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Nature of Suit Code: 870
Nature of Suit: Tax Suits
Cause of Action: 

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UNITED STATES COURT OF 

FIL L D 

United States Court of Appeal~ 

APPEALS Tenth Circuit 

FOR THE TENTH CIRCUIT DEC 2 3 1992 

ROBERT L. HOECKER 

UNITED STATES OF AMERICA, 

v. 

Plaintiff-Counter-ClaimDefendant-Appellee, 

ELLIS A. NEILSON and CARMEL NEILSON, 

Defendants, 

and 

L. SHYRL BROWN and ILA D. BROWN, 

Defendants-CounterClaimants-Appellants . 

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) 

Clerk . 

) No. 91-4175 

) (D.C . No. 89-C-143-J) 

) (D. Utah) 

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ORDER AND JUDGMENT* 

Before MOORE and TACHA, Circuit Judges, and SAFFELS,** Senior 

District Judge. 

**Honorable Dale E. Saffels, Senior District Judge, United States 

District Court for the District of Kansas, sitting by designation. 

After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist the determination of this appeal. See Fed. R. App. P . 

* This order and judgment has no precedential value and shall 

not be c ited, or used by any court within t he Tenth Circuit, except for purposes of establishing the doctrines of the law of 

the c ase , res judicata, or collateral estoppel. 10th Cir. R. 36.3. 

Appellate Case: 91-4175 Document: 010110154891 Date Filed: 12/23/1992 Page: 1 
34(a); 10th Cir. R. 34.1.9. 

submitted without oral argument. 

The case is therefore ordered 

The United States brought this action against defendants 

L. Shyrl Brown and Ila D. Brown to reduce to judgment Mr. Brown's 

unpaid tax liability, to set aside as fraudulent Mr. Brown's 

conveyance of real property to Mrs. Brown, and to foreclose 

federal tax liens against the fraudulently transferred property. 

The district court entered judgment in the amount of $190,404.89, 

plus interest and statutory additions, for unpaid income taxes for 

the years 1971, 1972, 1973, 1977, 1978, 1980, and 1982, against 

Mr. Brown, the sole wage earner. The district court also set 

aside as fraudulent Mr. Brown's conveyance of his interest in his 

business property, upheld the tax liens on the property, and 

d d h f 1 d d ld . f h 1 · 1 

or ere t e property orec ose an so to satis y t e iens. 

Defendants appeal. We exercise our jurisdiction under 28 U.S.C. 

§ 1291, and affirm. 

The real property that is the subject of the foreclosure and 

sale order was used by Mr. Brown for his dentistry business. 2 In 

1972, Mr. Brown conveyed his undivided one-half interest in the 

property to his wife, defendant Ila D. Brown, who owned the other 

undivided one-half interest, resulting in title to the property in 

1 The district court granted the parties' requests to stay 

sale of the property. 

the 

2 The government also claimed that the defendants' residential 

real property, held from the date of purchase in Mrs. Brown' s 

name, was subject to foreclosure and sale for Mr. Brown's tax 

liability, but the district court declined to find a fraudulent 

conveyance of the residential property. The government filed a 

notice of appeal , but subsequently voluntarily dismissed its 

appeal . 

2 

Appellate Case: 91-4175 Document: 010110154891 Date Filed: 12/23/1992 Page: 2 
Mrs. Brown ' s name. At about that time, Mr. Brown ceased paying 

federal income taxes. Mr. Brown continued to use the property for 

his business. 

Defendants raise several arguments on appeal. In general, 

they maintain the government failed to establish a duty to pay 

taxes and failed to establish the district court's jurisdiction. 

They also claim (1) the action was not filed in compliance with 26 

U.S.C. §§ 7401 and 7403 requiring authorization for the civil 

action by the Secretary of the Treasury and the Attorney General; 

(2) the district court erred in receiving and relying on various 

items of evidence; (3 ) the district court's findings of fact and 

law that the business property was fraudulently conveyed was 

incorrect; and (4) defendants were denied their right to a jury 

trial. 

I. TAX PROTESTER ARGUMENTS 

Defendants make several arguments that the district court was 

without jurisdiction. We review de novo the question of the 

district court's jurisdiction. Kunkel v. Continental Casualty 

Co . , 866 F.2d 1269, 1273 (10th Cir. 1989). 

In Lonsdale v. United States, 919 F.2d 1440 (10t h Cir. 1990) , 

we addressed and rejected many tax protester arguments, several of 

which were raised by defendants in this case to challenge the 

district court's jurisdiction. In Lonsdal e we r ejected arguments 

raised here by petitioners, holding that 

the following argumen ts ... are completely lacking in 

legal merit a nd patently frivolous: 

3 

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(2) the authority of the United States is confined 

to the District of Columbia; 

{ 3) 

government ' s 

individuals; 

[various] arguments against 

power to impose income taxes 

(6) the income tax is voluntary; 

the 

on 

(7) no statutory authority exists for imposing an 

income tax on individuals; [and] 

(9) individuals are not required to file tax 

returns fully reporting their income. 

at 1448. Also meritless is the argument that "the 

Commissioner of Internal Revenue and employees of the Internal 

Revenue Service have no power or authority to administer the 

Internal Revenue laws . because of invalid or nonexistent 

delegations of authority . " Id . Accordingly, defendant's similar 

arguments are rejected as meritless. 

II. AFFIRMATIVE DEFENSE - 26 U.S.C. §§ 7401 & 7403 

Defendants raised the affirmative defense that the government 

failed to comply with 26 U.S . C. §§ 7401 and 7403(a) , which require 

the authorization of the Secretary of the Treasury and the 

Attorney General before commencement of a civil action to collect 

taxes or enforce a tax lien. Defendants claim the civil action 

against them was filed without the requisite authorizations. 

Counsel for the government filed the following written statement: 

3. By letter dated March 21 , 1986 Chief Counsel, 

Internal Revenue Service by Marion K. Mortensen, 

District Counsel, a delegate of the Secretary of the 

Treasury, requested that an action be brought to reduce 

the federal tax assessments against L. Shyrl Brown to 

judgment, to set aside the fraudul ent conveyance of two 

4 

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parcels of real property and to foreclose the federal 

tax liens against L. Shyrl Brown. 

4. I was instructed by Stephen G. Fuerth, Chief, 

Civil Trial Section, Western Region, Tax Division, U.S. 

Department of Justice to bring the present action. Mr. Fuerth is a delegate of the Attorney General of the 

United States. 

I declare under penalty of perjury that the 

foregoing is true and correct. 

R. Vol. I, doc. 50 at 1-2. 

The record reflects that defendants did not respond to the 

government's statement. They neither came forward with evidence 

to controvert the statement nor challenged the form or the content 

of the statement. In pleadings filed after the government's 

statement of compliance with §§ 7401 and 7403(a), defendants 

merely reiterated their claim that the government had not complied 

with those sections. 

Once the government offered some evidence of compliance with 

§§ 7401 and 7403(a), defendants had the burden of going forward 

with evidence to establish their affirmative defense. See 

Simopoulos v . Virginia, 462 U.S. 506, 510 (1983) ("Placing upon the 

defendant the burden of going forward with evidence on an 

affirmative defense is normally permissible."); Patterson v . New 

York, 432 U. S. 197, 207-08 (1977) (requiring defendant to carry 

burden of persuasion on affirmative defense of extreme emotional 

disturbance does not violate due process clause). Defendants 

failed to meet their burden. Therefore, because the government's 

evidence of compliance with§§ 7401 and 7403(a) is uncontroverted, 

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we determine defendants conceded that the government complied with 

those sections. 

III. EVIDENTIARY MATTERS 

Defendants allege several evidentiary errors. First, they 

claim the government failed to produce sufficient admissible 

evidence to establish the taxes due from Mr. Brown. 

In a suit brought by the government to collect taxes 

resulting from unreported income, the government 

generally establishes a prima facie case when it shows a 

timely assessment of the tax due, supported by a minimal 

evidentiary foundation, at which point a presumption of 

correctness arises. A presumption of correctness 

attaches to the Commissioner's assessment, once some 

substantive evidence is introduced demonstrating that 

the taxpayer received unreported income. This 

presumption will permit judgment in the Commissioner's 

favor unless the opposing party produces substantial 

evidence overcoming it. 

United States v. McMullin, 948 F.2d 1188, 1192 

1991) (citations omitted). 

(10th Cir. 

In this case, the government introduced into evidence the 

certificates of assessment. The government then elicited 

testimony from Mr. Brown that he had not filed a tax return 

showing his income since 1970, and that he had been the s ole 

source of financial support of his family of eight during the tax 

years in question. Accordingly, the government's evidence met the 

McMullin test . Defendants produced no evidence to challenge the 

information reflected on the assessments. Therefore, judgment in 

the government's favor was warranted. 

Defendants next contend the certificates of assessment were 

inadmissible hearsay evidence. They also contend the certificates 

were inadmissible because they are computerized summaries. 

6 

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Certificates of assessments fall 

exception to the rule against hearsay 

within the public records 

because they "qualify as 

'[r]ecords, reports, or data compilations, in any form, of 

public offices or agencies, setting forth ... matters observed 

pursuant to duty imposed by law as to which matters there was a 

duty to report.'" Hughes v. United States, 953 F.2d 531, 539 (9th 

Cir. 1992) (quoting Fed. R. Evid. 803(8)). Official IRS documents, 

including those generated by computer, are admissible as public 

records. Id . at 540; see also United States v. Hayes, 861 F.2d 

1225, 1228 (10th Cir. 1988 ) (noting the "well established 

proposition" that data generated by computer may qualify under 

business records exception of Rule 803(6)). Accordingly, we 

determine the certificates of assessment were properly admitted. 

Defendants further complain that they were denied discovery 

of the documents underlying t he assessments. "We review orders 

relating to discovery for an abuse of discretion." Johnson ex 

rel. Johnson v. Thompson, 971 F.2d 1487, 1497 (10th Cir. 1992 ) , 

petition for cert . filed, 61 U.S.L.W. 3371 (U.S. Nov. 4, 1992) (No . 

92-779). During trial, the government's attorney stated that the 

government had complied with all of defendants' discovery 

requests. R. Vol. III at 138-39. Defendants did not dispute the 

government's representation except to say they were really trying 

to discover information other than the supporting documents. Id. 

at 142 - 43. 

Defendants also complain that no witness appeared to testify 

about the data underlying the assessments, yet they refused the 

district court's offer to make available two witne sses who 

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executed the certificates of assessment. R. Vol. IV at 243-44. 

The district court found that defendants had adequate opportunity 

to ascertain the identity of any witness they wanted to call. Id. 

at 243. Defendants do not dispute the figures stated in the 

assessments, except to say that the government has not proven 

their accuracy to defendants' satisfaction. Therefore, we 

perceive no abuse of discretion relating to discovery of the 

information underlying the assessments. 

IV. FRAUDULENT CONVEYANCE 

The district court found that Mr. Brown had conveyed the 

business property to his wife with the intent to defraud the 

United States. R. Vol. II, doc. 107 at 6. Based on that finding, 

the district court set aside the transfer pursuant to Utah Code 

Ann. § 25-1-7 (1953) (currently codified at§ 25-6-5 (1989)) , and 

ruled that Mr. Brown retained a one-half undivided interest in the 

business property to which the federal tax liens attached. 

R. Vol. II, doc. 107 at 7. 

Defendants allege several errors relative to the district 

court's order setting aside the business property conveyance: (a) 

the correct statute of limitations was four years after the 

transfer, as provided by Utah Code Ann. § 25 -6- 10 (1989), not the 

six years provided by the federal statute for collection of tax 

after assessment, 26 U.S.C. § 6502; 3 (b) the government failed to 

prove it was a creditor; (c) the government failed t o establish 

notice and demand were sent to defendants; (d) the Utah fraudulent 

3 The statute was subsequently amended to provide for 

ten-year statute of limitations. 26 U.S.C. § 6502(a) (1990) . 

8 

a 

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conveyance statute, § 25-1-7 (1953), permitting a future creditor 

to move to set aside a fraudulent conveyance, is 

unconstitutionally vague; (e) the government's liens did not 

attach to the property; and (f) a prerequisite to a finding of 

fraudulent conveyance under Utah Code Ann. 25-1-4 (1953) (currently 

codified at section 25-6-6 (1989)), was a finding that Mr. Brown 

was insolvent at the time of the conveyance or that he became 

insolvent because of the conveyance. 

We conduct a de novo review of the district court's 

determination of state law. Mares v. ConAgra Poultry Co., 971 

F.2d 492 , 495 (10th Cir. 1992). We review de novo the 

construction of federal statutes. FDIC v. Canfield, 967 F.2d 443, 

445 (10th Cir.), cert. dismissed, 113 S. Ct. 516 (1992). 

The Utah four-year statute of limitations for fraudulent 

conveyances, section 25-6-10 (1989), conflicts with the federal 

law providing a six-year statute of limitations under 26 U. S.C. 

§ 6502. The Supremacy Clause, U.S. Const . art. VI, cl. 2, accords 

priority to federal rights "whenever they come in conflict with 

state law." Chapman v. Houston Welfare Rights Org., 441 U.S. 600 , 

613 (1979); accord Golden State Transit Corp . v. City of Los 

Angeles, 493 U.S. 103, 107 (1989). "It is well settled that the 

United States is not bound by state statutes of limitation or 

subject to the defense of laches in enforcing its rights. The 

same rule applies whether the United States brings its suit in its 

own court or in a state court. " United States v. Summerlin, 310 

U.S . 414, 416 (1940 ) (citations omitted). 

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The district court relied on section 25-1-7 (1953) and 

Dahnken. Inc. v . Wilmarth, 726 P.2d 420 (Utah 1986), in finding 

Mr. Brown had fraudulently conveyed his interest in the business 

property to his wife, and therefore that Mr. Brown retained a onehalf undivided interest in the property, subject to the federal 

tax liens. The district court properly employed state law to 

ascertain defendants' interest in the property, then applied 

federal tax law to that interest . United States v . National Bank 

of Commerce, 472 U.S . 713, 722 (1985) ( 11 [S]tate law controls in 

determining the nature of the legal interest which the taxpayer 

had in the property[;] tax consequences thenceforth are 

dictated by federal law. 11 ) . 

Defendants argue on appeal that the Utah statute permitting a 

future creditor to request a conveyance to be set aside as 

fraudulent, section 25 - 1 - 7 (1953), is unconstitutionally vague. 

The question of the constitutionality of the statute is not listed 

in the pretrial order as a disputed issue. Our review of the 

record does not reveal that defendants raised this argument at the 

district court, and defendants fail to direct us to pertinent 

portions of the record. See Securities & Exch. Comm'n v. Thomas, 

965 F.2d 825, 826-27 (10th Cir. 1992) (in counseled case, court 

would not search the record for the requisite record support). 

Therefore, we decline to address the issue raised for the first 

time on appeal. See Hicks v. Gates Rubber Co., 928 F.2d 966 , 970 

(10th Cir. 1991) . 

We next address defendants' claims that the government failed 

to prove it was a creditor, and that the assessment procedure was 

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deficient. Proof that the government was a creditor was received 

at trial in the form of the assessment notices for the tax years 

in question. See Long v. United States, 972 F.2d 1174, 1181 (10th 

Cir. 1992) (citing cases) (certificate of assessment prima facie 

evidence of valid assessment). Moreover, "a Certificate of 

Assessments and Payments is sufficient evidence that an assessment 

was made in the manner prescribed by [26 U.S.C.] § 6203 and Treas. 

Reg. 301.6203-1." Id. 

The government became a creditor on the dates the tax returns 

were due. 26 U.S . C. § 615l(a) (taxpayer shall pay the tax at the 

time fixed for filing the return); Pan Am. Van Lines v. United 

States, 607 F.2d 1299, 1301 (9th Cir. 1979) (holding tax was due on 

the date the tax return was due); United States v. Thomassen, 610 

F. Supp. 386, 391-92 (D. Neb. 1985) (same); see also Holywell Corp. 

v. Smith, 112 S. Ct. 1021, 1028 ( 1992) ( "No tax liability becomes 

due under § 6151 until the time required for making. 

returns." ) . Therefore, we reject defendants' claims that the 

government was not a creditor and the assessment procedure did not 

comply with statutory requirements. 

Defendants also claim that the liens did not attach to the 

property, primarily because title was transferred to Mrs. Brown's 

name prior to the notices of assessments, and prior to trial. A 

federal tax lien arises upon assessment for unpaid taxes, and 

attaches to all property belonging to the delinquent taxpayer. 

26 u.s.c. §§ 6321 - 6322. When the district court set aside the 

conveyance to Mrs. Brown, Mr. Brown's interest became subject to 

the liens. 

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Defendants next claim that because Mr. Brown was not 

insolvent prior to the conveyance of the business property to Mrs. 

Brown, and because the conveyance did not make him insolvent, Utah 

Code Ann. § 25-6-6 (1989 ) precludes a finding that the conveyance 

was fraudulent . The district court set aside the conveyance of 

the business property pursuant to Utah Code Ann. § 25-1-7 (1953 ) , 

not section 25-1-4 (1953) (currently section 25-6-6 (1989 )) . 

"Utah ' s Fraudulent Conveyance Act, § 25-1-1, et seq., establishes 

several different grounds for setting aside a debtor's transfer of 

property as a fraudulent conveyance. " Butler v. Wilkinson, 740 

P.2d 1244, 1260 (Utah 1987 ) (emphasis added). Actual fraudulent 

intent is required to make a conveyance fraudulent under section 

25-1-7, while a transfer by an insolvent debtor under section 

25-1-4 requires no actual intent. Butler, 740 P. 2d at 1261 . The 

district court's finding that the conveyance was fraudulent under 

section 25-1-7 does not conflict with the separate provisions of 

section 25 - 1 - 4. Therefore, the district court ' s determination 

will not be set aside . 

V. JURY TRIAL 

Finally, defendants maintain they were entitled to a jury 

trial. A defendant in a suit brought by the government for 

collection or recovery of taxes is entitled to a jury trial . 

United States v. Anderson, 584 F.2d 369, 373 (10th Cir. 1978 ) . 

Where the government seeks only to enforce its tax lien, an action 

sounding in equity, no right to a jury arises. United States v. 

Annis, 634 F.2d 1270, 1272 (10th Cir. 1980). Where, as here, the 

government seeks a money judgment and foreclosure of tax liens, 

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the taxpayer is entitled to a jury trial on the money judgment 

claim. McMullin, 948 F.2d at 1190. 

Here, the government's evidence that Mr. Brown was indebted 

for unpaid taxes included the certificates of assessment and Mr. 

Brown's testimony that he alone had provided all of the financial 

support for his family during the tax years in question. 

Defendants presented no countervailing evidence. Under these 

circumstances, even if defendants had been granted a jury on the 

government's legal claims, the district court would have been 

required to direct a verdict on those claims in the government's 

favor. Therefore, any error in denying defendants a jury trial 

was harmless. Id. at 1192. 

All pending motions are DENIED. 

The judgment of the United States District Court for the 

District of Utah is AFFIRMED. The mandate shall issue forthwith. 

Entered for the Court 

Dale E. Saffels 

Senior District Judge 

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