Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_14-cv-01771/USCOURTS-azd-2_14-cv-01771-4/pdf.json

Nature of Suit Code: 870
Nature of Suit: Tax Suits
Cause of Action: 28:1441 Petition for Removal- Action for Interpleader

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Nancy K. Duckett, 

Plaintiff, 

v. 

Dennis M. Enomoto, et al., 

Defendants. 

No. CV-14-01771-PHX-NVW

ORDER 

At issue is whether the federal tax lien, 26 U.S.C. § 6321, attaches to money held 

in a discretionary support trust created under Arizona law for the benefit of the delinquent 

taxpayer. Before the Court are the taxpayer’s and the IRS’ competing motions for 

summary judgment. (Docs. 89, 91.) For the reasons that follow, the IRS’ motion will be 

granted in part and denied in part, and the taxpayer’s motion will be denied. 

I. BACKGROUND 

The following facts are stipulated for present purposes or otherwise undisputed. 

In 2004, Miyoko Enomoto (“Ms. Enomoto”) executed a will in Pima County, 

Arizona. The will divided certain of Ms. Enomoto’s personal property and the residue of 

her estate into three shares, to be devised to her three children: Dr. Dennis Enomoto (“Dr. 

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Enomoto”), Nancy Duckett, and Joanne Bradley. The will called for Dr. Enomoto, but 

not Duckett or Bradley, to receive his share via trust: 

The One-Third share of my Estate, other than tangible personal property, 

that is to be distributed to my son DENNIS MASAKI ENOMOTO, if such 

amount should exceed $50,000, shall be distributed in trust. The Trustee 

shall pay to DENNIS MASAKI ENOMOTO so much or all of the net 

income and principal of the trust as in the sole discretion of the Trustee may 

be required for support in the beneficiary’s accustomed manner of living, 

for medical, dental, hospital, and nursing expenses, or for reasonable 

expenses of education, including study at college and graduate levels. Any 

income not so paid shall be accumulated and added to the principal of such 

trust at the end of the trust’s tax year. In the Trustee’s sole discretion and 

to the extent the Trustee deems advisable, the Trustee may consider or 

disregard the funds available to the beneficiary from other sources or the 

duty of anyone to support the beneficiary. Should the principal of the trust 

drop below $10,000, the Trustee shall distribute the balance of the 

principal, together with the undistributed income therefrom to DENNIS 

MASAKI ENOMOTO. 

Under the terms of the will, Carol Severyn Trust Management Services was named as 

trustee, but Dr. Enomoto enjoyed “the limited authority to request the removal of the 

Trustee and appoint a successor Trustee.” Any successor trustee would have to be an 

Arizona licensed private fiduciary and could not be a member of Dr. Enomoto’s family. 

The will named Duckett as the personal representative of the estate. 

According to the Internal Revenue Service (“IRS”), Dr. Enomoto failed to meet 

his tax obligations in tax years 2007 through 2011. The IRS made assessments totaling 

$701,079.11 and sent Dr. Enomoto statutory notices and demand for payment. Dr. 

Enomoto did not timely pay the full amounts demanded but has made substantial 

payments since then. 

Ms. Enomoto passed away in February 2013, and Duckett filed a probate petition 

in state court the following month. In April 2014, Duckett prepared a final accounting of 

the estate, to which both Dr. Enomoto and Bradley agreed. That accounting provided, in 

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relevant part, that the estate would deliver $173,545.12 to the trustee of the trust created 

for Dr. Enomoto’s benefit. 

In June 2014, the IRS served on Duckett, in her capacity as personal 

representative, a Notice of Levy demanding that she turn over any of Dr. Enomoto’s 

“property and rights to property” in her possession pursuant to a federal tax lien. When 

Duckett informed Dr. Enomoto of the levy, he objected to paying the IRS the funds slated 

for delivery into the trust. Duckett then filed an interpleader action in state court against 

Dr. Enomoto, the IRS, Carol Severyn, and Carol Severyn Trust Management Services. In 

August 2014, the IRS removed the action to this Court pursuant to 28 U.S.C. § 1444. 

After removal, Dr. Enomoto appointed Kurt Tittelbach, an Arizona licensed 

private fiduciary, as the trust’s successor trustee. The Court then dismissed Severyn and 

Carol Severyn Trust Management Services, and Tittelbach intervened in his capacity as 

successor trustee. According to the IRS, Dr. Enomoto still owed a balance of $499,761 

as of May 18, 2015. 

The IRS initially moved for summary judgment directing that the interpleaded 

funds be given to the IRS. Dr. Enomoto and Tittlebach filed a cross-motion for summary 

judgment precluding IRS entitlement to the trust. The Court denied both motions 

because the funds were still being held by Duckett and were not yet held in trust. 

Accordingly, the Court ordered Duckett to transfer the funds (minus her attorney fees) to 

Tittelbach and then dismissed her. 

Now that the funds are held in trust, the parties have renewed their summary 

judgment motions. The disputed legal issue is whether the federal tax lien on Dr. 

Enomoto’s “property” or “rights to property” attaches to the trust funds. 

II. LEGAL STANDARD 

A motion for summary judgment tests whether the opposing party has sufficient 

evidence to merit a trial. At its core is whether sufficient evidence exists from which a 

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reasonable jury could find in favor of the party opposing the motion. Summary judgment 

should be granted if the evidence reveals no genuine dispute about any material fact and the 

moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). For purposes 

of the pending motions, there are no disputed facts. This case therefore presents a pure 

question of law. 

III. ANALYSIS 

To satisfy a tax deficiency, the federal government may impose a lien on any 

“property” or “rights to property” belonging to the taxpayer: 

If any person liable to pay any tax neglects or refuses to pay the same after 

demand, the amount . . . shall be a lien in favor of the United States upon 

all property and rights to property, whether real or personal, belonging to 

such person. 

26 U.S.C. § 6321. This statutory language “is broad and reveals on its face that Congress 

meant to reach every interest in property that a taxpayer may have.” United States v. 

Nat’l Bank of Commerce, 472 U.S. 713, 719-20 (1985). “Stronger language could hardly 

have been selected to reveal a purpose to assure the collection of taxes.” Glass City Bank 

v. United States, 326 U.S. 265, 267 (1945). 

The parties dispute whether the funds held in Ms. Enomoto’s testamentary trust 

constitute Dr. Enomoto’s “property” or “rights to property” for purposes of the federal 

tax lien. Answering this question requires a two-step analysis. The Court must “look 

initially to state law to determine what rights the taxpayer has in the property the 

Government seeks to reach, then to federal law to determine whether the taxpayer’s statedelineated rights qualify as ‘property’ or ‘rights to property’ within the compass of the 

federal tax lien legislation.” Drye v. United States, 528 U.S. 49, 58 (1999). 

A. Dr. Enomoto’s rights in the trust funds under Arizona law 

Determination of Dr. Enomoto’s rights in the trust funds begins with the Arizona 

Trust Code. A.R.S. §§ 14-10101 to 14-11102. The Code sets default and mandatory 

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rules governing trusts created under Arizona law. A.R.S. §§ 14-10105, 14-10107. On 

matters where the Code is silent, the common law of trusts governs. A.R.S. 

§ 14-10106(A). On certain topics, the Code instructs courts to look to the Second 

Restatement of Trusts for interpretation of the common law. A.R.S. § 14-10106(B). 

When interpreting a trust, the overriding goal is to ascertain the intent of the settlor. 

Weinstein v. Weinstein, 235 Ariz. 40, 44, 326 P.3d 307, 311 (Ct. App. 2014). 

Under the Code, a beneficiary may recover damages against a trustee who violates 

a duty owed to him. A.R.S. §§ 14-11001(A), 14-11002(A). Thus, if a trustee pays a 

beneficiary less trust money than is owed, the beneficiary may recover the difference. 

See A.R.S. § 14-11002(A)(1). Similarly, courts may remedy a trustee’s breach of duty by 

compelling the trustee to pay money. A.R.S. § 14-11001(B)(3). In this framework, a 

beneficiary’s right to trust funds depends on the trustee’s duty to pay the funds, which 

itself depends on the terms of the trust. This principle is easily stated but not so easily 

applied. Three examples illustrate the difficulty.1

Start with a simple case. Suppose a trust directs the trustee to pay the beneficiary 

$1,000 from the trust funds each year. Under these terms, the trustee’s duty to pay is 

clearly defined, and a violation would be obvious. Were the trustee to pay only $800 one 

year, the beneficiary could recover the remaining $200. The beneficiary’s right to the 

trust funds would be a right to specific payments at specific times. 

Now consider a harder case. Suppose a trust directs the trustee to pay the 

beneficiary “so much or all of the income and principal of the trust as may be required for 

support in the beneficiary’s accustomed manner of living.” Traditionally, this sort of 

trust was known as a “support trust.” See Restatement (Second) of Trusts § 154 (Am. 

Law Inst. 1959). The Arizona Trust Code refers to it as a “discretionary trust” in which 

 1

 For a more thorough discussion of beneficiary rights in trust assets for purposes 

of the federal tax lien, see 4 William D. Elliott, Federal Tax Collections, Liens & Levies

¶ 9.09[3][j] (2016 update) and sources cited therein. 

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the trustee’s discretion is “limited by an ascertainable standard.” See A.R.S. 

§ 14-10504(E). Whatever the label, the trustee’s duty to pay is somewhat fuzzy because 

the trust does not specify payment amounts or schedules. But the duty is not empty, since 

the trustee must pay whatever amount is in fact required under the standard set forth in 

the trust. See Restatement (Second) of Trusts § 154 cmt. d. Thus, if the beneficiary is 

“accustomed” to a $50,000-per-year lifestyle and has no income, a trustee who pays only 

$40,000 per year could be liable for the remaining $10,000. See A.R.S. § 14-10504(C) 

(recognizing beneficiary’s right to “maintain a judicial proceeding against a trustee for 

. . . failure to comply with a standard for distribution”). The beneficiary’s right to the 

trust funds would be a right to payments in accordance with an ascertainable standard. 

Now consider an extreme case. Suppose a trust permits the trustee to pay the 

beneficiary “any amount, including zero, of the income or principal of the trust as the 

trustee in his sole discretion shall determine.” Traditionally, this sort of trust was known 

as a “discretionary trust.” See Restatement (Second) of Trusts § 155. The Arizona Trust 

Code refers to it as a “purely discretionary” trust. See A.R.S. § 14-10504(E). Whatever 

the label, the trustee’s duty to pay is tenuous because “the trustee may in his absolute 

discretion refuse to make any payment to the beneficiary.” Restatement (Second) of 

Trusts § 155 cmt. c. But the trustee is not absolved of all duty. Trustees must always act 

in good faith. A.R.S. § 14-10105(B)(2); In re Wills’ Trust Estate, 8 Ariz. App. 591, 595, 

448 P.2d 435, 439 (Ct. App. 1968). No trust language, however strong, can entirely 

remove a power held in trust from judicial review; otherwise “the power would not be 

held in trust at all.” Stix v. Commissioner, 152 F.2d 562, 563 (2d Cir. 1945) (Learned 

Hand, J.). Thus, no matter how broad a trustee’s discretion, he may not abuse it. See

A.R.S. § 14-10504(C) (recognizing beneficiary’s right to “maintain a judicial proceeding 

against a trustee for an abuse of discretion”). An Arizona court reviewing a trustee’s 

exercise of discretion would treat the decision with deference and would consider several 

factors, including the trust’s terms and purposes and the trustee’s motives. In re Esther 

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Caplan Trust, 228 Ariz. 182, 186-87 ¶¶ 17-21, 265 P.3d 364, 368-69 (Ct. App. 2011). 

The beneficiary’s right to the trust funds would be a right to payments the withholding of 

which would constitute an abuse of discretion. 

These examples represent points on a spectrum of the possible extent of a 

beneficiary’s rights to trust assets under Arizona law. On this spectrum, Dr. Enomoto’s 

rights fall somewhere between the second and third examples because Ms. Enomoto’s 

testamentary trust has elements of a traditional support trust and a traditional 

discretionary trust. 

On one hand, the trust is clearly intended for Dr. Enomoto’s support. The trust 

identifies funds that “shall be distributed” to Dr. Enomoto: 

The One-Third share of my Estate, other than tangible personal property, 

that is to be distributed to my son DENNIS MASAKI ENOMOTO, if such 

amount should exceed $50,000, shall be distributed in trust. 

The trust then sets an ascertainable standard for payment: 

The Trustee shall pay to DENNIS MASAKI ENOMOTO so much or all of 

the net income and principal of the trust as in the sole discretion of the 

Trustee may be required for support in the beneficiary’s accustomed 

manner of living, for medical, dental, hospital, and nursing expenses, or for 

reasonable expenses of education, including study at college and graduate 

levels. 

Such payments are mandatory, since the trustee “shall pay” this amount and the trust 

identifies no other beneficiary. 

On the other hand, the trust leaves to “the sole discretion of the Trustee” the 

specific determination of how much payment is required under the articulated standard. 

In making this determination, the trustee may consider or disregard other potential 

sources of income: 

In the Trustee’s sole discretion and to the extent the Trustee deems 

advisable, the Trustee may consider or disregard the funds available to the 

beneficiary from other sources or the duty of anyone to support the 

beneficiary. 

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Once the trust principal falls below $10,000, however, the trustee has no discretion and 

must distribute the remaining funds: 

Should the principal of the trust drop below $10,000, the Trustee shall 

distribute the balance of the principal, together with the undistributed 

income therefrom to DENNIS MASAKI ENOMOTO. 

Trusts of this nature—directing payment under a general standard while leaving 

specific calculations to the trustee—are sometimes referred to as “discretionary support” 

trusts or “hybrid” trusts. See Evelyn Ginsberg Abravanel, Discretionary Support Trusts, 

68 Iowa L. Rev. 273, 277-80 (1983). As with traditional support trusts, the trustee must 

pay Dr. Enomoto in accordance with an ascertainable standard. But as with traditional 

discretionary trusts, the trustee’s determination of exactly how much payment is required 

is reviewable only for abuse of discretion. The result is essentially a traditional support 

trust, but with deferential judicial review. That is, a trustee applying the payment 

standard in Ms. Enomoto’s testamentary trust has more leeway than a trustee applying the 

equivalent standard in a traditional support trust. See id. at 290. Thus, Dr. Enomoto’s 

right to the trust funds is a right to payments the withholding of which would constitute an 

abuse of discretion in applying an ascertainable standard. 

Dr. Enomoto tries to bypass all this complexity with a simple argument: 

(1) Under the Arizona Trust Code, the trust here is a 

“discretionary trust.” 

(2) According to cases in other jurisdictions, the federal tax 

lien does not attach to “discretionary trusts.” 

(3) Therefore the federal tax lien does not attach to the trust 

here. 

But this argument rests on an equivocation. The Arizona Trust Code uses the term 

“discretionary trust” broadly, in a way that includes traditional support trusts. Compare

A.R.S. § 14-10504(A)(1) with Restatement (Second) of Trusts § 154. The cases cited by 

Dr. Enomoto, however, use the term narrowly, in explicit contrast with traditional support 

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trusts. See, e.g., First of America Trust Co. v. United States, No. 91-2352, 1993 WL 

327684, at *2-3 (C.D. Ill. Mar. 15, 1993). Thus, Dr. Enomoto’s argument fails because it 

relies on conflicting meanings of a word at the same time. 

The confusion is understandable because the term “discretionary trust” only 

recently acquired a dual meaning. The Second Restatement of Trusts distinguishes 

“discretionary trusts” from “support trusts.” Restatement (Second) of Trusts §§ 154, 155. 

But the Third Restatement abandons the term “support trust” and instead uses the term 

“discretionary trust with a support standard” to describe the same concept. Restatement 

(Third) of Trusts § 60, rptr’s note to cmt. a (Am. Law Inst. 2003). The Uniform Trust 

Code follows the Third Restatement, categorizing as a type of “discretionary trust” what 

was traditionally known as a support trust. See Unif. Trust Code § 504 & cmt. (Unif. 

Law Comm’n 2000, amended 2010). The Arizona Trust Code follows suit. See A.R.S. 

§ 14-10504.2

 Importantly, this change in terminology does not affect the beneficiary’s 

underlying right to compel payment. See Unif. Trust Code § 504 cmt. It is the nature of 

this right that is relevant here. 

B. Whether Dr. Enomoto’s rights in the trust funds qualify as “property” 

or “rights to property” for purposes of the federal tax lien 

“The question whether a state-law right constitutes ‘property’ or ‘rights to 

property’ is a matter of federal law.” United States v. Nat’l Bank of Commerce, 472 U.S. 

713, 727 (1985). The statute itself provides little guidance on the matter. It merely 

imposes a lien on “all property and rights to property, whether real or personal, belonging 

to” the delinquent taxpayer. 26 U.S.C. § 6321. It does not define the terms “property” or 

“rights to property.” 

 2

 The Arizona Code heightens confusion because, unlike the Uniform Code, it 

instructs courts to use the Second Restatement and not the Third Restatement as a source 

of common law in determining rights of a beneficiary’s creditors and a settlor’s intent. 

Compare Unif. Trust Code § 106 with A.R.S. § 14-10106(B). 

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This imprecision is intentional. Congress “knew that the forms and varieties of 

property would remain in flux, and that a definition capable of precisely capturing those 

valuable interests for the tax gatherers’ harvest would elude it.” Randall v. H. Nakashima 

& Co., 542 F.2d 270, 278 (5th Cir. 1976). By not “enumerating attributes or varieties of 

property rights,” Congress gave the statutory language “expansiveness” and “flexibility.” 

Id. at 279. 

But with flexibility comes unpredictability. With Congress having kicked the can 

down the road, courts across the country are tasked with applying broad statutory 

language in a wide variety of situations, without the benefit of bright lines or clear tests. 

The Supreme Court has provided some limited direction. “In determining whether 

a federal taxpayer’s state-law rights constitute ‘property’ or ‘rights to property,’ ‘[t]he 

important consideration is the breadth of the control the [taxpayer] could exercise over 

the property.” Drye v. United States, 528 U.S. 49, 61 (1999) (quoting Morgan v. Comm’r 

of Internal Revenue, 309 U.S. 78, 83 (1940)) (alterations in original). Applying this 

metric, the Supreme Court has held that “a taxpayer’s right under state law to withdraw 

the whole of the proceeds from a joint bank account constitutes ‘property’ or the ‘right to 

property’ subject to levy for unpaid federal taxes, although state law would not allow 

ordinary creditors similarly to deplete the account.” Id. at 58 (citing Nat’l Bank of 

Commerce, 472 U.S. at 723-27). Similarly, “a taxpayer’s right under a life insurance 

policy to compel his insurer to pay him the cash surrender value qualifies as ‘property’ or 

a ‘right to property’ subject to attachment for unpaid federal taxes, although state law 

shielded the cash surrender value from creditors’ liens.” Id. (citing United States v. Bess, 

357 U.S. 51, 56-57 (1958)). By contrast, “no federal tax lien could attach” to the 

proceeds of a life insurance policy, since those proceeds were “unavailable to the insured 

in his lifetime.” Id. at 58-59 (citing Bess, 357 U.S. at 55-56). 

Here, the question is whether a beneficiary has enough “control” over funds held 

in a discretionary support trust to trigger federal tax lien attachment. Neither the 

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Supreme Court nor the Ninth Circuit Court of Appeals has addressed this question. Other 

courts have, with mixed results. It is difficult to harmonize these results in a principled 

way. Courts appear to be deciding the question ad hoc, based on the unique combination 

of circumstances before them. In this judicial landscape, the best a court can do is 

identify the factors most relevant to its decision and explain how those factors compare or 

contrast with similar cases. 

1. Cases in which the federal tax lien did not attach 

Dr. Enomoto cites four cases in support of his position that the tax lien does not 

attach to the trust funds. One has nothing to do with taxes or federal law. Myers v. 

Kansas Dep’t of Soc. & Rehab. Servs., 254 Kan. 467 (1994).3

 The other three are also 

unpersuasive. 

In First of America Trust Co. v. United States, No. 91-2352, 1993 WL 327684 

(C.D. Ill. Mar. 15, 1993), the delinquent taxpayer was one of several beneficiaries of a 

trust containing both “support” language and “discretionary” language: 

[T]he Trustee shall pay or apply the net income and so much of the 

principal as the Trustee may in its sole discretion deem necessary or 

appropriate for the support, comfort and welfare of such of [the 

beneficiaries] as shall be living from time to time, . . . the Trustee having 

full power and authority from time to time to fix and change the amounts to 

be so received by them, respectively. 

Id. at *3 (second and third alterations in original). The court determined that the 

beneficiary could not “compel payment” from the trust principal under Maryland law and 

therefore had no “property interest” in the trust principal for purposes of the federal tax 

 3

 Dr. Enomoto cites Myers as an instance where a trust similar to Ms. Enomoto’s 

testamentary trust was deemed “discretionary” under state law. 254 Kan. at 477. The 

court concluded the beneficiary could not “compel the trustee to pay” any trust funds. Id. 

But here, Dr. Enomoto can compel the trustee to pay trust funds in some circumstances, 

as explained above. Moreover, the trust in Myers did not place the word “shall” next to 

the word “pay,” a fact the court relied on in concluding the trust was discretionary. See

id. Ms. Enomoto’s trust, in contrast, directs that the trustee “shall pay” Dr. Enomoto. 

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lien. Id. at *4-5. This determination is unpersuasive here because under Arizona law Dr. 

Enomoto can compel the trustee to pay trust funds in some circumstances, as explained in 

Part III.A. Moreover, First of America Trust is factually distinguishable because there, 

(1) the trustee had not invaded the trust principal in the eighteen years since the trust was 

created, suggesting no beneficiary had a property interest in the principal, and (2) the 

trust had been created for multiple beneficiaries, which means (though not stated by the 

court) that any single beneficiary’s right to invade the trust principal would reduce the 

trust income available to the others. See id. at *3. 

In re Wilson, 140 B.R. 400 (N.D. Tex. 1992) is inapplicable here because the trust 

there gave the trustee discretion as to whether to pay at all, not just as to how much 

payment was required under an ascertainable standard: 

My Trustee, in its sole discretion, may distribute sixty (60%) of the income 

to or for the benefit of my daughter, NANCY LOU WILSON; provided 

however, any part or all of such income that is not distributed shall be 

accumulated for the benefit of my daughter, NANCY LOU WILSON, and 

my Trustee shall have the sole discretion to distribute all or any part of such 

accumulated income to or for the benefit of my daughter at such time or 

times as my Trustee determines to be in the best interest of my daughter. 

Id. at 402 (emphasis added). Moreover, unlike here, the trust specified where the funds 

would go upon the beneficiary’s death: 

Any income and/or accumulated income not distributed at the date of my 

daughter’s death shall be distributed to her descendants. 

Id. According to the court, that was a “clear statement that the Trustee is not obligated to 

distribute anything to the [beneficiary] during her lifetime.” Id. at 406-07. 

Texas Commerce Bank National Ass’n v. United States, 908 F. Supp. 453 (S.D. 

Tex. 1995) is least persuasive of all because the opinion contains no complete quotation 

of the relevant trust language, making a thorough evaluation of the court’s reasoning 

impossible. Thus, none of the cases cited by Dr. Enomoto preclude federal tax lien 

attachment to his right to the trust funds. 

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2. Cases in which the federal tax lien attached 

The IRS relies principally on United States v. Delano, 182 F. Supp. 2d 1020 (D. 

Colo. 2001), an opinion with sound reasoning but limited applicability. There the 

delinquent taxpayer, James Delano, was the sole beneficiary of a trust containing 

language substantially similar to Ms. Enomoto’s testamentary trust: 

During my son’s lifetime, my trustee shall pay to or apply for the benefit of 

my son so much of the income or principal, or both, as my trustee in its sole 

and absolute discretion shall deem necessary or advisable for his 

maintenance, health, education, comfort and welfare. My trustee may, but 

need not, consider all funds known to my trustee to be available to him. 

Any undistributed income may be added to principal from time to time in 

the discretion of my trustee. 

Id. at 1022. The court held that this trust did not give the trustee “discretion to refuse all 

payments” to Delano and therefore Delano’s interest in the trust constituted “a property 

interest to which a federal tax lien may attach.” Id. at 1023-25. In reaching this 

conclusion the court noted two trust characteristics that are also present here. First, the 

taxpayer was the trust’s sole beneficiary. Id. at 1023. Second, the word “shall” preceded 

the word “pay” whereas the word “discretion” followed words referring to amount of 

payment, indicating the trustee’s discretion governed only how much to pay, not whether 

to pay. See id. at 1023. So too here: 

The Trustee shall pay to DENNIS MASAKI ENOMOTO so much or all of 

the net income and principal of the trust as in the sole discretion of the 

Trustee may be required . . . . 

These characteristics suggest the settlor in both cases intended the beneficiary to be paid, 

thus giving the beneficiary some control over the trust funds. Two additional features of 

Ms. Enomoto’s trust support that inference here: the trust states that the funds “shall be 

distributed” to Dr. Enomoto and that once the principal falls below $10,000, the trustee 

loses all discretion and must pay Dr. Enomoto the remaining funds: 

The One-Third share of my Estate, other than tangible personal property, 

that is to be distributed to my son DENNIS MASAKI ENOMOTO, if such 

amount should exceed $50,000, shall be distributed in trust. 

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. . . 

Should the principal of the trust drop below $10,000, the Trustee shall 

distribute the balance of the principal, together with the undistributed 

income therefrom to DENNIS MASAKI ENOMOTO. 

In some respects, however, Delano had greater control over the trust funds there than Dr. 

Enomoto does here, because Delano had the option to terminate the trust and retain all 

trust assets and because he and his son were the trustees. Id. at 1021-23. Thus, the 

argument for federal tax lien attachment is weaker here than in Delano. 

A closer analogue is United States v. Taylor, 254 F. Supp. 752, 755 (N.D. Cal. 

1966). There the delinquent taxpayer, Lee Jones, Jr., was the sole beneficiary of a 

discretionary support trust that provided in relevant part: 

The trustees shall pay to or apply for the benefit of my son, LEE JONES, 

JR., so much of the net income of said trust, up to the whole thereof, as the 

Trustees may from time to time deem necessary or advisable for his proper 

care, maintenance and support. The balance of said net income, if any, 

shall be accumulated by the Trustees, and from time to time added to the 

principal of the trust estate. 

Id. at 755 n.1. The court determined that this trust gave Jones the “basic beneficial right 

to receive payments from income to the extent needed for his support” and that federal 

tax liens “attached to and subsist against that right.” Id. at 756. In reaching this 

conclusion the court noted that the trust, like Ms. Enomoto’s trust, stated the trustees 

“shall pay” the beneficiary and gave the trustees discretion only as to the amount of 

payment necessary under the trust standard. Id. at 755. The court also noted that under 

California law, were the trustees to exercise their discretion unreasonably, Jones could 

compel them to act otherwise. Id. Dr. Enomoto has a similar right under Arizona law. 

The most significant difference between Taylor and this case seems to be that in Taylor

the trustees paid Jones weekly for several months before the government sued them, id. at 

754, whereas here the trustee has not paid Dr. Enomoto anything. Still, Dr. Enomoto’s 

control over the trust funds here is comparable to Jones’ control over the trust funds 

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there. Therefore Taylor’s conclusion as to tax lien attachment is persuasive and 

applicable here. The federal tax lien attaches to Dr. Enomoto’s right to the trust funds.

This conclusion is in accord with other courts that have followed Taylor, see, e.g., 

Delano, 182 F. Supp. 2d at 1023; Magavern v. United States, 415 F. Supp. 217, 221 

(W.D.N.Y. 1976), aff’d, 550 F.2d 797 (2d Cir. 1977); United States v. Harris, No. 95-

CR-00227-TEH-1, 2016 WL 524852, at *3 (N.D. Cal. Feb. 10, 2016), as well as at least 

one restatement of the law, see Restatement (Second) of Trusts § 157(d) (United States 

may pierce support trust to satisfy claim against beneficiary). 

3. Enforcement of the lien 

If the IRS were seeking only a judgment that the federal tax lien attaches to Dr. 

Enomoto’s right to the trust funds, no further discussion would be necessary. But the 

IRS’ motion also seeks to transfer the entirety of the trust funds to the United States. 

That is a step too far. 

Dr. Enomoto’s right to the trust funds is, as explained in Part III.A, a right to 

payments the withholding of which would constitute an abuse of discretion in applying 

an ascertainable standard. While that right affords him enough control over the trust 

funds to trigger federal tax lien attachment, it does not by itself justify enforcement of the 

lien as to any specific amount. As explained in Taylor, the right differs from other 

property rights in that “it has no permanently fixed dollar value” and “is variable 

according to the taxpayer’s needs.” 254 F. Supp. at 756. While the right can be 

“assigned a reasonably accurate dollar value by assessing the taxpayer’s current needs 

and living demands,” id., the IRS has provided no evidence of Dr. Enomoto’s needs or 

demands and therefore no reason to think the lien extends to all the trust funds. In other 

words, the IRS has a valid lien but has not resolved “the practical problems of enforcing 

the lien.” Id.

Delano is of little help. There, the court noted the problem—that Delano’s right to 

the trust had “no permanently fixed dollar value”—but determined that his right extended 

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to all the trust assets because (1) the trust named him as the sole beneficiary, (2) the trust 

would terminate upon his death, and (3) the trust permitted him to terminate the trust and 

retain all assets without regard to the remainder beneficiaries. 182 F. Supp. 2d at 

1023-24. Here, in contrast, although Dr. Enomoto is the trust’s sole beneficiary, the 

parties have not adequately briefed the trust consequences of his death4

 and the trust does 

not permit him to unilaterally terminate the trust and retain all assets. Therefore it is less 

clear whether Dr. Enomoto’s right extends to all the trust funds. 

For this reason, the IRS’ summary judgment motion will be (1) granted to the 

extent it seeks a judgment that the federal tax lien attaches to Dr. Enomoto’s right to the 

trust funds but (2) denied without prejudice to the extent it seeks a transfer of those funds 

to the United States. More evidence would be necessary to justify the latter conclusion. 

See Taylor, 254 F. Supp. at 758 (allowing “additional hearings or proceedings” to 

effectuate foreclosure of federal tax lien); accord Magavern, 415 F. Supp. at 221 (holding 

federal tax levy valid but stating “determination of the actual amount of trust income 

and/or principal reached by the levy must await trial”). 

Admittedly, this outcome is somewhat unsatisfactory. Both parties have advanced 

simpler, more practicable positions: the IRS says it is entitled to all the trust funds, and 

Dr. Enomoto says it is not entitled to any. But both of these positions oversimplify the 

facts and the law. In reality, Dr. Enomoto’s right to the trust funds gives him enough 

control to trigger tax lien attachment, but it is too circumstance-dependent to allow 

enforcement of the lien as to any specific amount on the current record. 

 4

 The only relevant assertion from either party is a sentence in Dr. Enomoto’s 

Reply brief: “Pursuant to A.R.S. § 14-2604(A), at Dr. Enomoto’s decease, the remaining 

Trust assets would pour back into the residuary under the Will, to be distributed to the 

other two beneficiaries (Dr. Enomoto’s sisters).” (Doc. 74 at 4.) The sentence is not 

followed by any citation to authority. 

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IT IS THEREFORE ORDERED that the IRS’ Renewed Motion for Summary 

Judgment (Doc. 91) is (1) granted to the extent it seeks a judgment that the federal tax 

lien attaches to Dr. Enomoto’s right to the funds held in Ms. Enomoto’s testamentary 

trust created for his benefit, (2) denied without prejudice to the extent it seeks a transfer 

of those funds to the United States, and (3) otherwise denied. 

IT IS FURTHER ORDERED that Dr. Enomoto and Tittelbach’s Renewed Motion 

for Summary Judgment (Doc. 89) is denied. 

Dated this 18th day of April, 2016. 

Neil V. Wake

United States District Judge

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