united states always are three minutes for a bottle or well this case involves the government's attempt to collect against valuable royalty rights under fraudulent conveyance alter ego and nominee theories the undisputed fact that edward holland transfer those royalty rights to a wholly owned partnership at a time when he already owed millions of dollars in taxes which continued to accrue millions more and he continued to borrow against those assets st personal benefit following the transfer however the district court failed to court way to these facts as well as other facts supporting the government's collection theories and reject those theories based solely on is the termination that the transfer was made for adequate consideration in failing to have his her wasn't just for the one thousand nine hundred and ninety eight through two thousand and five royalty rights because there not just for the rights for a certain period of years that's recorrect that there alternates what gets transferred no five just so we understand the way of the land here we don't think there was a transfer in two thousand and five there was a loan refinance so the loan that was executed simultaneous with the nine hundred and ninety eight dollars transaction is refinance so the original loan is paid off you're not relying on anything that happened in two thousand and five for your fraudulent conveyance alter ego or nominee theory right seven years later so your honor this court in spots when i was looking at the nominee theory said that the appropriate timeframe to focus on is when the i r s actually assesses taxes when the tax liens arise as a matter of law and so looking at that time period we're focused on holl of the liabilities that existed at the time of the ninety transfer as well as what difference that makes the government's collection theories so it's correct that the nine hundred and eighty six the one thousand nine hundred were the one that had been assessed at that time period but they were not the only liabilities that were doing away if you look at this court's decision adams building company the circuits decision and sure thing taxes are due and owing on april th the day that return is due to be filed the day the pain is required to be remitted even in the absence of a formal assessment what is the difference for those of us who are specialists in your field between do annoying and s s do a knowing means that the government is a creditor and payer is a debtor at that moment what is obsessed ad assessed means that the government can actually take formal steps that there's a lien that rises a matter of law and the government can collect that liability the government can't collect the live one billion till it's been off formally assessed and what do you do to assess its the recording of the formal act of assessment or the acts of collection until that is the tax court litigation has concluded at the time that this happened he's actually contesting what the government claims that he owes correct that's correct so you're saying that any time  bank loans money to somebody or an entity that that person is using legally like a corporation you have to look back to see if the sole shareholder the transfer of the assets of the corporation if the government claims that that person owed any taxes whether they whether they've levied or not and if the government says they owe taxes years ago then you can then claim that that transfer into the corporation was fraudulent we think that you have to look at the facts and circumstances you have to look at both direct evidence of an intent to hinder delay or defraud present or future creditors as well as badges of fraud to give rise to an inference of such a stop at the st one is there anything wrong in there you would have a claim the taxes would be doing all he would take the money in the taxes would have been paid that's correct while you're taking one dollar more step so if he had gotten this fifteen million dollars and he just simply put it in the bank then there'd be no basis for your any of your three claims to look through the transaction that right there would be a basis for a fraudulent claim because there would be an intent to hinder delay or fraud if the money was sitting there awaiting the iris making the formal assessment and taking the step who also was going to put the money in an account waiting for the government they're going to put the money in the account because they got the money from collateral izing these assets and they're going to spend it which is what he did or they're going to put it in an account well but by spending it there was no money left over for the government when these taxes were ultimately assessed after the tax court litigation was completed but there was money left over he bought two houses right the i r s alternately when he bought a city by two houses yes he purchased two houses in his own name with those how do you prove any any he used a combination of debt and money to buy those houses right i believe i don't know if there is three million eight hundred thousand dollars of houses and two million five thousand dollars in mortgages so there's one million three hundred thousand dollars in equity in those houses at the time he buys correct yes there are so that that covers that plus the amount that he actually paid down on the taxes comes pretty one million dollars in interest so that's three dollars or nine million dollars right correct so we had in the money that of that part that was done paid down plus the equity in the two dollars houses it almost equals what at that point the government said he owed by close i mean there's an interest calculations not built into the one point eight but but yes i mean to be added in the two point one you're claiming an interest on top of the one eighty one point eight plus two dollars yes well it's one dollar that had been assessed so we get a bigger number than that are met the prior or the assessed that was actually paid all right ok so so ignore so i'm not exactly right of money but the point is he had he in the houses alone plus what he paid down on the dead he he had he had covered just in the houses a fairly good portion of what the government claimed that he owed that's true but those houses now he also parties so they were no longer his name did you government was u k out did you challenge at any point the houses or the transfer of the houses was able to claw back and seize one of the properties which was transferred to his son the other property i don't believe the iris is able to reach i don't know exactly as a property but if he transferred it presumably transferred it for value and then you could have reached the value unless he unless maybe dispy dissipated that as well but in any event you got some equity in the houses he pays down a portion of the death there's no dispute about those two things right wrecked and then he and then he has the partnership shares that's also correct are so did you go after the partnership shares well the irises not foreclose on the partnership shares no but that the partnership interest is substantially less valuable than the royalty rights held in history holland's own name because he had income or the assets following the transfer so i think just walk through what happened so this is all against the backdrop of the fact that the ira had served notice of intent to levy on the world to rights as it had been repeatedly in successfully in the past how come you're wouldn't have priority over whatever incumbrance was on the partnership shares because right now we can't directly attached the partnership assets we have after the tree after the transaction they have a value but that's the ninety transaction that was fifteen one million dollars of debt sitting on top of that what i'm asking you know the i r s usually kind of trumps everybody would the i r s be able to to take priority so to speak over those other encumberances no your honor because it's a partnership level incumbrances on a partnership asset so the government in foreclosing against the partnership interest would be junior to all partnership level that's unless we apply one of the government's collection theories it's at issue in this case ok no i don't but at but at the time you could have recovered that we would still be junior because of the transfer absent the application of these collectors you're just in holland but what that mean that the value the documents themselves say the value of these assets at the time was twenty three million dollars the transaction involved fifteen million dollars correct so in addition to the houses you've got eight million dollars of  value equity will call it in the partnership interests so he does this transaction let's assume that it that it it required the government to look to a different source for repayment than the stream of payments that were coming in year after year from these royalties so sassoon the thing if you can can dispute that but what makes it fraudulent because the taxpayer substitutes one potential source of in this case recovery from a creditor happens to be the i r s for another potential source of recovery because we look at the debtors and the intent to  present or future creditors and if what i'm trying to figure out is if you get full consideration in which the government doesn't dispute you admit that you've got full consideration and there's still busy the equity in the houses and the partnership how does that evidence an intent to hinder or delay because he did not intend to use that money to pay the taxes he intended to dissipate richard roth or hones personal attorney testified that there were two purposes of this transaction one was to generate cash for homes personal use in a lump sum which he then dissipated the nd purpose was tree move these assets from the reach of creditors specifically including the i r s as well as that's that's not the words he said the purpose was bankruptcy remote if you looked at the cases that that apparently is is a phrase that is a term of art have you looked at the at the definition of bankruptcy remoteness i did not know that that was a term of art i have not looked at the death but spelled out by the th circuit what that means and it doesn't mean purpose of hindering creditors it means if if a lender wants to lend money and wants to make sure that they don't have to fight with other creditors over that sum of money they can put that they put the asset in a form that separates it from who originally owns it that's exactly why you'll form a corporation in many instances so you get the benefit the corporate form and the finding of adequate consideration the fact that holland ended up with a big pile of cash and shares in a partnership that were equal to the value that he bumped does not necessarily preclude a conveyance determination issues now whether he's treated fairly it's whether his creditors are treated unfairly as a rector or of this deal and we would submit that this is what we look to see if the creditors are treated unfairly do we look at what happened to the creditors and their ability to recover at the time of the transaction or do we look back now ten years later when that debt has gone from four or five million dollars to twenty million dollars it depends on the on the different collection theory that we're applying so in the frozen canadian sense we're looking at the intent at the time  transfer in the alter ego context what we're looking at is the relationship between the tax payer and the entity as the seven circuit described it is the land services you're looking at surely to parties where there's a heaping of liabilities onto one of the related parties and  squirreling away that sets in the other and here the royalty assets are generating tax liabilities on an ongoing basis the assets in the income stream are located in the partnership holland is stuck with the past present and future tax liabilities attributable to those that sets but we can't reach the assets that are generating the tax liability to satisfy the tax liability that's the type of unjust loss that the alter ego doctrine is intended to to look to remedy the time of the transaction could you have reached a sufficient amount by loving on the partnership interests true payoff whatever your at that time the assessed balances but the iris could not lead the four the ninety one through ninety four years with a ninety five to ninety initiated tax court proceedings that precluded collection until two thousand and two for the earlier years in two thousand and six for the later years that's when the assessments hit for those correct at the i r s assessed the two thousand assessment that may be coming his way for what years was that nine hundred and ninety four ok and what all in you know liability interest penalties a set or what was the number that  doing this ninety eight dollars deal that's a month why i mean so judgment keep points out that the royalty assets are worth twenty three million there's a you say and so the royalty asset is transferred to the partnership right act and then that asset become security collateral for a loan that the bank then makes to the partnership correct not only to the partnership nominally to the partnership but somehow the money goes directly to holland correct and but the the amount of the incumbrance on the royalty asset was fifteen million white so why couldn't the i r s whenever the assessments were made why couldn't they take the value of holland shares in the partnership and thereby get whatever equity remained of that eight million that would appear to have existed ninety eight why couldn't they reach that by giving the partnership shares ultimately the iris could have done that if it had at that point discovered this complicated series of transactions and figured out on ravel them i don't think there's evidence that the address knew in two thousand and three aware of the transaction not necessarily what could you done rabbit but i think that was roughly two thousand and four that it began to become aware of the nature of the transaction is there any equity left in the partnership shares at that time there would have been equity left in the partnership shares letter that said something to the effect of tell there's a assessment or something like that you can continue with your regular course of business and it was i think it was the investment banker who was notified of the error and i think they had issues and we don't have the  asking you why didn't the government do this why didn't the government do that in your response is well the government didn't know anything about it but the government appears to have known about it whether they could do anything about is a different question without having the other half of that communication i don't know what it is that the i r s knew about when he tells edward holland a month after the transaction and after the one thousand nine hundred transaction you can continue your normal course of business with the pullman group edward holland in july of one thousand and eight shouldn't have any business with the pullman group this would be the partnerships relationship with the pullman group not edward hall and so i don't know what it is that's referring to without the complete set of that communication i just don't know that there's a full disclosure of the transaction ok so we hear from  police but i asked just one of one other question and i know i'm getting us into a different area here but and so i don't i don't want to give you any more time other than just this one question and that deals with the priority question with the bank of scotland the government's position seems to be that when the financing statement filed by the bank lapsed that that somehow constituted a release of the bank security interest and that just simply not what you see see law applies in general and in new york in particular it does affect the perf the the issue of perfection and what happens to subsequent loans but the only way that you then jump ahead because of somebody la is if is if something happened to release their security interest which is not what happens with a lapse so could you explain where i'm wrong there or what your argument is would qualify as a security interest as the holder of a security interest for purposes against a subsequent judge me and this court in citizens state bank said that the tense of has become protected is important not that the interest had become protected in the past not that it will become protected in the future but that it has become protected against subsequent judgment lien creditors under local law if the subsequent judgment in creditor came in and recorded an interest that would be junior to a subsequent judgment creditor it has not become a case are you relying on for the  citizens state bank is the case dealing with the tense of has become perfected or protected rather than had or will be perfect in the future dialogue back and forth i want to try to focus on some of the questions that you were asking and some of the answers that the government gave one thing i just heard was the government said that millions were owed at the time of the transaction in one thousand nine hundred and eight but as you pointed out  that was all paid off in india with you i'm not either impressed or care very much about that getting paid what i'm more interested in interested in is the fact of this transaction ninety eight upon host ninety eight s specifically the assessments that are likely coming based upon the notice that mr holland gets a month before this deal ok so there was only one notice at the time of the transaction that he received and that notice was in the appeals court it was for close to four million dollars approximately four years later it was determined that he it was to ted chunk would give a deposition in this case he explains that for a number of months prior to the transaction being conducted members of the investment bank the pullman company and as well as from wilkie far which was the law firm that structured and close the transaction were diligently working to schedule all existing debts that were then owed by mr holland to ensure that sufficient monies would be escrowed as a result of the transaction didn't do anything as to the potential tax liability or ninety one to ninety four they did not ask for money because it wasn't yet determined until it was resolved and then assessed there's a big difference between how this deal treats extant debts at the time of the transaction and the ability of post ninety eight dollars creditors to collect on those debts is that fair  that is fair however at the time of the closing there were no debts right and on talking about post i don't but at the time of the close there were no deaths and as should be king pointed out there were significant assets twenty three million dollars exchanged fifteen in cash some of which went to transaction costs and paying off the debts but no transaction yes mr holland a lot walked away with eight dollars half one million dollars in cash plus as as you just pointed out eight million dollars in equity in the partnership units all which existed post transaction debt free and then no further taxes were sassed for the next five years now that this partnership interest with the partnership itself becomes more in concord with debt in the next six or so years is that fair or is that correct no i don't believe i mean mil starts to go down in equity correct yes over time and then the government didn't commence this action until two thousand and twelve but what so very much because they sell these assets for twenty one million that's correct  the court gets involved that's right so over that fourteen year period there were still at various times depending upon what was going on millions of dollars  to take any of the cash never sought to take the partnership units and many many years had passed before there was any sort of assessment at all  was the money exchanged as a result of the refinance and mr holland had sufficient funds to pay those debts at that time seven years after the initial transaction if you so chose  to speak to what was going on between mr holland and the i r s in the two thousand and five or post two thousand and five that means these are all equitable doctrine and so it seems to me the he's going to use it to pay it off i mean why not do what they did before which is say we're going to we're going to escrow it for reason because he's not going to pay it off he's going to go buy more houses or whatever i mean why is that any assurance that everything's going to go well and that this these monies are going to go to legitimate creditors obviously the bank is sympathetic to creditors rather than get dissipated  at that time again i think the only dots that we're aware of were those assessments that had just sprung up before that let me want to frame the question this way if i might for just a nd if i were a bank of scotland didn't advance any money then it probably would be an into a different discussion that we're having but you advanced enough money to pay off the partnership debts correct yes or are you advanced a little bit more that want to hollander that was a one million dollars or something like that and then you set up a line of credit that he could draw down on in the future and some time later i think he drew down another four million dollars right now are you aware of any doctrine that one of the banks steps in and refinances a transaction like the bank did here that the bank has any obligation or duty to anybody to see that the that the the borrower that the owner of the bar or in other words holland owns the partnership that the owner of the bar or then uses the money that flows down to him or her properly i'm not aware of any such doctrine you're on any case that says that or even hints at that you know you're on it now if you were back if you were involved back in two thousand in one thousand nine hundred and eighty we might have a different question because then you're part of the initial transaction but i assume your position is you're just stepping up given value your refinancing you didn't do any of this stuff yes your honor that i believe is why the entire focus of the case has been on  intent and the transaction that occurred in one thousand nine hundred and eight so then the question that you have to face is whether you get priority whether whether you're the priority that you had is maintained by after your financing statement lapsed now the government says that once that lapses then under citizen that wipes out any prior priority that you had what's your response to that there's no basis for that whatsoever the government has said that as a matter of course but hasn't substantiated with any law are you see see requiring that that the pre lapse perfection somehow goes away  when do we did herman when the government arose were that when the government gave notice in february two thousand and twelve because of it rose post lapse as i understand the distinction between the case that you cited in your own grief that would suggest that that that subsequent green would take priority so even if the subsequent leads take priority there there are de minimus amounting doesn't matter let's take the period of time from when you did the deal in two thousand and five to the time that lapses what citizen says is that this does the death of the interpretation of the words has become exclude security interest which is not yet been perfected under local law at the time of the lapse had all the liens that you're relying upon been perfected yes wrong as well as those interests which have been released have you ever released a security interest we have not your honor and the the fact of lapsing is not a release it's simply a question of priority between one creditor or the other based upon the notice that one gets when they look at the u c c records right yes your honor were protected at through your financing statement lapsus the i r s then files liens after that your position is that can't under the u c c constitute jumping them ahead of something that you had already perfected that they knew about if they had looked at the u c c's even though as lapsed absolutely as far as subsequent advances arlene's are loans after that what you're describing is as de minimus you probably lose ass to that yes and if that's the case then it doesn't make a difference fortunately there's a yes you're going to answer my question which is if it was a notice of the lien that's critical i think the notice in february two thousand and twelve would have been for the entire amount but you're saying that you think that the government lien arises at the time of assessment and so two thousand and three through two thousand when you last december two thousand and ten all those would have happened when the security interest was still on file or directory in other words the assessment doesn't relate back for nominee or whatever theory has merit you know it seems to me that the equity at the time the government figures out their particular so there's the ninety eight dollars deal potentially eight million dollars in equity at that time it would seem the government assesses the ninety one to ninety four liabilities i think in like two thousand and three  one million and they don't get large there's no large one again until about two thousand and eight so maybe let's say two or three million cessna it's by the time of the two thousand and five deal that out whether the government is impaired in its ability to collect on these later post ninety eight assessments in fact as a result of the ninety eight  because they don't know they don't have assessments in hand at the time of the deal they don't have the transaction particulars and by the time they have the assessments and they understand where mr hollande sent most of his assets on which they normally you know normally they put a lien or whatever with the companies paying the royalties by the time they figure out are they basically shorted a certain amount certain millions which is really what you're fighting over it boils down to i don't know how many millions but if you get fourteen point whatever out of this twenty one dollars then they're going to be shorted some amount in their view or whatever and so are they shorted at the end of the day even if there's equity are they shorted a certain amount by their government's not going to be able to collect their one billion you agree with that yes they'll collect something less because you're going to take nine and they own nineteen and that adds up to more twenty one dollars so if if if they come before the other creditors which has not yet been determined but if they're nd in line then they would get the remainder which would be approximately ten million dollars and so right now i understand we're fighting we're not fighting about the total amount that they're entitled to or the total amount you're entitled to somebody is going to get shorted and i'm just trying to figure out whether the government ability to collect the loans i'm sorry the assessments that it makes after nine hundred and ninety eight was as a practical matter impaired by the  ninety eight transaction so no it wasn't impaired by the one thousand transaction if anything the one thousand nine hundred transaction to help them recover whatever they were needed to recover that is at the time of the transaction they rode the one million four hundred thousand dollars and they got the thousand dollars after immediately after the transaction there was no money owed in subsequent time after the transaction there were still the partnership units and whatever cash or whatever that cash ended up being exchanged for whether it's houses real property whatever was so the problem here is that the government never sought to once it had its assessments never sought to recover on those and then secondarily one other very important point is that it really isn't the one thousand nine hundred and eight transaction that the government is complaining about even though they say they are what they're saying is something that judge mckeague pointed out at the very beginning of the government's argument that once that money came through and things or other transactions followed later often years later then really they should be complaining about oh if mr holland bought a house for a relative then perhaps that transaction perhaps could be classified as a fraudulent transfer if there were no full and fair exchange eccentrics uttered if you had the debts at the time but none of that is that issue here for some reason here they're only attacking the ninety eight transaction they're claiming in their complaint that these subsequent transfers occurred but as you can see from the briefs  from the record there's no evidence with respect to any of that because i think it just doesn't bode well for what they actually did in the amounts still coming in the royalty amounts i believe are going  no i believe my colleague can probably identify this better than i can because he was involved in the two thousand and fifteen transaction but i believe a company can rd party company came in bought the rights do with the apparently nature of this partnership i mean he treated it it's a joke i mean he has total control over it the separate form is  just he's the one who disregards the separate form in the ninety eight payout goes directly to him not through the corporate partnership right partnership has the assets and he gets he gets the loan proceeds well maybe ok let's set that aside ok i mean you know he has total control over this thing he's like the only he's the managing member or whatever and it's just seems like this this hollow partnership else l c or whatever it is is just a complete sham and has no separate form in fact no independence whatsoever from i mean well all the technical requirements were maintained they were independent directors it was necessary to the transaction to be formed and at the time that it closed there was no use of it whatsoever to commit any sort of fraud or wrong or hindrance or anything like that if anything it made it more possible and easier for the government to collect had it decided to do so would be ways either for the government just slap a lien or whatever they  on the royalty stream itself you know rather than have to go after these partnerships shares which have eight figure incumbrances on them that there's something if they if the road streams had not been assigned in the nine thousand nine hundred and eighty on never happened if they had been assigned they would have been able to be levied but he didn't know any money at that time the money that he would be paid well but you know you get up a letter in the mail that the i r s thinks you go for money and that's really going to get your attention that's not just sort of you know and that's why you're calling in writing with the i r s saying is it ok for me to go forward with this how much money do i owe you let me make sure you get paid everything you're owed and a decision on a motion to dismiss we're only here this is case is closed all discoveries complete there's a lot of that that's part of it there are a lot of maybes there's a lot of theory but there are very few facts but the idea that as the district court found that holland got treated fairly ergo try to creditors got treated fairly that's basically what the discourse says and i think conflating mr holland's interests with those of the creditors is a very questionable thing to do i think would he was trying to put himself st at least in the evidence that they they present i i would strongly disagree with anything legally wrong with what he did  i don't know if it was worth ten months that he spent most of it but well within months he spent three eight so that's half of it right little us just wrong yeah all right well if we asked mr his intention of setting up the partnership was to avoid not paying taxes and borrowing eight million dollars is not the way to achieve nonpayment of taxes so if there was sufficient amount borrowed to cover that liability there were sufficient amount power to cover all of his liabilities if he had timely paid them one of the problems and to understand how this works is they take the royalties they stick them in the limited partnership and then edward how and pays tax on the royalties as they're being used to pay off the creditors so every year he gets a tax return it shows the royalty income which the government would see if they wanted to know where the royalties are gone they would see it on his stance return in addition to that i believe a one thousand and ninety nine dollars would be issued  to the on the royalties to the partnership and then what's called the k one would come down that would be reflected and edward hounds returned so it was it was all available the information was all available to the government at the time what one of the co government knows from these k ones are tax returns they know pretty quickly that the assignments been made that they can see as income and they can see that he's reporting the income and they can see if they see the one thousand and ninety nine it's related to the partnership they'll see who's paying the royalties to the partnership and they'll see that he has to report that income the problem that he has is that he's paying tax on income which is going to not going to him it's going to the investors in addition to that it's during early or in the argument it was suggested that the value of the partnership is going down over time because of the possible liabilities i'm not sure of any liabilities that occur that cause it to go down but the the equity value is actually going up because the principal on the note is getting paid every time those royalties are paid to the investors so the amount of the secured interest is actually going down over time it goes down sufficiently so that he can refinance and purchase and purchase again i mean and  terrible the way they didn't either didn't warn him or didn't you know say you're going to need to hold on to this money you cannot spend it because you're going to have very large liabilities and you're not going to receive that cash with which to pay the taxes but that's the what's causing the large liabilities here is because he's getting is getting taxes and funds he doesn't have the other point i think is important is raised by judge kathleen and that is the in significance of the partnership one of the problems with this case is you could take almost any business that's been such a closely held business and go in under the structure of argument that the government has there and say that business doesn't exist there was a transfer of the business without consideration you're still benefiting from the property that you transferred to the business i could set up a business transfer machinery and cash  business take profits out it would all be the same i'd be benefiting from what i transferred i'd be closely in control i'd be closely it because you know everything would be all the same arguments would apply and there would be no separate business sanity if you adopt the principle that in this case the partnership was a sham because that would mean that every single business entity would be a sham i've addressed that in the brief so that also why every single case the site deals with lack of consideration at the time of the transfer i'm not sure but every case they put that's very possible the the the way to address that issue is to look to see if there's a legitimate business purpose in setting up the entity and there was i mean this was alone this wasn't alan's idea it was a loan transaction those cases are addressed on page thirty one through thirty five of my brief the situations where illegitimate business purpose robots the implication that there was a fraudulent transaction what do you think again meant business purpose was to do this to do this loan it wasn't and to keep in mind that this wasn't alan's idea this was the investors that wanted the limited partnership so that they actually don't you know somebody has to pay tax on those royalties and by doing this court stopped at the question of adequate consideration in the cases no matter which law we apply here seem to say that you have to look at the other so called bad is a fraud now you're basically saying that your guy was duped the i r s is saying this was a callous carefully calculated scheme to suck money out so the i r s wouldn't get it ten years later but those are all bad is a fraud questions that the court never got to so why would it not be appropriate at least as to the fraudulent conveyance question to remand the case back to the judge to address these other five or six whatever the number is bad is a fraud in disha and then simply make a determination on all of our b s as briefly as the section on this case law relating to whether a judge must go through every single element of a particular you know whatever the elements are in order to reach a conclusion and then see had in fact raise these concerns but felt that the consideration was the most important factor in making the decision and that in the cases that have i looked at that and i mean that the construct the consideration what was received a legitimate business purpose is enough to rebut all of the fraud implications from the circumstantial evidence that you're referring to the six elements closeness whatever all the other factors that are involved well maybe that's what the judge will say if we do remain at it back but the opinion doesn't really say that doesn't it doesn't say what i just said it just references them and then make goes out and makes it limited liability company and the government and it's a cardinal rule of business entities that the creditors of the added to come st the owners cannot take the head of the creditors the creditors have to favor the owners get anything and what is going on here is that the government is saying we want more than what edward allen have and we're now we count had only the net value of the company the government is saying it wants ahead of all the creditors to take just pick out just the asset and leave all the creditors behind and that's the danger i think in this case is that if the court if the court or the district court were to rule in favor of the government we'd have situations where people would be dealing with business entities in the government can always come in later in just i guess the question the thing that seems to have emerged from this argument is that the government may have had more ability to collect the amount so after they were assessed partnership shares take take what hollande take his equity in the partnership shares chase some of the properties or the assets that he had purchased with the funds from the transactions why didn't the government do some of those things before you know period so the reason for the delays not in the record typically the reason why something like this takes a long period time is partially because of the prohibition on assessment and collection during tax court proceedings partially because of lack of resources at the i r s partially because when you have a complicated financial transaction it does take a long time to try going ravelled lose threads and try to apply a collection theory to that complicated how much outside of this the government has collected directly from holland you mentioned they were able to obtain one of the houses so of the nineteen million owed by has the government able to collect any of that elsewhere they have made some involuntary collection they've tried lobbying against miller corp in which holland has an interest they've were able to seize that one house they're lobbying against his social security payments any idea how much the enormous i don't know the amount  disadvantage by this that the government is is making these assessments eventually they they filed liens but had this transaction not occurred they would have had to attempt to seize presumably from these two record companies that were selling these songs they would have had to try to seize the stream of revenue every year in perpetuity essentially my read about that wrecked that's what the i r s had been doing in the past so what happened here by this collateral is ation is that this future stream of income was then reduced what i think would be correct to call its present value and that's what ended up with this twenty one million dollars or something like that right twenty three million dollars the papers say that that this stream of income in the however long into the future they were using was was worth after that time twenty three million dollars  so had you taken the steps which you've sort of reluctantly agreed that you could have taken the steps but for all these reasons you say you didn't in a way what would be wrong with looking at this as a transaction that actually would have helped the government because it took these future state district future stream of income which i'm betting wouldn't even keep up with the interest and penalties that you've been charging and monetise did so that it was to sue its present cash value that you could have assessed there's another seven million dollars that's currently owed on preach transfer years that has not been collected there's another twelve million dollars for post transfer years that has not been collected if we take a broader view of this the government hasn't question been hindered because those taxes remain outstanding we collected one dollar at the expense of collecting the next one thousand dollars or twenty million dollars and i think that perhaps the but how long would it have taken you had this would be a team of income not be reduced to its present value to collect this grand total royalty rights and i think that the best way to frame this is perhaps through the government's alter ego theory which doesn't necessarily even have to involve a transfer of assets what is looking at is the relationship between holland and the partnership are they effectively one in the same or the operating with the partnersh instrumentality of holland instead of looking at this as whether holland and the partnership exchange adequate things we need to look at this as whether holland and the partnership or effect of the left and right hands of the same person so when the district court focuses on what goes from the left hand to the right hand what goes from the right hand to the left hand we think they're missing the point the government's collection theory is the alter ego theory is saying the government should be able to attach what's in both hands and how would this be public this transaction here and in a very global sense be any different than setting up a closed corporation i'm not sure i understand the question here you have an individual business person they own a machine shop they're producing a product it becomes quite valuable they're concerned that this product is going to harm somebody they're going to owe damages so they put these assets that produce this product into a corporation that they own one hundred percent of they transferred into the corporation the corporation borrows money so the corporation then can pay the value of what was transferred into the corporation back to the person who transfer it that's that is this transaction isn't it we don't think this is a machine shop selling a product this is the partnership that set up for the full purpose of  loan to holland the money doesn't even go through the partnership there's no business purpose it was ran an action said in its right in the papers that holland says i will transfer these assets to the partnership if the money then comes to me and that's what what difference would it make if that if that payment had gone to the partnership and then pursuant to the terms of the agreement the partnership just endorsed the check and for an forwarded on to holland what possible difference does that make from any kind of an economic reality question doesn't make and it hurts in terms of economics but it certainly makes a difference in terms of whether this is a real partnership with a real business purpose no real business would take out thirteen plus one million dollars in loans and never see a penny of that money go through the partnership never reinvest any kind of a business purpose this was solely to for the purpose of channeling money to holland that he then dissipated rather than paying his taxes are you suggesting that somebody some person who has a very lucrative stream o that they they must engage in that they must if they're going to do this sort of transaction with a bank or something that they have to do that directly that that it's contrary to it's subject invalidation if for whatever reason they choose to to conduct this transaction through a partnership or some separate corporate form not saying that that's automatically the case  think it depends on all the facts and circumstances this what that's what this court said and like it that's what the michigan court of appeal what you just said would apply to any circumstance where the person does the transactions through a separate corporate form rather than just do it personally we disagree how to because of the  fraud that are present in this case that not only was there that's different but you were saying it has no purpose other than to fund this transaction and i would imagine there are many transactions that have an entity involved that have really has no purpose other than to serve that transaction and i think we would be concerned about potentially invalidating a lot of perfectly legitimate transactions if we wrote an opinion based on the sort of no other no purpose yes we put in the his collection statement his form for thirty three collection statement i will look at that that i m going through all this trouble is because of this a lapse secured lapse quite an actual statement and so i put these are all equitable doctrines what do you make of like that high level kind of conclusion that it seems to me about your that your case hinges are kind of a technical know that's an important question and so we're not here solely because we think we have priority over r p s list of whether r b s has priority of the government it's important for the government to be able to directly attach assets held by the partnership because not only if we can't directly touch these assets not only are we behind r b s who with principal interest in attorney's fees probably has a claim of ten dollars or eleven million dollars now we're also behind the partnerships accountants and attorneys like mr new schultz regardless of has not already between the government and these other parties beyond the bank are they before us on this appeal you know your honor but if it did the district court rule on that question or rather the district court say that he  was the court was reserving that for later proceed it reserve that question your honor so why would we be then ruling on that for either of those reasons because absent the application of one of the government's collection theories it is going to be junior to these other parties just saying this is one reason why this appeal matters to you this about something we would decide if the court says that the right looks give me a yes or no this matters to you but you're not asking us to say ok fair go you you telling us the potential consequences yes the other side saying you better not wipe out a bunch of legitimate transactions where you're trying to get the i r s their money right right yes ok all right thanks a lot appreciate your arguments both sides