
have to testify against him at a criminal trial. Fearing that the marriage
would not be enough to keep her off the stand, the plaintiff left the country,
taking her children to Costa Rica.
The next consideration is the plaintiff's claim that she paid for the
farm with her own money. While the agreement sets out that after the divorce
May would pay the plaintiff child support and "salary" for her work
at his office, he would often "forget" to pay her and paid her intermittently.
The plaintiff did not consistently work full time for May, although her salary
in no way reflected how many hours she actually worked. There is no documentation
of these payments to the plaintiff, as he paid her in cash. Also, he admittedly
paid the plaintiff additional money when she needed it. Accordingly, there
was apparently no meaningful change in May's support of the family after the
divorce, and the plaintiff has not established that she made the payments on
the farm using her own independent funds.
Further, May's asset-hiding activity was in contemplation of litigation.
May admitted that part of the reason he put the farm in the plaintiff's name
was to shield it from medical malpractice claims. Also, the purchase of the
farm, the divorce settlement, and May's other attempts to hide assets all occurred
after he was on notice of potential litigation with the IRS. May quit filing
tax returns and paying taxes in 1979. He had already been audited once prior
to the purchase of the farm. Even though that audit did not result in jeopardy
tax assessments, May must have known that he could not continue to fail to
file returns and pay taxes indefinitely without facing consequences from the
May always treated the farm as though it were his own. He lived on the
property, he kept his hearse (titled in the Basic Bible Church) on the property.
He kept stored gold and silver on the property. He raised chickens on the property
for his cock-fighting hobby, and built pens for the chickens. He planted a
garden on the farm each year. He built a porch on the property to store dental
equipment and records. He referred to the farm as "his farm" or "our
farm." He admittedly offered to sell the farm to at least one other person
before it burned down. After the fire, he arranged for the insurance claim
to be filed, acted as go-between for his wife, filled out personal property
inventory forms, and dealt with insurance adjustors and inspectors.
Finally, May was an insured by definition under the policy covering the
farm and its contents. The policy defined insured to include a spouse if the
spouse were a resident of the named insured's household. There is no question
that the plaintiff and May were married at the time of the fire. The plaintiff
disputes, however, that she and May were members of the same household when
the fire occurred. Under Missouri law, the term "household" refers
to a collection of persons, whether related by consanguinity or
affinity or not related at all but who live or reside together
as a single group or unit which is of a permanent and domestic
character, with one head, under one roof or within a single
curtilage; who have a common subsistence and who direct their
attention toward a common goal consisting of their mutual
interest and happiness.
Watt by Watt v. Mittelstadt, 690 S.W.2d 807, 815-16 (Mo. Ct. App.
1985); Cameron Mut. Ins. Co. v. Marler, 926 S.W.2d 62, 64 (Mo. Ct.
App. 1996). The plaintiff and Dr. May fit this definition. They lived
together at the farm, they worked together, they raised their
children together, although the plaintiff felt that May was too hard
on the children. They shared at least one common goal in that they
arranged their lives as much as possible to keep Dr. May out of jail.
The plaintiff had intended to return to the farm and would have done
so had it not burned to the ground. Her temporary sojourn in Costa
Rica did not remove her from the household. While the plaintiff now
claims that she had had enough of May's abuse and adultery, she had
apparently known about it and accepted it in the past. The plaintiff
cites no cases stating that acts of adultery or abuse prevent a
married couple from being members of the same household for homeowner
insurance purposes. Also the plaintiff evidently did not tell May of
her decision to leave, as he had not obtained a residence other than
the farm until it burned, and he bought the plaintiff several
expensive kitchen appliances after the fire, which he later claimed
were stolen from the barn on the property. Even at the time of trial,
although clever enough to have an address separate from May's, the
plaintiff resided at 1223 Southwest Boulevard in Jefferson City,
which was just down the street from May's Jefferson City office at
1312 Southwest Boulevard. The facts establish that the plaintiff and
May were members of the same household, thus rendering him an insured
by policy definition. Since Dr. May was an insured by policy
definition and had an interest in the farm property, he also had an
interest in the insurance proceeds.
Other courts have found a nexus between the taxpayer and the subject
property with far less evidence than was available to the court in this case.
In Hill v. United States, 844 F.Supp. 263 (W.D. N.Car. 1993), this nexus was
shown by proving that the taxpayer and his wife lived on the subject property;
the taxpayer built the house sitting on the property; the house was built with
a kit purchased with checks issued in the taxpayer's name; and the taxpayer
claimed the property as his own on the building permit applications. The plaintiff,
the taxpayer's daughter, did not live on the subject property. In Morris v.
United States, 813 F.2d 343 (11th Cir. 1987), the nexus was shown when the
Government proved that the plaintiff could not have purchased the subject property,
as he did not have enough money; the property was actually purchased with checks
written on the taxpayer's girlfriend's account; the taxpayer had made regular
deposits in his girlfriend's account; and the plaintiff was the taxpayer's
In this case, the court holds that the plaintiff was May's nominee, or
at least the nominee of the May family, and that the Government has shown the
requisite nexus between the taxpayer, May, and the insurance proceeds, at least
for the real property. The personal property belonged partially to May, partially
to the entire family, and partially to the plaintiff or her children exclusive
of May. The Government has not shown sufficiently which portion of the insurance
proceeds for the personal property belong exclusively to the plaintiff and
her children and would, therefore, have been levied wrongfully. Accordingly,
the Government has only shown the requisite nexus with respect to the personal-property
reimbursement which the plaintiff concedes belonged exclusively to May, $14,040.
When the Government shows a nexus between the taxpayer and the property,
the taxpayer must then show that the levy was wrongful by establishing that
the taxpayer had no interest in the property. The Ninth Circuit, in Flores
called this "really the identical question" as whether the nexus
exists between that taxpayer and the property, and thus placed the burden of
persuasion on the Government. Id. It stated, "Principles of fair play
and common sense dictate the result which we reach." Id. at 1175-76. /3/
At least one other court apparently does not find the nexus and the wrongfulness
of the levy "really the identical question." A district court found
in Hill, supra, at 271, that although the Government showed a nexus between
the taxpayer and the property in question, the plaintiff met her burden of
showing the levy was wrongful by showing her father (the taxpayer) had no interest
in the property. In that case, as stated above, the Government showed the nexus
by proving that the taxpayer lived in the property, that he had claimed it
as his own when applying for building permits, and that he built the house
himself using a kit purchased with checks drawn in his own name.
The plaintiff then showed that the levy was nonetheless wrongful because
her father had no interest in the property. He was thus not her nominee and
he did not defraud his creditors by placing assets in his daughter's name.
Although he purchased the materials kit for the house on the property, the
money came from a safe which was filled with the plaintiff's money that her
grandfather had given her. She also intended to return and live in the property
herself some day. The property was titled in the plaintiff's name.
In this case, the plaintiff alleges that the levy was wrongful because
any ownership interest May would have had in the farm was given to Scoville,
either as a gift, or as part of the divorce settlement. The plaintiff points
to several Missouri cases holding that any transfer of property from a husband
to his wife is presumed to be a gift or advancement. See, e.g., Gilliland v.
Gilliland, 96 Mo. 522, 10 S.W. 139 (1888). Plaintiff also cites Mo. Rev. Stat.
section 451.250, which provides that all property belonging to a woman at her
marriage, or which may have come to her during the marriage by gift, bequest
or inheritance, or by purchase with her separate money or means is her separate
As an illustration of the presumption in operation, the plaintiff relies
chiefly upon the Tenth Circuit case, Pate v. United States, 949 F.2d 1059 (10th
Cir. 1991). In Pate, a home was purchased and titled in the wife's name although
the husband paid the purchase price. Relying "primarily" on the presumption
in favor of a resulting trust when title to real property is taken in one person's
name but the purchase price is paid by another, the district court found that
the home could be used to pay the tax debts of the husband. Id. at 1060. The
Tenth Circuit reversed, holding that "[w]hen a husband purchases property
for his wife, not only is the resulting trust presumption inapplicable, but
the wife is entitled to the opposing presumption that the property is hers
alone by way of a gift or advancement." Id. at 1061. Importantly, in Pate,
the Tenth Circuit did not find any other basis for ascribing the property to
the husband. It was not shown that the husband attempted to shield other assets
as May did, using other nominees or dealing only in cash. Critically, the Tenth
Circuit noted in Pate that the acquisition of the subject property "was
not tainted by any existing and accruing tax liabilities, which did not arise
until years later." By the time Scoville and May purchased the farm in
1983 and subsequently divorced, May had already failed to file income tax returns
or pay taxes for several years, since 1979, and had already been audited once.
Accordingly, even though the jeopardy assessment did not come until 1993, the
structuring of the May's assets which occurred ten years earlier in the purchasing
of the home and the divorce settlement are tainted by the near certainty of
future tax liabilities.
Finally, Pate was seriously limited recently in the Tenth Circuit's decision
in McGavin v. Segal, 189 F.3d 1215, (10th Cir. 1999). In McGavin, a husband
placed a home in his wife's name although he resided in it with her and paid
the taxes, insurance and other bills for the property. The husband also placed
other assets in the name of his wife and a corporation. The Tenth Circuit stated
that the district court in McGavin did not simply rely on the inapplicable
general rule that a resulting trust was presumed when the purchase price was
paid by someone other than the person in whose name the property was titled.
Since the district court in McGavin considered other factors, sufficient to
impose a constructive trust, the court found the cases distinguishable. Id.
Further, the presumptions in Gilliland, Pate and similar cases are rebuttable.
When a couple structures assets such as the Mays did to avoid tax liability,
the presumption may well be rebutted. In Kaiser v. Kaiser, 722 F.2d 1574, 1583
(2nd Cir. 1983), the Second Circuit stated that "[t]he transfer of property
by the debtor to his spouse while insolvent, while retaining the use and enjoyment
of the property, is a classic badge of fraud." In Kaiser, the husband
purchased two homes with his own money, but placed the homes in his wife's
name. He was insolvent at the time. He lived in the homes with his wife and
treated the properties as his own. Id. He also created dummy corporations to
hide other assets. While not mentioning any presumption of gift, the Second
Circuit allowed the homes to cover the husband's debts, even though they were
titled in the wife's name. The court finds the case at bar much more similar
to Kaiser than to Pate. Even though May still had his dental practice, /4/
and so was technically not insolvent after the divorce agreement, the remainder
of his property went either to the plaintiff or was titled in the name of the
Basic Bible Church, so that he had no property which could readily be used
to satisfy his tax debt.
Finally, the plaintiff argues that the levy was improper because in Missouri,
the plaintiff and Dr. May could have held the property as tenants by the entirety,
which would have rendered the property unavailable to pay the debts of only
one of the spouses, Dr. May. While it is true that the parties could have structured
their property so that they were tenants by the entirety, they specifically
chose not to so structure the property, instead putting the farm in the plaintiff's
name only. They may not now claim to take advantage of Missouri law with respect
to tenancy by the entirety. See Herndon v. United States, 501 F.2d 1219, 1221
(8th Cir. 1974) (holding that while the plaintiff and her husband could have
held the subject property as tenants by the entirety under Arkansas law, they
held the property under the husband's name only, thereby exposing the property
to levy for the debts of only one spouse). /5/
The plaintiff also claims that the levy on the insurance proceeds violated
her constitutional due process rights. First, she contends that the failure
of the Government to notify her of the levy violated her due process and statutory
rights. 26 U.S.C. section 6335(a) provides that notice of seizure shall be
given "to the owner of the property (or, in the case of personal property,
the possessor thereof) . . . ." The insurance proceeds are personal property,
and the United States notified the holder of the proceeds, State Farm, of the
seizure. Therefore the statutory notice provisions were satisfied.
In a similar situation, the Southern District of Georgia held that, so
long as statutory notice had been given, no due process rights were violated.
Douglas v. United States, 562 F.Supp. 593, 596- 97 (S.D. Ga. 1983). In Douglas,
a woman's savings account was seized pursuant to a levy, and used to satisfy
the delinquent taxes of her son, whose name was also on her account. The woman
could apparently show that the account funds belonged entirely to her under
state law and that her son had no interest in them, and thus the IRS levy would
have been wrongful. Her wrongful levy claim, however, was outside the limitations
period. She claimed that her due process rights had been violated in that she
was never given notice of the seizure of the account funds. The court held
that the bank had been notified as possessor of the property pursuant to the
statute, and thus due process had been satisfied.
Scoville next claims that her due process rights were violated because
she was not given a full pre-seizure or post-seizure hearing. The Supreme Court
of the United States has approved the Internal Revenue Code's levy procedure.
In United States v. National Bank of Commerce, 472 U.S. 713 (1985), the Court
found that the wrongful levy action under section 7426(a) of the Code adequately
protects the rights of third parties who claim that their property was wrongfully
levied upon to satisfy the tax liabilities of another individual. Id. at 728.
The Court found that this statutory scheme "balanced the interest of the
Government in the speedy collection of taxes against the interests of any claimants
to the property, and reconciled those interests by permitting the IRS to levy
on the assets at once, leaving ownership to be resolved in a post-seizure administrative
or judicial proceeding." Id. at 729.
Various circuit courts presented with the plaintiff's arguments have
also concluded that the process provided third parties in the wrongful levy
process was constitutionally adequate. Myers v. United States, 647 F.2d 591
(5th Cir. 1981), and Valley Finance, Inc. v. United States, 629 F.2d 162 (D.C.
Cir. 1980), both held that since section 7426(a) allows third parties to bring
an action for wrongful levy immediately after seizure, the third parties were
provided due process. Further, Myers found that the third party challenging
the seizure was not constitutionally entitled to contest the validity of the
tax assessment giving rise to the liens upon which the levy was based. Myers,
647 F.2d at 603. The cases cited by plaintiff are not to the contrary. Because
the Internal Revenue Code's levy procedures were followed in this case, the
plaintiff shows no due process violations.
For all of the above reasons, the court concludes that the levy of the
insurance proceeds for the real property was proper, as the plaintiff held
the property as a nominee of Dr. May and the May family, which included taxpayer
Dr. Joseph May. The court also concludes that the levy of the insurance proceeds
for the personal property was proper to the extent of $14,040, the amount which
the Government has proven the taxpayer had an interest. The remainder of the
total proceeds of $60,688 is not shown to be for his personal property. /6/
Accordingly, it is
ORDERED that the clerk enter judgment in favor of the plaintiff in the
amount of $46,648.22, the amount of the insurance proceeds for the contents
of the dwelling not shown by the United States to have been solely owned by
the taxpayer, Dr. May. It is further
ORDERED, pursuant to 26 U.S.C. section 7426(g), plaintiff is awarded
interest on the judgment entered in her favor from November 18, 1993 (the date
the IRS received the insurance proceeds for the plaintiff's personal property
wrongfully levied upon), to the date of judgment. /7/ The plaintiff is ordered
to submit an application setting forth the applicable interest rate and the
amount of interest to which she is entitled within thirty days of the date
of this order.
Howard F. Sachs
United States District Judge
Dated: December 3, 1999.
/1/ May had an office in Jefferson City, Missouri, and an office in south
Kansas City, Missouri. Due to the distance between the two offices, he would
spend a couple of days per week at each office. The farm property was close
to the Kansas City office and May would usually stay there when he was in Kansas
City. When May was in Jefferson City, he would stay at his office or with one
of his tax- protestor friends.
/2/ May also had a 1988 Chevrolet Suburban which he placed in the name of
the Basic Bible Church, and he had a bank account in the Church's name.
/3/ The Flores court held that the Government had not shown the requisite
nexus between the taxpayer and the property, and thus that the levy was wrongful.
It qualified this holding, however, stating,
We are not here faced with a situation in which the Government
demonstrates a nexus between the taxpayer and the property by a
preponderance of the evidence, but the plaintiff makes a claim
to the property derivatively from the taxpayer, through gift or
otherwise. Obviously that situation is different from the
present case, and our holding is limited to a requirement that
the Government trace the property to the taxpayer.
Id. at 1176 n. 8 (citations omitted). In this case, plaintiff does
claim in her brief that all property and money given to her by her
husband were gifts, and uses the Missouri presumption to support her
argument. Accordingly, the plaintiff does not present the same case
that the court faced in Flores.
/4/ The court also notes that May's practice included no dental equipment,
but only a lease with May's ex-wife for the necessary equipment.
/5/ To the extent the defendant suggests a presumption that personal property
is held jointly or by the entireties (Brief, p. 76 n. 11), it has not established
that the result would be more favorable than is reached here.
/6/ In Missouri, the presumption is that property (including personal property)
owned jointly by married persons is held as a tenancy by the entirety. Seabaugh
v. Seabaugh, 839 S.W.2d 49, 50 (Mo. Ct. App. 1992). Unless there is some reason
to attribute the debt to both spouses, the property held by the entirety cannot
be used to satisfy the debt; the lien simply does not attach. United States
v. Hutcherson, 188 F.2d 326, 330-31 (8th Cir. 1951) (Missouri law, cited with
approval in Tony Thornton Auction Svc. Inc. v. United States, 791 F.2d 635,
637 (8th Cir. 1986)). Because the personal property was not formally titled,
the presumption applies here.
/7/ Post-judgment interest will continue to accrue.
END OF FOOTNOTES
to Tax Protestor Exhibit