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United States v. T.J. Enterprises & Acoustical, Inc.

United States District Court, D. Utah

May 31, 2019

UNITED STATES OF AMERICA, Plaintiff,
v.
T.J. ENTERPRISES & ACOUSTICAL, INC.; GURULE PROPERTIES INCORPORATED d/b/a GURULE PROPERTIES, INC.; LINDA GURULE a/k/a LINDA LEE ROACH; RDLC MANAGEMENT; STATE OF UTAH, TAX COMMISSION; STATE OF UTAH, DEPARTMENT OF WORKFORCE SERVICES; SALT LAKE COUNTY, UTAH; WORKERS COMPENSATION FUND OF UTAH; CERTIFIED REPROGRAPHICS, INC.; CHEKLINE, INC. d/b/a CHECK MAX; NEW HAMPSHIRE INSURANCE COMPANY, a member company of AMERICAN INTERNATIONAL GROUP, INC.; and SAVAGE SCAFFOLD & EQUIPMENT, INC., Defendants.

          MEMORANDUM DECISION AND ORDER GRANTING IN PART AND DENYING IN PART • [61] UNITED STATES' MOTION FOR SUMMARY JUDGMENT; AND • [64] DEFENDANTS GURULE PROPERTIES, INC. AND LINDA GURULE'S MOTION FOR SUMMARY JUDGMENT

          David Nuffer, United States District Judge

         The United States of America (“United States”) filed this action on February 2, 2015, seeking to reduce to judgment federal tax assessments against T.J. Enterprises & Acoustical, Inc. (“T.J. Enterprises”) and to foreclose related tax liens against real property located at 480 West Century Drive, Murray, Utah 84123 (the “Subject Property”).[1] Gurule Properties Incorporated (“GPI”) holds record title to the Subject Property and disputes that T.J. Enterprises has any legal or equitable interest in the Subject Property. The United States has filed a Motion for Summary Judgment (“U.S. Motion for Summary Judgment”).[2] Defendants GPI and Linda Gurule (collectively, the “Gurule Defendants”) filed a memorandum in opposition, [3] and Defendant T.J. Enterprises filed a memorandum in response, [4] to which the United States replied.[5]

         The Gurule Defendants also filed a joint Motion for Summary Judgment (“Gurule Motion for Summary Judgment”), [6] which is fully briefed and involves the same issues raised in the U.S. Motion for Summary Judgment.[7]

         The parties agree that the United States' federal tax assessments against T.J. Enterprises should be reduced to judgment. However, the United States has failed to meet its burden to establish that T.J. Enterprises has an interest in the Subject Property, or that the United States otherwise has valid and enforceable tax liens on the Subject Property. Therefore, as discussed below, the U.S. Motion for Summary Judgment[8] and the Gurule Motion for Summary Judgment[9]are granted in part and denied in part.

         Contents

         Undisputed Facts ............................................................................................................................. 3

         Federal Tax Liabilities ........................................................................................................ 4

         Federal Tax Liens ............................................................................................................. 13

         The Subject Property ......................................................................................................... 15

         Other Parties to the Lawsuit .............................................................................................. 20

         Summary Judgment Standard ....................................................................................................... 26

         Discussion ..................................................................................................................................... 27

         The United States' action is not subject to a Utah State statute of limitations. . ............... 27

         The United States is entitled to summary judgment reducing the federal tax assessments against T.J. Enterprises to judgment. . ................................................................... 28

         GPI is entitled to summary judgment regarding the Subject Property and the validity of the tax liens against the property. . ........................................................................ 29

         The undisputed material facts establish that T.J. Enterprises does not have an interest in the Subject Property under Utah law. . ..................................... 30

         Because T.J. Enterprises does not have a legal interest in the Subject Property, the United States is not entitled to foreclose the tax liens against the Subject Property. . ................................................................................................... 32

         Issues regarding the Deed of Trust assigned to Linda Gurule are moot. . ......................... 33

         Order…… ..................................................................................................................................... 33

         UNDISPUTED FACTS[10]

         1. T.J. Enterprises was incorporated in Utah by Teddy Gurule in 1997.[11]

         2. Teddy Gurule was the President and sole owner of T.J. Enterprises.[12]

         3. In 2003, T.J. Enterprises began having significant tax related difficulties and other serious financial problems, which continued until T.J. Enterprises went out of business in 2010.[13]

         Federal Tax Liabilities

         4. T.J. Enterprises filed quarterly federal employment tax (Form 941) returns for the tax periods ending: 6/30/2003, 9/30/2003, 12/31/2003, 3/31/2004, 6/30/2004, 9/30/2004, 12/31/2004, 3/31/2005, 12/31/2005, 3/31/2006, 6/30/2006, 9/30/2006, 12/31/2006, 3/31/2007, 6/30/2007, 9/30/2007, 12/31/2007, 6/30/2009, 9/30/2009, and 3/31/2010. Each of those returns showed a balance due for the relevant tax period; however, T.J. Enterprises failed to make payments of those taxes when they were due.[14]

         5. For the quarter ending 12/31/2009, T.J. Enterprises failed to file a quarterly federal employment tax (Form 941) return. After examination, the IRS assessed the balance due for that quarter.[15]

         6. On the following dates, a duly-authorized delegate of the Secretary of Treasury made timely assessments of liability for the unpaid quarterly federal employment taxes, penalties, and interest as follows:[16]

         Form 941 Assessments

Tax Period

Assessment Date

Amount Assessed

2003 - Q2 (Jun. 2003)

8/16/2004

$ 33, 103.17 (Tax)

8/16/2004

7, 448.21 (Late Filing Penalty)

8/16/2004

3, 310.32 (Fed. Tax Deposit Penalty)

8/16/2004

2, 151.71 (Failure to Pay Tax Penalty

8/16/2004

1, 906.78 (Interest)

9/20/2004

1, 655.16 (Fed. Tax Deposit Penalty)

10/15/2007

4, 633.13 (Failure to Pay Tax Penalty)

2003 - Q3 (Sept. 2003)

8/16/2004

$ 59, 383.60 (Tax)

8/16/2004

13, 361.31 (Late Filing Penalty)

8/16/2004

5, 938.36 (Fed. Tax Deposit Penalty)

8/16/2004

2, 969.19 (Failure to Pay Tax Penalty)

8/16/2004

2, 530.65 (Interest)

9/20/2004

2, 969.18 (Fed. Tax Deposit Penalty)

10/15/2007

11, 876.72 (Failure to Pay Tax Penalty)

10/20/2014

59, 484.28 (Interest)

2003 - Q4 (Dec. 2003)

9/6/2004

$ 79, 131.75 (Tax)

9/6/2004

17, 804.64 (Late Filing Penalty)

9/6/2004

7, 913.16 (Fed. Tax Deposit Penalty)

9/6/2004

3, 165.27 (Failure to Pay Tax Penalty)

9/6/2004

2, 595.11 (Interest)

10/11/2004

3, 956.59 (Fed. Tax Deposit Penalty)

10/15/2007

16, 617.67 (Failure to Pay Tax Penalty)

10/20/2014

78, 096.03 (Interest)

2004 - Q1 (Mar. 2004)

7/26/2004

$ 52, 848.32 (Tax)

7/26/2004

5, 284.83 (Fed. Tax Deposit Penalty)

7/26/2004

792.72 (Failure to Pay Tax Penalty)

7/26/2004

593.84 (Interest)

8/30/2004

2, 642.42 (Fed. Tax Deposit Penalty)

10/15/2007

12, 155.70 (Failure to Pay Tax Penalty)

10/13/2008

246.66 (Failure to Pay Tax Penalty)

10/17/2011

299.40 (Failure to Pay Tax Penalty)

10/20/2014

40, 688.93 (Interest)

2004 - Q2 (Jun. 2004)

11/8/2004

$ 2, 500.63 (Tax)

11/8/2004

250.06 (Fed. Tax Deposit Penalty)

11/8/2004

50.01 (Failure to Pay Tax Penalty)

11/8/2004

30.18 (Interest)

9/20/2004

81, 239.02 (Tax from Duplicate Return)

9/20/2004

8, 123.90 (Late Filing Penalty)

9/20/2004

8, 123.90 (Fed. Tax Deposit Penalty)

9/20/2014

733.51 (Interest)

10/15/2007

20, 884.90 (Failure to Pay Tax Penalty)

10/13/2008

418.70 (Failure to Pay Tax Penalty)

10/17/2011

2, 487.18 (Failure to Pay Tax Penalty)

10/20/2014

69, 618.14 (Interest Assessed)

2004 - Q3 (Sept. 2004)

11/29/2004

$ 63, 462.99 (Tax)

11/29/2004

6, 271.03 (Fed. Tax Deposit Penalty)

11/29/2004

313.55 (Failure to Pay Tax Penalty)

11/29/2004

248.92 (Interest)

1/3/2005

3, 135.51 (Fed. Tax Deposit Penalty)

10/15/2007

15, 364.01 (Failure to Pay Tax Penalty)

10/13/2008

313.55 (Failure to Pay Tax Penalty)

10/17/2011

3, 449.07 (Failure to Pay Tax Penalty)

10/20/2014

48, 896.97 (Interest)

2004 - Q4 (Dec. 2004)

5/26/2005

$ 81, 921.26 (Tax)

5/26/2005

8, 891.14 (Late Filing Penalty)

5/26/2005

6, 586.03 (Fed. Tax Deposit Penalty)

5/26/2005

1, 290.91 (Interest)

3/26/2007

4, 826.95 (Fed. Tax Deposit Penalty)

3/26/2007

48, 269.52 (Additional Tax Assessed)

5/28/2007

2, 413.47 (Fed. Tax Deposit Penalty)

10/15/2007

19, 843.95 (Failure to Pay Tax Penalty)

10/13/2008

5, 792.34 (Failure to Pay Tax Penalty)

10/17/2011

2, 896.17 (Failure to Pay Tax Penalty)

10/20/2014

87, 527.63 (Interest)

2005-Q1 (Mar. 2005)

5/26/2005

$ 72, 048.84 (Tax)

5/26/2005

2, 313.10 (Late Filing Penalty)

5/26/2005

7, 204.88 (Fed. Tax Deposit Penalty)

5/26/2005

374.53 (Interest)

10/15/2007

17, 339.44 (Failure to Pay Tax Penalty)

10/20/2014

51, 129.10 (Interest)

2005 - Q4 (Dec. 2005)

2/11/2008

$ 37, 026.42 (Tax)

2/11/2008

4, 207.71 (Late Filing Penalty)

2/11/2008

1, 870.08 (Fed. Tax Deposit Penalty)

2/11/2008

2, 337.62 (Failure to Pay Tax Penalty)

2/11/2008

3, 897.37 (Interest)

3/17/2008

935.05 (Fed. Tax Deposit Penalty)

10/17/2011

2, 337.61 (Failure to Pay Tax Penalty)

10/20/2014

9, 430.32 (Interest)

2006 - Q1 (Mar. 2006)

7/17/2006

$ 74, 431.94 (Tax)

7/17/2006

2, 675.08 (Late Filing Penalty)

7/17/2006

562.23 (Failure to Pay Tax Penalty)

7/17/2006

584.41 (Interest)

7/17/2006

1, 350.00 (Late Filing Penalty)

10/30/2006

4, 946.79 (Fed. Tax Deposit Penalty)

10/30/2006

18.11 (Interest)

10/15/2007

960.00 (Failure to Pay Tax Penalty)

10/13/2008

720.00 (Failure to Pay Tax Penalty)

10/20/2014

7, 631.08 (Interest)

2006 - Q2 (Jun. 2006)

12/03/2007

$ 111, 508.00 (Tax)

12/03/2007

10, 658.25 (Late Filing Penalty)

12/03/2007

5, 947.09 (Fed. Tax Deposit Penalty)

12/03/2007

4, 026.45 (Failure to Pay Tax Penalty)

12/03/2007

6, 578.28 (Interest)

1/7/2008

2, 368.50 (Fed. Tax Deposit Penalty)

10/17/2011

7, 816.05 (Failure to Pay Tax Penalty)

10/20/2014

24, 341.38 (Interest)

2006 - Q3 (Sept. 2006)

12/3/2007

$ 124, 849.00 (Tax)

12/3/2007

26, 516.02 (Late Filing Penalty)

12/3/2007

11, 924.88 (Fed. Tax Deposit Penalty)

12/3/2007

8, 249.43 (Failure to Pay Tax Penalty)

12/3/2007

13, 157.48 (Interest)

1/7/2008

5, 892.45 (Fed Tax Deposit Penalty)

10/17/2011

21, 212.81 (Failure to Pay Tax Penalty)

10/20/2014

58, 289.01 (Interest)

2006 - Q4 (Dec. 2006)

12/3/2007

$ 109, 054.00 (Tax)

12/3/2007

24, 537.15 (Late Filing Penalty)

12/3/2007

10, 905.36 (Fed. Tax Deposit Penalty)

12/3/2007

5, 997.97 (Failure to Pay Tax Penalty)

12/3/2007

9, 266.00 (Interest)

1/7/2008

5, 452.70 (Fed. Tax Deposit Penalty)

10/17/2011

21, 265.53 (Failure to Pay Tax Penalty)

10/20/2014

52, 658.70 (Interest)

2007 - Q1 (Mar. 2007)

12/3/2007

23, 868.20 (Tax)

12/3/2007

5, 145.34 (Late Filing Penalty)

12/3/2007

2, 386.81 (Fed. Tax Deposit Penalty)

12/3/2007

914.73 (Failure to Pay Tax Penalty)

12/3/2007

1, 364.41 (Interest)

1/7/2008

1, 143.41 (Fed. Tax Deposit Penalty)

10/17/2011

4, 802.32 (Failure to Pay Tax Penalty)

10/20/2014

10, 822.58 (Interest)

2007 - Q2 (Jun. 2007)

12/3/2007

$ 13, 880.02 (Tax)

12/3/2007

1, 873.80 (Late Filing Penalty)

12/3/2007

1, 388.00 (Fed. Tax Deposit Penalty)

12/3/2007

347.00 (Failure to Pay Tax Penalty)

12/3/2007

437.53 (Interest)

1/7/2008

694.00 (Fed. Tax Deposit Penalty)

10/17/2011

3, 123.00 (Failure to Pay Tax Penalty)

10/20/2014

6, 002.69 (Interest)

2007 - Q3 (Sept. 2007)

12/17/2007

$ 39, 715.08 (Tax)

12/17/2007

201.71 (Failure to Pay Tax Penalty)

12/17/2007

208.84 (Interest)

3/31/2008

2, 873.35 (Fed. Tax Deposit Penalty)

10/17/2011

3, 044.39 (Failure to Pay Tax Penalty)

10/20/2014

5, 020.70 (Interest)

2007 - Q4 (Dec. 2007)

06/30/2008

$ 41, 204.27 (Tax)

06/30/2008

1, 257.21 (Late Filing Penalty)

06/30/2008

698.45 (Failure to Pay Tax Penalty)

06/30/2008

780.76 (Interest)

7/21/2008

3, 130.66 (Fed. Tax Deposit Penalty)

7/21/2008

139.69 (Failure to Pay Tax Penalty)

7/21/2008

88.12 (Interest)

10/17/2011

6, 146.38 (Failure to Pay Tax Penalty)

10/20/2014

9, 224.53 (Interest)

2009 - Q2 (Jun. 2009)

8/31/2009

$ 83, 549.58 (Tax)

8/31/2009

2, 318.90 (Fed. Tax Deposit Penalty)

10/20/2014

417.05 (Interest)

2009 - Q3 (Sept. 2009)

12/07/2009

$ 58, 343.62 (Tax)

12/07/2009

4, 144.64 (Fed. Tax Deposit Penalty)

10/20/2014

665.23 (Interest)

2009 - Q4 (Dec. 2009)

11/1/2010

$ 117, 625.04 (Tax)

11/1/2010

24, 188.38 (Late Filing Penalty)

11/1/2010

5, 375.19 (Failure to Pay Tax Penalty)

11/1/2010

4, 014.12 (Interest)

12/14/2011

10, 766.35 (Fed. Tax Deposit Penalty)

10/17/2011

5, 912.72 (Failure to Pay Tax Penalty)

10/15/2012

6, 450.23 (Failure to Pay Tax Penalty)

10/20/2014

21, 170.61 (Interest)

10/20/2014

9, 137.83 (Failure to Pay Tax Penalty)

2010 - Q1 (Mar. 2010)

6/21/2010

$ 152, 308.05 (Tax)

6/21/2010

21.74 (Failure to Pay Tax Penalty)

6/21/2010

12.42 (Interest)

10/17/2011

326.09 (Failure to Pay Tax Penalty)

10/15/2012

195.65 (Failure to Pay Tax Penalty)

10/20/2014

378.16 (Interest)

         7. Despite timely notice and demand for payment of the tax assessments described above, T.J. Enterprises has neglected or refused to make full payment of the assessed amounts to the United States.[17]

         8. T.J. Enterprises filed federal unemployment tax (Form 940) returns for the 2007 and 2010 tax years. Each of those returns showed a balance due for the relevant tax period; however, T.J. Enterprises failed to make payments of those taxes when they were due.[18]

         9. On the following dates, a duly-authorized delegate of the Secretary of Treasury made timely assessments of liability for the unpaid federal unemployment taxes, penalties, and interest as follows:[19]

         Form 940 Assessments

Tax Period

Assessment Date

Amount Assessed

2007

4/14/2008

$ 2, 598.49 (Tax)

4/14/2008

116.93 (Late Filing Penalty)

4/14/2008

259.84 (Fed. Tax Deposit Penalty)

4/14/2008

38.98 (Failure to Pay Tax Penalty)

4/14/2008

37.65 (Interest)

5/19/2008

129.92 (Fed. Tax Deposit Penalty)

2/2/2009

159.78 (Failure to Pay Tax Penalty)

2/2/2009

104.41 (Interest)

2/1/2010

510.14 (Additional Tax Assessed)

2/1/2010

25.51 (Late Filing Penalty)

2/1/2010

55.78 (Interest)

10/17/2011

24.64 (Failure to Pay Tax Penalty)

10/15/2012

12.69 (Failure to Pay Tax Penalty)

10/20/2014

102.68 (Interest)

2010

3/7/2011

$ 6, 708.16 (Tax)

3/7/2011

6.32 (Failure to Pay Tax Penalty)

3/7/2011

1.82 (Interest)

10/15/2012

59.99 (Failure to Pay Tax Penalty)

10/20/2014

83.05 (Interest)

10/20/2014

91.57 (Failure to Pay Tax Penalty)

         10. Despite timely notice and demand for payment of the tax assessments described above, T.J. Enterprises has neglected or refused to make full payment of the assessed amounts to the United States.[20]

         11. T.J. Enterprises filed a federal corporation income tax (Form 1120) return for the 2008 tax year. T.J. Enterprises' Form 1120 showed a balance due for the relevant tax period; however, T.J. Enterprises failed to make payments of those taxes when they were due.[21]

         12. On the following dates, a duly-authorized delegate of the Secretary of Treasury made timely assessments of liability for the unpaid federal income taxes, penalties, and interest as follows:[22]

         Form 1120 Assessments

Tax Period

Assessment Date

Amount Assessed

2008

11/30/2009

$ 178.00 (Late Filing Penalty)

10/20/2014

33.86 (Interest)

         13. Despite timely notice and demand for payment of the tax assessments described above, T.J. Enterprises has neglected or refused to make full payment of the assessed amounts to the United States.[23]

         14. For the tax period ending 12/31/2006, T.J. Enterprises failed to file Form W-2s for its employees, as required by 26 U.S.C. § 6051.[24]

         15. Pursuant to 26 U.S.C. § 6721(e), the IRS made a timely assessment of liability for the unpaid Section 6721 penalty as follows:[25]

         26 U.S.C. § 6721 Penalty

Tax Period

Assessment Date

Amount Assessed

Dec. 2006

1/4/2010

$ 188, 473.90 (Civil Penalty)

10/20/2014

32, 407.15 (Interest)

         16. Despite timely notice and demand for payment of the tax assessments described above, T.J. Enterprises has neglected or refused to make full payment of the assessed amounts to the United States.[26]

         17. T.J. Enterprises made a request for installment agreement on May 12, 2005, which the IRS accepted on October 24, 2005.[27]

         18. The installment agreement was terminated in April 2006 after T.J. Enterprises failed to make payment, and notice of the termination of the installment agreement was sent to T.J. Enterprises on April 8, 2006.[28]

         19. As of April 28, 2017, the outstanding balances of the assessments against T.J. Enterprises are as follows:[29]

Tax Type

Tax Period

Outstanding Balance

Form 941

6/30/2003

$25, 271.10

9/30/2003

$172, 854.39

12/31/2003

$228, 178.58

3/31/2004

$116, 101.89

6/30/2004

$208, 962.58

9/30/2004

$149, 291.93

12/31/2004

$277, 148.27

3/31/2005

$161, 042.66

12/31/2005

$47, 659.83

3/31/2006

$28, 442.35

6/30/2006

$118, 990.69

9/30/2006

$286, 821.25

12/31/2006

$260, 707.01

3/31/2007

$53, 907.87

6/30/2007

$30, 248.66

9/30/2007

$26, 201.76

12/31/2007

$53, 859.99

6/30/2009

$2, 872.62

9/30/2009

$4, 858.00

12/31/2009

$212, 086.27

3/31/2010

$3, 410.08

Form 940

2007

$797.41

2010

$974.91

Form 1120

2008

$252.78

§ 6721 Penalty

12/31/2006

$240, 825.76

         20. The total outstanding balance of the assessments against T.J. Enterprises at issue in this lawsuit is $2, 711, 768.64, as of April 28, 2017.[30]

         21. T.J. Enterprises does not dispute the assessments or balances due for any of the tax periods at issue in this case.[31]

         Federal Tax Liens

         22. Despite timely notice and demand for payment of the tax assessments for each of the tax periods at issue in this matter, T.J. Enterprises neglected or refused to make full payment of the assessed amounts to the United States.[32]

         23. As a result of T.J. Enterprises' failure to pay the employment taxes, unemployment taxes, income taxes, and civil penalties described above, and in order to provide notice to third parties entitled to notice of the statutory liens under 26 U.S.C. § 6323, the IRS filed Notices of Federal Tax Liens (“NFTL”) regarding the tax assessments with the County Recorder of Salt Lake County, Utah.[33]

         24. The United States filed and re-filed its NFTLs pursuant to 26 U.S.C. § 6323 as follows:[34]

         NFTL Filings

Tax Type

Tax Period

Filing Date

Refiling Date

Form 941

6/30/2003

9/15/2004*

11/22/2013

9/30/2003

9/15/2004*

11/22/2013

12/31/2003

1/14/2005

11/22/2013

3/31/2004

9/15/2004*

9/30/2013

6/30/2004

1/14/2005

7/25/2014

9/30/2004

1/14/2005

7/25/2014

12/31/2004

6/21/2005

7/25/2014

3/31/2005

6/21/2005

7/25/2014

12/31/2005

3/20/2008

3/31/2006

10/9/2007

6/30/2006

3/18/2008

9/30/2006

3/18/2008

12/31/2006

3/18/2008

3/31/2007

3/18/2008

6/30/2007

3/18/2008

9/30/2007

3/18/2008

12/31/2007

7/30/2008

6/30/2009

1/11/2010

9/30/2009

1/25/2010

12/31/2009

12/6/2010

3/31/2010

9/3/2010

Form 940

2007

7/30/2008

2010

4/4/2011

Form 1120

2008

2/7/2011

§6721 Penalty

12/31/06

3/4/2010

         * A revised NFTL was filed on September 14, 2009 for the tax periods ending 6/30/2003, 9/30/2003, and 3/31/2004 to correct the assessment dates listed in the original NFTLs

         25. In order to provide additional notice to potential subsequent purchasers and third parties entitled to notice of the statutory liens under 26 U.S.C. § 6323, the IRS filed Notices of Federal Tax Liens and NFTL re-filings as to Gurule Properties, as alter ego, nominee, or transferee of T.J. Enterprises, regarding the tax assessments with the County Recorder of Salt Lake County, Utah, as follows:[35]

         Nominee NFTL Filings

Tax Type

Tax Period

Filing Date

Refiling Date

Form 941

6/30/2003

9/9/2008

12/1/2014

9/30/2003

9/9/2008

12/1/2014

12/31/2003

9/9/2008

12/1/2014

3/31/2004

9/9/2008

12/1/2014

6/30/2004

9/9/2008

12/1/2014

9/30/2004

9/9/2008

12/1/2014

12/31/2004

9/9/2008

12/1/2014

3/31/2005

9/9/2008

12/1/2014

12/31/2005

9/9/2008

3/31/2006

9/9/2008

6/30/2006

9/9/2008

9/30/2006

9/9/2008

12/31/2006

9/9/2008

3/31/2007

9/9/2008

6/30/2007

9/9/2008

9/30/2007

9/9/2008

12/31/2007

9/9/2008

Form 940

2007

9/9/2008

Form 1120

2008

3/7/2011

         The Subject Property

         26. The Subject Property consists of one parcel of real property located at 480 West Century Drive, Murray, Utah 84123.[36]

         27. The Subject Property is more-particularly described in Paragraph 27 of the United States Complaint.[37]

         28. Prior to the purchase of the Subject Property, T.J. Enterprises leased commercial space for approximately $1, 700 per month.[38]

         29. In or about July 2005, Teddy Gurule's mother (Linda Gurule) was attending a church which is located immediately adjacent to the Subject Property and “300 yards or so” from the property T.J. Enterprises was renting at the time.[39]

         30. Linda Gurule observed a sign placard with words to the effect that the building was for sale by the owner.[40]

         31. Linda Gurule asked Teddy Gurule to make contact with the owner and see if they (Linda and Teddy) could negotiate agreeable terms for the purchase with the owner.[41]

         32. Linda Gurule and Teddy Gurule were involved in negotiating the purchase of the Subject Property from RDLC Management and, on July 27, 2005, Teddy Gurule signed a Note, Deed of Trust and Assignment of Rents, and other documents related to the purchase of the Subject Property on behalf of “Gurule Properties, Inc.”[42]

         33. The purchase price for the Subject Property was $310, 000.[43]

         34. Linda Gurule's husband, Barry Wickel, provided the initial down-payment to RDLC Management in the amount of $30, 000.[44]

         35. T.J. Enterprises neither paid nor provided any of the money used by GPI for the down payment paid to RDLC Management.[45]

         36. GPI was incorporated on July 28, 2005.[46]

         37. Linda Gurule is the sole shareholder of GPI.[47]

         38. Linda Gurule and Teddy Gurule are Officers of GPI.[48]

         39. Linda Gurule, Teddy Gurule, and Teddy's wife (Linda Gurule) are Directors of GPI.[49]

         40. The Subject Property was purchased through a contract and the execution of a Note with RDLC Management (“RDLC Management Note”).[50]

         41. On August 5, 2005, GPI, by and through Ted Gurule, executed the RDLC Management Note for payment of the balance of the purchase price of $280, 000.[51]

         42. On August 5, 2005, RDLC Management executed and delivered a Warranty Deed in favor and for the benefit of GPI, which was recorded with in the office of the Salt Lake Count Recorder on August 5, 2005, at 3:56 p.m.[52]

         43. On August 5, 2005, GPI executed and delivered a Deed of Trust and Assignment of Rents in favor of RDLC Management to secure payment due under the Note, which was recorded in the office of the Salt Lake County Recorder on August 5, 2005 at the same time as the Warranty Deed.[53]

         44. T.J. Enterprises paid no money to RDLC Management for any purpose on August 5, 2005, or to anyone else in connection with the purchase of the Subject Property.[54]

         45. T.J. Enterprises had no agreement, written or otherwise, with RDLC Management or GPI in connection with the purchase of the Subject Property.[55]

         46. T.J. Enterprises never held title to the Subject Property in its own name and never transferred the Subject Property to GPI.[56]

         47. In addition to acting on GPI's behalf in purchasing the Subject Property, Teddy Gurule had signature authority on GPI's bank account, filed GPI's federal tax returns, and signed documents that purported to encumber the Subject Property.[57]

         48. GPI engaged in no business activities other than holding title to the Subject Property, and nobody other than T.J. Enterprises has occupied the property since GPI obtained title to the Subject Property.[58]

         49. The terms of repayment for the $280, 000 RDLC Management Note required monthly payments of $2, 000 and bi-annual balloon payments of $30, 000, for a total of $84, 000 per year.[59]

         50. Payments on the RDLC Management Note were made through First American Title Company.[60]

         51. T.J. Enterprises and GPI entered into two commercial lease agreements for the Subject Property, under which T.J. Enterprises contracted to make regular monthly rent payments to GPI in the amount of $7, 007.49. The lease agreements covered the time period of August 5, 2005 through December 31, 2009. During this time, T.J. Enterprises often made rent payments by making payments on the RDLC Management Note directly to First American Title Company.[61]

         52. During the period from August 2005 through 2008, T.J. Enterprises paid at least $262, 263 towards the RDLC Management Note.[62]

         53. GPI's income tax returns for 2005 through 2008 show the amount of money paid from T.J. Enterprises towards ...


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