Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-92-09004/USCOURTS-ca10-92-09004-0/pdf.json

Parties Involved:
Conley H. Cavanaugh
Appellant
Commissioner of Internal Revenue
Appellee

Document Text:

FILL D 

United Btatea Court of Appeal! Tenth Circuit 

UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT FEBO 9 1993 

ROBERT L. HOECKER 

CONLEY H. CAVANAUGH, TRANSFEREE, 

Petitioner-Appellant, 

V. 

COMMISSIONER OF INTERNAL REVENUE, 

Respondent-Appellee. 

Clerk . 

No. 92-9004 

T.C. No. 30374-89 

(Petition for Review) 

ORDER AND JUDGMENT* 

Before ANDERSON and EBEL, Circuit Judges, and BRIMMER,** District 

Judge. 

**Honorable Clarence A. 

District Court for the 

designation. 

Brimmer, 

District 

District Judge, United States 

of Wyoming, sitting by 

After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist the determination of this petition for review. See 

Fed. R. App. P. 34(a); 10th Cir. R. 34.1.9. The case is therefore 

ordered submitted without oral argument. 

* This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppel. 10th Cir. R. 

36.3. 

Appellate Case: 92-9004 Document: 010110170320 Date Filed: 02/09/1993 Page: 1 
Petitioner seeks review of the tax court's decision 

establishing his liability as the transferee for the unpaid income 

taxes, additions to tax, and interest as provided by law of his 

sister, Yvonne Cavanaugh. The tax court found that Yvonne 

Cavanaugh transferred property to petitioner with the intent to 

hinder and delay payment to her creditors and that Ms. Cavanaugh 

was left insolvent after the transfer, thereby establishing 

petitioner's liability under 26 U.S.C. § 6901(a) (1) (A) (i). The 

tax court also found that the notice of transferee liability was 

not barred by either the statute of limitations or the equitable 

doctrines of laches and estoppel . We affirm. 

26 U.S.C. § 6901(a} (1) (A) (i) provides that the liability of a 

transferee of property for the taxes of the transferor may be 

assessed and collected in the same manner and subject to the same 

provisions and limitations as in the case of the taxes with 

respect to which the liabilities were incurred. The existence and 

extent of a transferee's liability is determined by state law. 

Commissioner v. Stern, 357 U. S . 39, 45 (1958). 

Pursuant to Colorado law, a conveyance made with the intent 

to hinder, delay, or defraud creditors is a fraudulent conveyance . 

Colo. Rev . Stat . § 38-10-117 (Supp. 1992); Lowell Staats Mining 

Co. v . Pioneer Uravan. Inc., 878 F.2d 1259, 1265 (10th Cir. 1989). 

Lack of intent to defraud creditors will not defeat a suit; it is 

sufficient that the transferor intend "merely to hinder or to 

delay the payment of his creditors. " United States v. Morgan, 554 

F. Supp. 582, 585 (D. Colo. 1982). Further, the questions of 

intent and insolvency are questions of fact, Lowell, 878 F.2d at 

2 

Appellate Case: 92-9004 Document: 010110170320 Date Filed: 02/09/1993 Page: 2 
1265-66, which may be shown by circumstantial evidence. See 

Morgan, 554 F. Supp. at 586. Finally, findings of fact by the tax 

court may not be set aside unless they are clearly erroneous. 

Yates v . Commissioner, 924 F.2d 967, 969 (10th Cir. 1991). 

We have reviewed the tax court record in this case, and we 

have determined that the tax court's findings are not clearly 

erroneous. There is ample basis in the record to support the tax 

court's finding that the transfers were made with the intent to 

hinder or delay creditors and that the transferor was left 

insolvent thereby. 

Petitioner also argues that action against him as transferee 

for Ms. Cavanaugh's 1974, 1975, and 1976 tax deficiencies is 

barred by the one-year statute of limitations set forth in 26 

u.s.c. § 6901(c) (1) .

1 However, if no tax returns for those years 

were filed by Ms. Cavanaugh, the tax may be assessed or a 

collection proceeding brought at any time. See 26 U.S.C. 

§ 6501(c) (3). Ms. Cavanaugh was convicted of willful failure to 

file income tax returns for 1974, 1975, and 1976. This court 

affirmed that conviction. See United States v. Cavanaugh, No. 

82-1147 (10th Cir. Oct. 21, 1982) (per curiam) . Since this court 

has already determined that Ms. Cavanaugh fai led to file income 

tax returns for those years, the tax may be assessed or a 

collection proceeding brought at any time. Therefore, 

1 26 u.s.c. § 6901(c) (1) provides that, in the case of 

l i ability of an initial transferee, the period of limitations 

assessment of liability of a transferee shall be "1 year after 

expiration of the period of limitation for assessment against 

transferor." 

3 

the 

the 

for 

the 

the 

Appellate Case: 92-9004 Document: 010110170320 Date Filed: 02/09/1993 Page: 3 
one-year limitation period does not apply. In addition, we find 

no error in the tax court's finding that respondent met his burden 

by producing certified records which show that no tax returns were 

filed for 1977 and 1978 and that petitioner presented no evidence 

to the contrary. 

Petitioner maintains that respondent is barred by estoppel 

and laches in pursuing this action. We agree with the tax court's 

ruling that respondent is not barred from determining transferee 

liability by either estoppel or laches. See United States v. 

Summerlin, 310 U.S. 414, 416 (1940) (holding that the United States 

is not subject to the defense of laches); Uinta Livestock Corp. v . 

United States, 355 F.2d 761, 766 (10th Cir. 1966) (listing elements 

required for claim of equitable estoppel). 

We find no clear error in the detailed factual findings made 

by the tax court. Therefore, we affirm the tax court's decision 

for substantially the same reasons set forth in its Memorandum 

Findings of Fact and Opinion. 

The decision of the United States Tax Court is AFFIRMED . 

Entered for the Court 

Stephen H. Anderson 

Circuit Judge 

4 

Appellate Case: 92-9004 Document: 010110170320 Date Filed: 02/09/1993 Page: 4