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United States v. Wade

United States District Court, D. Utah, Central Division

October 2, 2017

UNITED STATES OF AMERICA, Plaintiff,
v.
STANLEY L. WADE, et al. Defendants.

          MEMORANDUM DECISION AND ORDER

          DAVID SAM SENIOR JUDGE.

         I. INTRODUCTION

         Both parties in this case have moved for entry of summary judgment pursuant to Fed.R.Civ.P. 56. On December 15, 2015, the United States filed this suit to reduce to judgment the federal income tax liabilities for tax years 1993 through 2004, assessed against Wade, and to foreclose the federal tax liens against his interest in the parcels of real property set forth in the complaint (hereinafter "the Subject Properties"). In March 2004, the Wades were indicted for several tax related crimes and for a 2002 false bankruptcy filing. On March 4, 2005, the Wades filed an affidavit under oath in a Utah court stating "[w]e or certain trusts or business entities legally or equitably owned by us are the owners" of the apartment complexes then purportedly titled in the name of the UBOs or other entities, and at issue in this case. The affidavit also stated "[w]e acknowledge and agree that our family or business entities owned or controlled by our family are the legal and beneficial owners" of the apartment complexes at issue in this case.

         On March 21, 2005, Wade was convicted of engaging in a conspiracy to defraud the United States based on his transfer of the apartment complexes into the UBOs. He was also convicted of three counts of tax evasion for knowingly and willingly signing and submitting federal income tax returns for tax years 1997, 1998, and 1999, omitting at least $4.6 million of taxable income generated from the operation of the apartment complexes at issue here, and one count of tax evasion related to his failure to pay the tax liabilities related to a criminal conviction against him in 1990 with regard to his 1982 and 1983 tax years. Finally, Wade was convicted of two counts related to his 2002 fraudulent bankruptcy filing. See United States of America v. Wade, 2:04-cr-0141-TS.

         Janet Wade was permitted to enter into a pretrial diversion agreement rather than face trial. Pursuant to the diversion agreement, Janet was required to submit correct tax returns for herself for the years 1993 through 2004, and to pay her half of the resulting tax liabilities. Janet hired an accountant who worked closely for several months with an IRS representative to construct accurate income tax returns for the years 1993 through 2004 which reported half of the rental income from the Subject Properties, and she paid the income tax reported on each of these returns, with the exception of 1993. Using the information reported by Janet on her returns for the years 1993 through 2004, the IRS made federal income tax assessments against Wade for the tax years 1993 through 2004.

         In 2011, Wade filed a mandamus proceeding in this Court, Wade v. Regional Director, Internal Revenue Service, Civil No. 11-4184, in which he sought an order directing the IRS to withdraw tax liens filed against certain of his properties and to desist from further tax collection efforts with regard to the tax years 1993-2004. The Court granted summary judgment in favor of the United States and dismissed Wade's suit. See Wade v. Regional Director, 504 Fed.Appx. 748 (10th Cir. 2012).

         Janet and the entities were named as parties to this action because they may claim an interest in some or all of the Subject Properties. Several defendants with recorded mechanic's liens were named pursuant to 26 U.S.C. ("I.R.C.") § 7403(b). Those defendants have either stipulated that they have no interest in any of the Subject Properties or have been defaulted by the Clerk of this Court. Finally, the United States named Ronald C. Baker as a defendant based on a recorded attorney's lien.

         Plaintiffs have four main allegations for which they are seeking summary judgment: (1) the federal tax assessments are entitled to a presumption of correctness; (2) Stanley Wade is liable for the fraud penalty; (3) foreclosure of the federal tax liens against the Subject Properties is proper; and (4) Stanley Wade's income tax liabilities are exempted from the bankruptcy discharge. Defendants assert in their summary judgment motion that the Subject Properties were transferred by gift from Stanley Wade to Janet Wade in 2004 and therefore cannot be subject to Stanley's alleged tax liabilities. The government recorded tax liens against all 19[1] of the Subject Properties and the government seeks to foreclose on the 19 Subject Properties in order to satisfy Stanley's alleged tax liabilities. Janet alleges that Stanley has no ownership interest in the 19 Subject Properties as they were properly gifted to her and she has paid all the taxes owed on them. Defendants further assert that the government's claim of fraudulent transfer of the Subject Properties to Stanley's wife is barred by the statute of limitations.

         II. SUMMARY JUDGMENT STANDARD

         Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); accord Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-250 (1986); Nelson v. Geringer, 295 F.3d 1082, 1086 (10th Cir. 2002); Russillo v. Scarborough, 935 F.2d 1167, 1170 (10th Cir. 1991).

         The party moving for summary judgment has the initial burden of showing the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Viktus v. Beatrice Co., 11 F.3d 1535, 1539 (10th Cir. 1993). Once the movant's burden is met by producing evidence which, if uncontroverted, would entitle the movant to judgment as a matter of law, the burden then shifts to the nonmoving party to demonstrate that there are genuine issues for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.574, 586-87 (1986); Viktus 11 F.3d at 1539. An issue of material fact is genuine where a reasonable jury could return a verdict for the party opposing summary judgment. Seymore v. Shawver & Sons, Inc., 111 F.3d 794, 797 (10th Cir. 1997). Conclusory allegations unsupported by specific factual data are insufficient to create a triable issue of fact so as to preclude summary judgment. See L & M Enters., Inc. v. BEI Sensors & Sys. Co., 231 F.3d 1284, 1287 (10th Cir. 2000); White v. York Int'l Corp., 45 F.3d 357, 360 (10th Cir. 1995).

         III. ANALYSIS

         In their summary judgment motion, the United States asserts that tax assessments made by the IRS are presumed to be correct and that the taxpayer bears the burden of overcoming this presumption. See United States v. Fior D'Italia Inc., 536 U.S. 238, 242-43 (2002). The United States also asserts that the federal tax liabilities were properly assessed against the Defendants and that all notices and demand for payment were properly sent, making the Defendants liable for the unpaid taxes and all additional penalties incurred. The government's position is that this includes the fraud penalty from Wade's transfer of property to alleged sham entities, his failure to cooperate with tax authorities, and the filing of two fraudulent bankruptcies.

         The government alleges that the Subject Properties at issue are subject to tax liens and foreclosure because the transfers of the Subject Properties by Wade were fraudulent; and the UBO's and business trusts hold title to the Subject Properties as Wade's nominees. In response, Defendants claim that the Subject Properties did not belong to Stanley during the 2006 tax assessment because he conveyed them to his wife as a gift in 2004. As a result of the alleged gift, Defendants assert that the ...


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