1

 On December 19, 2012, the District Judge entered default judgment against the other two

defendants, CIT Group/Equipment Financing and Celestial Pursuits Trust, Jim D. Welch, Executive

Trustee. Default Judgment [#94].

-1-

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLORADO

Civil Action No. 11-cv-02292-CMA-KLM

USA,

Plaintiff,

v.

JAMES D. WELCH, individually and as Executive Trustee of Celestial Pursuits Trust,

AMRA WELCH, as nominee/alter ego of James D. Welch, and

CIT GROUP/EQUIPMENT FINANCING, INC.,

Defendants.

_______________________________________________________________________

RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE

_______________________________________________________________________

ENTERED BY MAGISTRATE JUDGE KRISTEN L. MIX

This matter is before the Court on Plaintiff’s Motion for Summary Judgment

Against Jim D. Welch and Amra Welch [Docket No. 63; Filed October 3, 2012] (the

“Motion”). On December 26, 2012, Defendants Jim D. Welch (“Defendant Welch”) and

Amra Graff, formerly Amra Welch (“Defendant Graff”) (collectively, “Defendants”)1

 filed a

Response [#95]. On January 11, 2013, Plaintiff filed a Reply [#97]. The Motion has now

been fully briefed. Pursuant to 28 U.S.C. § 636(b)(1) and D.C.COLO.L.Civ.R. 72.1.C., the

Motion has been referred to this Court for recommendation [#67]. Having considered the

pleadings and the docket in this case, the Court is fully advised of the issues. For the

reasons set forth below, the Court respectfully RECOMMENDS that Plaintiff’s Motion [#63]

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 1 of 36
-2-

be GRANTED IN PART and DENIED without prejudice IN PART.

I. Statement of the Case and the Parties’ Arguments

A. Background

The above-captioned lawsuit was brought by Plaintiff United States of America on

August 31, 2011 [#1]. The purpose of the lawsuit was to recover unpaid taxes allegedly

owed by Defendant Welch to Plaintiff. Specifically, Plaintiff sought “[1] to reduce to

judgment the outstanding federal tax liabilities assessed against James D. Welch and [2]

to foreclose federal tax liens against a parcel of real property located in Colorado . . . .”

Compl. [#1] ¶ 1. The property at issue is referred to throughout this Recommendation and

the parties’ pleadings as the “Real Property” and is located at “Lot 2, in Black Forest

Square Filing No. 1, in El Paso County, Colorado, according to the plat thereof recorded

August 28, 1998 at Reception No. 98123605.” Id. ¶ 10; Routledge Ex. N, Warranty Deed

[#65-14]; Routledge Ex. O, Quitclaim Deed [#65-15]. The Complaint alleged that

Defendant Welch bought the property with his own funds, transferred title to Celestial

Pursuits Trust (the “Trust”), of which he was sole and Executive Trustee, in 1999, and then

transferred title from the Trust to his daughter, Defendant Graff. Compl. [#1] ¶¶ 11-13, 21;

see Decl. of Anthony Roybal (“Roybal Decl.”) [#64] ¶ 7; Routledge Ex. O, Quitclaim Deed

[#65-15]. 

B. Tax Liability

On May 25, 2000, the Internal Revenue Service (“IRS”) received a Form 1040, U.S.

Individual Income Tax Return, filed by Defendant Welch for tax year 1998. Routledge Ex.

C, Form 1040 for 1998 [#65-3]. On the Form 1040, Defendant Welch claimed that he had

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 2 of 36
-3-

no income for the tax year of 1998. Id. Plaintiff enclosed with the 1998 Form 1040 a twopage memorandum challenging the authority of the IRS to collect taxes. Id.; Watson Ex.

A, Dep. of Welch [#66-1] at 30-33. According to evidence entered by Plaintiff, Defendant

Welch failed to report three items of income on his 1998 tax return: $1,722,217 in gain from

the sale of stock; $6,000 in nonemployee compensation; and $10,162 in taxable interest.

Watson Ex. A, Dep. of Welch [#66-1] at 12-16; Routledge Ex. D, Income Tax Examination

Charges [#65-4] at 2.

On May 25, 2000, the IRS also received a Form 1040, U.S. Individual Income Tax

Return filed by Defendant Welch for 1999. Routledge Ex. F, Form 1040 for 1999 [#65-6].

Defendant Welch again claimed that he had no income and enclosed a two-page

memorandum challenging the authority of the IRS to collect taxes. Id.; Watson Ex. A, Dep.

of Welch [#66-1] at 33-35. According to Plaintiff, Defendant Welch failed to report income

on his 1999 tax return: specifically, $4,374,047 in income from stock sales, as well as

$5,058 in taxable interest. Motion [#63] at 4 (citing Watson Ex. A, Dep. of Welch [#66-1]

at 17-21). 

The Forms 1040, together with their attachments challenging the authority of the IRS

to collect taxes, were referred to the IRS Penalty Screening Committee for consideration

of whether Defendant Welch should be assessed a penalty for filing a fraudulent return.

Routledge Decl. [#65] ¶¶ 13-18. On July 10, 2000, and August 25, 2000, the IRS sent

Defendant Welch letters informing him that the Forms 1040 submitted for tax years 1998

and 1999 were frivolous and advising Defendant Welch that if he did not file corrected

returns, a fraudulent return penalty would be assessed under 26 U.S.C. § 6702. Routledge

Decl. [#65] ¶¶ 15-17; Routledge Ex. J, July 10th Letter 3176 [#65-10] at 2; Routledge Ex.

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 3 of 36
2

 Roybal does not discuss how much income Welch received from this sale.

-4-

K, August 25th Letter 3176 (1999 penalties) [#65-11] at 2; Routledge Ex. L, August 25th

Letter 3176 (1998 penalties) [#65-12] at 2. On August 30, 2001, when Defendant Welch

failed to file corrected returns for either tax year, the IRS Penalty Screening Committee

approved the imposition of frivolous return penalties. Routledge Decl. [#65] ¶ 18;

Routledge Ex. M, Penalty Screening Committee Case Approval Record [#65-13];

Routledge Decl. [#65] ¶¶ 13-14; Routledge Ex. H, Certificate of Assessments, Payments,

and Other Specified Matters for 1998 Civil Penalty ("Form 4340 for 1998 Penalties") [#65-

8]; Routledge Ex. I, Certificate of Assessments, Payments, and Other Specified Matters for

1999 Civil Penalty (“Form 4340 for 1999 Penalties”) [#65-9].

The IRS also assessed federal income tax liabilities against Welch for tax years

1998 and 1999. Routledge Decl. [#65] ¶¶ 7-18; Routledge Ex. B, Certificate of

Assessments, Payments, and Other Specified Matters for 1998 Income Tax Return (“Form

4340 for 1998 Liability”) [#65-2]; Routledge Ex. E, Certificate of Assessments, Payments,

and Other Specified Matters for 1999 Income Tax Return (“Form 4340 for 1999 Liability”)

[#65-5]. On August 13, 2003, a Notice of Deficiency concerning these tax liabilities was

sent to Defendant Welch by certified mail. Routledge Decl. [#65] ¶ 12; Routledge Ex. G,

Notice of Deficiency [#65-8]. While attempting collection of these liabilities, on May 20,

2008, IRS Revenue Officer Anthony Roybal (“Roybal”) interviewed Defendant Welch.

Roybal Decl. [#64] ¶¶ 3-4. Roybal asserts that during that interview, Defendant Welch

admitted to selling substantial amounts of stock in 1999 as part of the settlement of his

divorce from his ex-wife.2

 Id. Notably, Defendant Welch reported no income for 1999.

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 4 of 36
-5-

Routledge Ex. F, Form 1040 for 1999 [#65-6]. 

Plaintiff seeks to reduce to judgment federal income tax and frivolous return

penalties assessed against Defendant Welch for the years 1998 and 1999. Motion [#63]

at 8. Plaintiff argues that Forms 4340 are an appropriate means of establishing a valid

assessment, and that the assessments of tax and the assessments of penalties reflected

on these Certificates are entitled to a presumption of validity, establishing the

government’s prima facie case for the purposes of summary judgment. Id. at 9 (citing Long

v. United States, 972 F.2d 1174, 1181 (10th Cir. 1992)). Plaintiff contends that these forms

show that the federal tax liabilities were properly assessed against Defendant Welch, that

the notices and demand for payment were properly sent, and that Defendant Welch is

presumptively liable for the unpaid taxes, interest, penalties, and other statutory additions

identified thereon. Id. (citing March v. IRS, 335 F.3d 1186, 1188 (10th Cir. 2003); Guthrie

v. Sawyer, 970 F.2d 733, 737 (10th Cir. 1992); Hughes v. United States, 953 F.2d 531, 540

(9th Cir. 1992)). Defendant Welch complains that because the Forms 4340 submitted by

the United States were not Forms 23(c) signed under penalty of perjury, as he asserts is

required under 26 U.S.C. § 6065, the Court may not rely on them to establish the

presumption that a valid assessment occurred. Response [#95] ¶¶ 28,57.

Plaintiff next contends that a federal tax lien has been in effect since the liabilities

were assessed against Defendant Welch, and that because Defendant Welch has not paid

his federal tax liabilities, the United States may foreclose those tax liens on any property

in which Defendant Welch has an interest, including the Real Property discussed below.

Motion [#63] at 15 (citing 26 U.S.C. §§ 6321, 6322; Drye v. United States., 528 U.S. 49, 55

(1999)).

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 5 of 36
3

 In this matter, Plaintiff argues as an alternative theory that this was a fraudulent transfer.

Motion [#63] at 23. 

-6-

B. Transfer of the Real Property

On February 19, 1999, a Warranty Deed was recorded transferring title to the Real

Property from Samuel’s Custom Homes, Inc. to Celestial Pursuits Trust. Routledge Decl.

[#65] ¶ 19; Compl. [#1] ¶ 1. According to Plaintiff, Defendant Welch bought the Real

Property with his own funds, transferred title to Celestial Pursuits Trust, of which he was

Executive Trustee, and in 1999 then transferred title from the Trust to his daughter,

Defendant Graff. See Decl. Roybal [#64] ¶ 7; Routledge Ex. O, Quitclaim Deed [#65-15].

In his interview with the IRS, Defendant Welch admitted that although the Real

Property was titled in the name of the Trust, it was purchased with Defendant Welch’s

personal funds. Roybal Decl. [#64] ¶ 7. Defendant Welch explained that the Trust was

determined to be a bogus trust by the special master in his divorce case. Id. ¶ 5.

Defendant Welch admitted to Roybal that setting up the Trust was the worst thing he had

ever done and that he should not have done so. Id. ¶¶ 5 – 6. He also admitted that he was

ordered by the divorce court to liquidate all the assets of the trust and pay a portion of the

proceeds to his spouse pursuant to their divorce. Id. 

By quitclaim deed recorded December 15, 2003, Defendant Welch, as Trustee

of Celestial Pursuits Trust, transferred the Real Property to his daughter, Defendant Graff.3

Routledge Decl. [#65] ¶ 20; Routledge Ex. O, Quitclaim Deed [#65-15]. Defendant Welch

was sent a Notice of Deficiency by the IRS on August 12, 2003. Id. This document notified

him that the IRS intended to assess federal income tax liabilities against him for both 1998

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 6 of 36
-7-

and 1999, unless he filed a petition with the tax court within 90 days. Id. About four

months later, Defendant Welch transferred the Real Property to his daughter by a Quitclaim

Deed “in consideration of the sum of ten dollars and other consideration of value[.]”

Routledge Ex. O, Quitclaim Deed [#65-15]. During its assessment, the IRS was unable to

find any assets of Defendant Welch titled in his name. Roybal Decl. [#64] ¶ 8.

Plaintiff asserts that since initially purchasing the Real Property, Defendant Welch

has “used it as the personal residence for himself and, at times, his mother, son, and

grandchildren.” Motion [#63] at 6. Defendant Welch explicitly admits only that he has a son

and two grandchildren living at the Real Property. Watson Ex. A, Dep. of Welch [#66-1] at

26. Defendant Graff admits that she lived at the Real Property in 2003, and that her

grandmother, Louann Welch, resided there at the time of the deposition. Watson Ex. B,

Dep. of Graff [#66-2] at 13-14. Both Defendants assert the Fifth Amendment when asked

if or when Defendant Welch lived at the Real Property. Watson Ex. A, Dep. of Welch [#66-

1] at 24; Watson Ex. B, Dep. of Graff [#66-2] at 11. Although Defendants remain silent on

the issue, Plaintiff asserts that Defendant Graff “has placed no restrictions on the use of the

Real Property [by Defendant Welch.]” Motion [#63] at 6. 

Plaintiff contends that federal tax liens attach “not only to the property and rights to

property owned by the delinquent taxpayer, but also property held by a third party if it is

determined that the third party is holding the property as a nominee or alter ego of the

delinquent taxpayer.” Spotts v. United States, 429 F.3d 248, 251 (6th Cir. 2005) (citing

G.M. Leasing Corp. v. United States, 429 U.S. 338 (1977)). Plaintiff also argues that the

level of control maintained by Defendant Welch over the Real Property shows that

Defendant Graff is a nominee of Defendant Welch, that Defendant Welch is the true

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 7 of 36
-8-

beneficial owner of the Real Property, and that the interest is attachable by the federal tax

liens. Motion [#63] at 18. 

Plaintiff argues in the alternative that even if it were not the case that Defendant

Graff holds title to the Real Property as a nominee of Defendant Welch, the transfer of the

Real Property to Defendant Graff was a fraudulent conveyance under the Colorado Uniform

Fraudulent Conveyance Act. Id. at 19; Colo. Rev. Stat. § 38-8-105(1). Plaintiff adds that

even if this Court were to determine that Welch did not possess the actual intent to defraud

the United States through the transfer of the Real Property, those transfers are nonetheless

fraudulent under Colo. Rev. Stat. § 38-8-106(1). 

Defendants provide no information refuting the factual allegations in Plaintiff’s Motion

concerning the Real Property in this case, and instead simply assert that Defendant Welch

“has no interest in the property. . . [that i]t was never intended to be his, never has been

his, and has never been treated as his.” Response [#95] ¶ 62. Defendants instead focus

on “three main issues.” Id. ¶ 2. First, the Response complains that Plaintiff lacks authority

to bring this action, as Plaintiff presented no evidence to confirm that this case is brought

at the direction of the Attorney General and has been authorized by the IRS Chief Counsel.

Id. Second, Defendants argue that Plaintiff seeks to declare Defendant Welch as a

taxpayer and hold him liable as such without supporting evidence. Id. ¶ 10. Third, as

discussed above, Defendants argue that Plaintiff’s failure to provide Defendants with a

signed Form 23C defeats the presumption of a valid tax assessment and constitutes a

violation of due process. Id. ¶¶ 20, 57, 58.

II. Standard of Review

A. Summary Judgment

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 8 of 36
-9-

Summary judgment is proper when the record before the court “show[s] that there

is no genuine issue as to any material fact and that the movant is entitled to judgment as

a matter of law.” Fed. R. Civ. P. 56(c). A dispute is “genuine” if the outcome could be

decided in favor of either party. Farthing v. City of Shawnee, 39 F.3d 1131, 1135 (10th Cir.

1994). A fact is “material” if it could reasonably affect the outcome of the case. Anderson

v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). 

Where the movant bears the ultimate burden of proof at trial, it must submit evidence

to establish every element of its claims. In re Ribozyme Pharm. Inc. Sec. Litig., 209 F.

Supp. 2d 1106, 1111 (D. Colo. 2002). Once the Motion has been properly supported, the

burden shifts to the non-movant to show the existence of a genuine dispute of a material

issue by going beyond the allegations in its pleading and providing “specific facts showing

there is a genuine issue for trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). To

satisfy its burden of providing specific facts, the nonmoving party must tender affidavits or

other competent evidence. Concrete Works, Inc. v. City & County of Denver, 36 F.3d 1513,

1517 (10th Cir. 1994). The factual record and inferences therefrom are viewed in the light

most favorable to the nonmoving party. Byers v. City of Albuquerque, 150 F.3d 1271, 1274

(10th Cir. 1998). However, the Court is not obligated to consider conclusory statements

or testimony based on conjecture, subjective belief, or inadmissible evidence. Rice v.

United States, 166 F.3d 1088, 1092 (10th Cir. 1999). 

B. Fifth Amendment Privilege and Summary Judgment

A litigant in a civil action may unquestionably assert a Fifth Amendment privilege and

refuse to reveal information properly subject to the privilege. See Mid-America's Process

Serv. v. Ellison, 767 F.2d 684, 686 (10th Cir. 1985); see also United States v. Kordel, 397

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 9 of 36
-10-

U.S. 1, 7-8 (1970). However, a litigant asserting the privilege may have to accept certain

bad consequences that flow from that action. Baxter v. Palmigiano, 425 U.S. 308, 318-19

(1976). In particular, adverse inferences may be drawn against a party who refuses to

testify in response to probative evidence offered against him. Mitchell v. United States, 526

U.S. 314, 327 (1999). “[A]s Mr. Justice Brandeis declared, speaking for a unanimous court

. . . ‘[s]ilence is often evidence of the most persuasive character.’” Baxter, 425 U.S. at 319

(quoting United States ex rel. Bilokumsky v. Tod, 263 U.S. 149, 153-154 (1923)). The rule

that adverse inferences may be drawn from Fifth Amendment silence in civil proceedings

has been widely recognized by the circuit courts of appeals, including the Tenth Circuit, in

the years since Baxter was decided. See, e.g., United States v. $148,840.00 in U.S.

Currency, 521 F.3d 1268, 1274 (10th Cir. 2008) ("[a] party who asserts the privilege against

self-incrimination must bear the consequence of lack of evidence."); Daniels v. Pipefitters'

Ass'n Local Union No. 597, 983 F.2d 800, 801-02 (7th Cir. 1993); Koester v. American

Republic Investments, Inc., 11 F.3d 818, 823-24 (8th Cir. 1993); RAD Services, Inc. v.

Aetna Cas. & Sur. Co., 808 F.2d 271, 274-75, 277 (3d Cir. 1986); Brink's, Inc. v. City of

New York, 717 F.2d 700 (2d Cir. 1983); Hoover v. Knight, 678 F.2d 578, 581-82 (5th Cir.

1982). 

 Fifth Amendment privilege cannot be converted into “a sword whereby a claimant

asserting the privilege would be freed from adducing proof in support of a burden which

would otherwise have been his[,]” and thus, a party may not avoid his burden on a motion

for summary judgment by standing on a Fifth Amendment privilege. United States v.

Rylander, 460 U.S. 752, 758 (1983); see Chaffin, Inc. v. Wallain, 689 P.2d 684, 688-89

(Colo. Ct. App.1984) (holding that adverse inferences were permissible in the face of

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 10 of 36
-11-

defendants' repeated invocation of Fifth Amendment privilege in discovery responses); see

also United States v. $64,765.00 in U.S. Currency, 786 F. Supp. 906, 913 (D. Or. 1991).

Therefore, “the claim of privilege is not a substitute for relevant evidence.” Rylander, 460

U.S. at 761. However, in ruling on motions for summary judgment, all inferences are

generally drawn in favor of the non-movant. Byers, 150 F.3d at 1274. Therefore, where

there is any doubt that Plaintiff has clearly met its summary judgment burden, this Court

hesitates to drawn an adverse inference against one who claims the Fifth Amendment

privilege at the summary judgment stage. See In re Marrama, 445 F.3d 518, 522 (1st Cir.

2006); see also Mulero-Rodríguez v. Ponte, Inc., 98 F.3d 670, 678 (1st Cir. 1996)

(explaining that a party's invocation of the Fifth Amendment in discovery does not alter the

requirement that inferences for summary judgment be drawn in favor of non-movant);

accord LaSalle Bank Lake View v. Seguban, 54 F.3d 387, 390 (7th Cir. 1995) (“[E]ven in

a civil case a judgment imposing liability cannot rest solely upon a privileged refusal to

admit or deny at the pleading stage.”).

III. Analysis

The issue in this case is whether the United States is entitled to foreclose its federal

tax lien on the Real Property to satisfy Defendant Welch’s outstanding tax liabilities.

Because the United States is the Plaintiff in this suit, it has the ultimate burden of

demonstrating that foreclosure is appropriate. See In re Ribozyme Pharms., 209 F. Supp.

2d at 1111. Plaintiff must establish that (1) it has a valid federal tax lien, and (2) that the

taxpayer has an interest in the property that the lien seeks to foreclose. See United States

v. Janis, 428 U.S. 433, 440-41 (1976); United States v. Miller Bros. Const. Co., 505 F.2d

1031, 1036 (10th Cir. 1974). 

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 11 of 36
-12-

Plaintiff moves for summary judgment in its favor, asking the Court (1) to reduce to

judgment federal tax assessments against Defendant Welch for tax years 1998 and 1999,

and (2) to foreclose those tax liens against the Real Property. Motion [#63] at 1. In support

of the Motion, Plaintiff first contends that it has a valid federal tax lien because it has

conclusively established tax liabilities with presumptively valid tax assessments. Id. at 8-

12. Plaintiff next argues that it is entitled to foreclose its tax liens against the Real Property

at issue in this suit either because it is held by a nominee of Defendant Welch or because

it was fraudulently conveyed in an attempt to avoid tax liability. Id. at 14-24. 

A. Whether the United States Has the Authority to Bring Suit

 Defendants’ Response complains that Plaintiff lacks authority to bring this action

because Plaintiff presented no evidence to confirm that this case was authorized by the IRS

Chief Counsel and brought at the direction of the Attorney General. Response [#95] ¶ 62.

The Court addresses this preliminary argument first, finding that Plaintiff has presented

sufficient evidence to confirm its authority to bring this suit.

The authority to bring the suit was properly pleaded in the Complaint. Compl. [#1]

¶ 2. Unless the issue of authority is specifically challenged, that pleading is sufficient to

establish jurisdiction. United States v. Twenty-Two Firearms, 463 F. Supp. 730 (D. Colo.

1979). Here, Defendants challenged that authority, and Plaintiff has responded with

evidence sufficient to show that the United States has complied with the requirements of

26 U.S.C. § 7410. 

Section 516 of Title 28 of the United States Code provides that "the conduct of

litigation in which the United States, an agency, or officer thereof is a party, or is interested

. . . is reserved to officers of the Department of Justice . . . ." See also United States v.

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 12 of 36
-13-

Plesinski, 912 F.2d 1033, 1038 (9th Cir. 1990) (indicating that either the Department of

Justice or United States Attorneys can represent the United States in litigation), cert.

denied, 499 U.S. 919 (1991). The Department of Justice, under the direction of the

Attorney General, has promulgated regulations authorizing the Tax Division to represent

the United States in various tax matters. See 28 C.F.R. § 0.70.

By letter dated December 16, 2009, the Office of Chief Counsel of the IRS, a

delegate of the Secretary, authorized and requested this suit under 26 U.S.C. § 7401. See

Second Declaration of Rick Watson (“Watson Decl. (2)”), Ex. A, Letter from Office of Chief

Counsel of the Internal Revenue Service [#97-2]. Subsequently, the Attorney General of

the United States directed that this action be commenced, and the suit was therefore filed.

See Watson Decl. (2), Ex. 3, Letter from DOJ [#97-3]. Plaintiff included with its Reply a

copy of the letter dated August 31, 2011, indicating that [1] the Department of Justice was

authorized and requested to commence this action against the Defendant and that [2] the

Attorney General of the United States directed that this action be commenced. See id.

As the authorization letter shows [#97-2] , this action was brought at the request and

with the authorization of the Chief Counsel of the IRS, a delegate of the Secretary of the

Treasury. The production of the authorization letter is sufficient to show that the United

States complied with the § 7401 requirement. Palmer v. Internal Revenue Service, 116

F.3d 1309, 1311 (9th Cir. 1997); United States v. Twenty-Eight “Mighty Payloader”

Coin-Operated Gaming Devices, 623 F.2d 510, 513 n.2 (8th Cir. 1980). As the letter from

the Principal Deputy Assistant Attorney General [#97-3] shows, the Attorney General of the

United States directed that this action be commenced. Thus, the United States has

complied with the applicable procedural requirements, and in the absence of any evidence

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 13 of 36
-14-

that would rebut the presumption of regularity that attaches to the actions of public officers,

the Court has jurisdiction over this matter. See Palmer, 116 F.3d at 1311 (citing United

States v. Chem. Found., 272 U.S. 1, 14-15 (1926)). Defendants have presented no such

evidence to rebut this presumption, and the Court finds that Plaintiff has established

authority to bring the present suit to this Court.

B. Whether There Is a Valid Federal Tax Lien

Pursuant to 26 U.S.C. § 6321, a tax lien arises when (1) the taxpayer is found to be

liable to pay any tax; (2) a demand has been made for such payment; and (3) the taxpayer

has refused to pay. 

1. Liability as Taxpayer

Defendant Welch, under the heading of “No Liability in Evidence,” contests his

liability to pay the taxes at issue in this case. Response [#95] at 3. This section of

Defendants’ Response and attached exhibits consists solely of standard tax protestor

arguments that this Court has previously rejected and that the IRS has deemed “frivolous.”

See Recommendation Of United States Magistrate Judge [#60] (adopted by the District

Judge at [#68]); see also The Truth About Frivolous Tax Arguments, Internal Revenue

Service, 44 (Feb. 16, 2012), http://www.irs.gov/pub/irs-utl/friv_tax.pdf (last viewed on Feb.

21, 2013). 

With respect to Defendants’ argument that Plaintiff has failed to show that Defendant

Welch is a “taxpayer,” the Internal Revenue Code defines “taxpayer” at § 7701(a)(14) as

any person subject to any internal revenue tax, and § 7701(a)(1) defines “person” to

include an individual, trust, estate, partnership, or corporation. Defendant Welch argued

that this definition should not include him because he “does NOT hold a public office, nor

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 14 of 36
-15-

is he connected with a ‘trade or business’ within the United States as ‘trade or business’

is defined in the code at 26 U.S.C. §7701(a)(26).” Response [#95] ¶ 14. Section

7701(a)(26) does note that the term “trade or business” includes positions in public office.

However, 26 U.S.C. §7701(c) states that the use of the word ‘includes’ “shall not be

deemed to exclude other things otherwise within the meaning of the term defined.” Thus,

the word “includes” as used in the definition of “trade or business” is a term of enlargement,

not of limitation. See United States v. Latham, 754 F.2d 747, 750 (7th Cir. 1985) (holding

that “[i]t is obvious within the context of [the law that] the word ‘includes’ is a term of

enlargement not of limitation, and the reference to certain entities or categories is not

intended to exclude all others.”); see also Biermann v. Commissioner, 769 F.2d 707, 708

(11th Cir. 1985), reh’g denied, 775 F.2d 304 (11th Cir. 1985) (holding that the claim that

Biermann was not “a person liable for taxes” was “patently frivolous” and imposing

penalties). 

Every citizen’s responsibility to pay taxes is well settled. See Helvering v. Mitchell,

303 U.S. 391, 399 (1938); United States v. Tedder, 787 F.2d 540, 542 (10th Cir. 1986);

Abell v. Sothen, 214 Fed. App’x 743, 757 (D. Colo. 2007). Defendants have utterly failed

to offer evidence suggesting Defendant Welch should be exempt from that rule, and may

not avoid this burden by standing on a Fifth Amendment privilege. See Rylander, 460 U.S.

at 758 (holding that Fifth Amendment privilege cannot be used as "a sword whereby a

claimant asserting the privilege would be freed from adducing proof in support of a burden

which would otherwise have been his."); $64,765.00 in U.S. Currency, 786 F. Supp. at 913.

As such, Defendants’ arguments provide no basis for denial of summary judgment.

2. Demand and Failure to Pay

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 15 of 36
-16-

In this case, there is no dispute that Defendant Welch received demands for the tax

liability in question. Motion [#63] ¶¶ 8,11; Routledge Decl., Ex. G. Notice of Deficiency

[#65-7], Routledge Ex. J, July 10th Letter 3176 [#65-10] at 2; Routledge Ex. K, August 25th

Letter 3176 (1999 penalties) [#65-10] at 2; Routledge Ex. L, July 10th Letter 3176 (1998

penalties) [#65-10] at 2; Routledge Ex. B, Form 4340 for 1998 Liability [#65-2]; Routledge

Ex. E, Form 4340 for 1999 Liability [#65-5]. Defendant Welch received five Forms 668 that

included notice of each necessary assessment date for both Defendant Welch’s § 1040

liabilities and his § 6702 penalties. Response Ex. 2, 668(y) Forms [#95-2]. There is also

no dispute that Defendant Welch has not paid the requested tax liability. The contention

between the parties is instead whether these demands arose from a procedurally valid tax

assessment against Defendant Welch. 

A "federal tax lien is perfected upon assessment and no further action need be

taken." United States v. Novotny, 90 A.F.T.R.2d (RIA) 2002-5684, 2002-5695 (D. Colo.

2002) (citing United States v. Vermont, 377 U.S. 351, 352 (1964)). Further, "[a]n

assessment of tax as well as an assessment for failure to file tax returns and make

estimated tax payments are entitled to a presumption of validity." Id. at 2002-5694

(citations omitted). Courts have repeatedly held that a Certificate of Assessments is

sufficient evidence that tax assessments were properly made, and that these certificates

may be relied upon in ruling on a motion for summary judgment. See, e.g., Long v. United

States, 972 F.2d 1174, 1181 (10th Cir. 1992); United States v. Chila, 871 F.2d 1015, 1017

(11th Cir. 1989); United States v. Miller, 318 F.2d 637, 639 (7th Cir. 1963); see also United

States v. Nuttall, 713 F. Supp. 132, 135 (D. Del. 1989) aff'd, 893 F.2d 1332 (3rd Cir. 1989)

(finding that Forms 4340 establish government's prima facie case that assessment is valid

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 16 of 36
-17-

for purposes of summary judgment); see also Nestor v. Commissioner, 118 T.C. 162 (2002)

(holding that it was not an abuse of discretion for the Appeals Officer to use Form 4340 to

verify the assessment). In support of this Motion, Plaintiff has submitted Forms 4340,

Certificates of Assessments, Payments and Other Specified Matters, pertaining to

Defendant Welch’s federal tax liabilities for each tax year at issue. Routledge Ex. B, Form

4340 for 1998 Liability [#65-2]; Routledge Ex. E, Form 4340 for 1999 Liability [#65-5].

Plaintiff has also submitted Forms 4340 for Defendant Welch’s civil penalty liabilities for

filing fraudulent and frivolous tax returns. Routledge Ex. H, Form 4340 for 1998 Penalties

[#65-8]; Routledge Ex. I, Form 4340 for 1999 Penalties [#65-9]. Thus, Plaintiff establishes

a presumption of a valid assessment.

Because these assessments are given a presumption of correctness, the burden

now shifts to Defendants to submit admissible evidence to rebut that presumption.

Novotny, 90 A.F.T.R.2d at 2002-5694. While Defendants challenge this presumption under

one large heading alleging “Violation of Defendants [sic] Right to Due Process,” the Court

isolates and separately addresses Defendants’ two identifiable arguments regarding the

procedural invalidity of the assessments.

a. Lack of Signature

In an attempt to rebut the presumption of valid assessment, Defendants first argue

that every document required by the Internal Revenue Code must be signed under penalty

of perjury, pursuant to 26 U.S.C. § 6065. Response [#95] ¶¶ 18, 30. This argument is

easily dismissed. 26 U.S.C. § 6323(f)(3) provides that “[t]he form and content of the notice

[of a lien imposed by § 6321] shall be prescribed by the Secretary [, and that s]uch notice

shall be valid notwithstanding any other provision of law regarding the form or content of

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 17 of 36
-18-

a notice of lien.” 26 U.S.C. 6323(f)(3) (emphasis added). Accompanying regulations at 26

C.F.R. § 301.6323(f) provide that the notice of federal tax lien must be filed on a Form 668,

Notice of Federal Tax Lien Under Internal Revenue Laws, and must identify the taxpayer,

the tax liability giving rise to the lien, and the date the assessment arose. 26 C.F.R. §

301.6323(f). The regulation also provides that “[s]uch notice is valid notwithstanding any

other provision of law regarding the form or content of a notice of lien.” 26 C.F.R. §§

301.6323(f)-1(d) (emphasis added.

Defendant Welch admits to having received these Forms 668, and notably includes

each of the five forms no less that five separate times in attachments to Defendants’

Response. See Response Ex. 2, 668(y) Forms [#95-2], Response Ex. 5, Identical Copies

of 668(y) Forms [#95-5]; Response Ex. 6, Feb. 27, 2012 FOIA Request [#95-6] at 4-8;

Response Ex. 7, Subpoena to Produce Documents for Maureen Green [#95-7] at 4-8;

Response Ex. 8, Subpoena to Produce Documents for Sally Kilpatrick [#95-8] at 4-8. Each

Notice of Federal Tax Lien includes what kind of tax has been assessed (a), the tax period

for which it was assessed (b), a date of assessment (d), and the unpaid balance of said

assessment (f). Response Ex. 2, 668(y) Forms [#95-2]. According to 26 C.F.R.

301.6323(f)-1(d), these forms constitute valid notice of a federal lien, regardless of whether

or not they bear the signature of the Secretary of the Treasury.

Tax assessments are formally recorded on a record of assessment. 26 U.S.C. §

6203. In order to support a valid assessment, the summary record of assessment must

“provide identification of the taxpayer, the character of the liability assessed, the taxable

period, if applicable, and the amount of the assessment;” the date of the assessment is the

date the summary record is signed. 62 C.F.R. § 301.6203-1. The Court can identify no

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 18 of 36
-19-

statutory or regulatory requirement mandating that, to be valid, a notice of federal tax lien

must be signed by anyone or, if it is signed, that it must be signed by the Secretary of the

Treasury. The Truth About Frivolous Tax Arguments, Internal Revenue Service, 44 (Feb.

16, 2012), http://www.irs.gov/pub/irs-utl/friv_tax.pdf (last viewed on Feb. 21, 2013).

Similarly, the Court can identify no requirement in the statute or regulation that the

Secretary of the Treasury personally sign an assessment. Id. at 42. As such, Defendants’

arguments under 26 U.S.C. § 6065 fail to rebut the presumption of a valid assessment.

b. Absence of Form 23C

Plaintiff seems to understand Defendants’ next due process argument as relying on

Huff v. United States, 10 F.3d 1440 (9th Cir. 1993), to support a claim that the Forms 4340

submitted by Plaintiff may not be relied upon by the Court to establish a valid assessment

as they do not contain a “23C” assessment date. Reply [#97] at 7. However, while

Defendants cite Huff, they do so to argue that “there must be a proper procedural

assessment” in the form of a separate Form 23C. Response [#95] ¶ 28. Defendants

contend that the government’s failure to produce this form, despite Defendants’ repeated

requests, creates a “genuine issue of material fact as to whether the IRS has complied with

the requirements of § 6203.” Id. ¶ 57. 

The IRS has repeatedly refuted the argument that before the IRS may collect

overdue taxes, the IRS must provide taxpayers with a summary record of assessment

made on a Form 23-C or on another particular form. See Rev. Rul. 2007-21, 2007-1 C.B.

865; see also The Truth About Frivolous Tax Arguments, Internal Revenue Service, 42

(Feb. 16, 2012) http://www.irs.gov/pub/irs-utl/friv_tax.pdf (last reviewed on Feb. 21, 2013).

In an Internal Revenue Bulletin published on April 2, 2007, the IRS addressed this very

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 19 of 36
-20-

argument:

[A]lthough an assessment is recorded on a summary record of assessment,

such as the Form 23C . . . there is no legal requirement that a summary

record of assessment be provided to a taxpayer before the Service may

proceed with collection activity. Further, if a taxpayer requests proof that an

assessment was made, the Service is not required to provide any particular

form or information in any particular format to the taxpayer so long as the

Service provides the information required by Treasury Regulation §

301.6203-1 to the taxpayer. Any position to the contrary has no merit and is

frivolous. 

Rev. Rul. 2007-21, 2007-1 C.B. 865 (emphasis added). In Nestor, 118 T.C. at 166, the tax

court held that the petitioner was not entitled to production of Form 23C at his collection

due process hearing, and that it was not an abuse of discretion for the Appeals Officer to

use Form 4340 to verify the assessment, for purposes of section 6330(c)(1). Similarly, in

Powell v. Commissioner, T.C. Memo. 2009-174, 98 T.C.M. (CCH) 56, *6 (2009), the court

awarded a $25,000 penalty against the petitioner for frivolously asserting that the

respondent was obligated to produce a Form 23C where, just as Defendant Welch has,

petitioner had received notices of deficiency. 

To support a valid assessment, a summary record of assessment must identify the

taxpayer, the character of the liability, the taxable period, and the amount of the

assessment. 62 C.F.R. § 301.6203-1. In support of this Motion, Plaintiff has submitted

Forms 4340 pertaining to Defendant Welch’s federal tax liabilities and civil penalties for

each of the tax years at issue. Routledge Ex. B, Form 4340 for 1998 Liability [#65-2];

Routledge Ex. E, Form 4340 for 1999 Liability [#65-5]; Routledge Ex. H, Form 4340 for

1998 Penalties [#65-8]; Routledge Ex. I, Form 4340 for 1999 Penalties [#65-9]. Forms

4340 are generated under seal and signed by an authorized delegate of the Secretary of

the Treasury, and are thus self-authenticating under Federal Rule of Evidence 902(1). Fed.

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 20 of 36
-21-

R. Evid. 902(1). Forms 4340 are also admissible into evidence as a trustworthy public

record. Fed. R. Evid. 803(8). Though the Forms 4340 in this case use the term

“assessment date” rather than “23C date,” the Forms 4340 plainly sets forth the

assessment dates and are sufficient to support summary judgment. See, e.g., Long, 972

F.2d at 1181; Chila, 871 F.2d at 1017; Miller, 318 F.2d at 639; Routledge Ex. B, Form 4340

for 1998 Liability [#65-2]; Routledge Ex. E, Form 4340 for 1999 Liability [#65-5]; Routledge

Ex. H, Form 4340 for 1998 Penalties [#65-8]; Routledge Ex. I, Form 4340 for 1999

Penalties [#65-9]. There is no additional requirement for the IRS to produce a separate

Form 23(c).

Defendants’ arguments that due process has been violated are demonstrably

without merit. When Plaintiff supports an assessment of tax liability with Certificates of

Assessments and Payments, these certificates provide presumptive proof of a valid

assessment. See, e.g., Long, 972 F.2d at 1181; Chila, 871 F.2d at 1017; Miller, 318 F.2d

at 639; Egbert v. United States, 752 F. Supp. 1010, 1019 (D. Wyo. 1990) aff’d 940 F.2d

1539, cert. denied 502 U.S. 1016; see also Nuttall, 713 F. Supp. at 135; see also Nestor,

118 T.C. at 166. It is settled law in this Circuit that for purposes of granting summary

judgment, a Certificate of Assessments and Payments is sufficient evidence that an

assessment was made in the manner prescribed by § 6203 and C.F.R. § 301.6203-1. See,

e.g., Long, 972 F.2d at 1181; see also James v. United States, 970 F.2d 750, 755 (10th Cir.

1992) (holding that where the IRS mailed notices of assessment and demand for payment,

(1) the IRS documents can establish that assessments were made, and (2) these notices

satisfy the requirement that the IRS provide a copy of the record of the assessment). Once

a Certificate of Assessment reveals a taxpayer's liability, the burden is on the taxpayer to

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 21 of 36
-22-

overcome the presumption of accuracy by presenting countervailing proof. Egbert, 752 F.

Supp. at 1019. Defendants provide no evidence to counter this presumption, and

Defendants’ arguments are insufficient to overcome a motion for summary judgment. See

Sullivan v. Scoular Grain Co. of Utah, 930 F.2d 798, 800 (10th Cir.1991) ("A nonmoving

party cannot survive a motion for summary judgment based on bare allegations in the

pleadings without supporting evidence.").

Plaintiff has met its initial burden for summary judgment by providing the Forms

4340 in support of the Motion, and Defendants have provided no information to refute this

presumption. Therefore, the Court finds that the assessment in this case is presumptively

valid.

 3. Amount of Tax Liability

In addition to the issues raised above, the parties dispute what amount, if any,

Defendant Welch owes the IRS. At the time of the filing of its Motion on October 3, 2012,

Plaintiff contended that Defendant Welch’s outstanding tax liability was $6,601,594.09.

Motion [#63] at 14; Routledge Decl. [#65] ¶ 4. 

All that Defendants need do to survive summary judgment on a finding of liability is

present sworn testimony refuting the material allegations made in the summary judgment

evidence presented by Plaintiff. Fed. R. Civ. P. 56(e). This, as discussed above, they

failed to do. When Defendants were deposed and asked about the Notices of Deficiency

for the tax years at issue, they asserted their Fifth Amendment right against

self-incrimination, despite having no reason to believe that they were under any type of

criminal investigation. Watson Ex. B, Dep. of Graff [#66-2]; Watson Ex. A, Dep. of Welch

[#66-1]. Defendants' assertions of the Fifth Amendment in this context allow the court to

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 22 of 36
-23-

draw a negative inference that Defendants have no substantive evidence to challenge the

tax assessments at issue, and that the assessments are correct. See Baxter v.

Palmigiano, 425 U.S. 308, 318 (1976); see also United States v. Simons, No. 06-750, 2009

WL 4348331, at *2 (D. Utah 2009). However, although the Court has carefully reviewed

the parties' motions, analyzed the evidence presented, and considered them in light of the

applicable law, the Court is unable to conclude that Plaintiff has presented sufficient factual

allegations as to the precise amount of Defendant Welch’s tax liability.

 Defendants have refused to provide documents or testimony from which their

income may be determined, but now assert that the IRS has erred in determining income

for the years at issue. See Watson Ex. D, Jim D. Welch's Responses to United States'

Interrogatories and Document Requests [#66-4]; Watson Ex. F, Amra Welch's Responses

to United States' Interrogatories and Document Requests [#66-6]. A defendant’s failure

to testify regarding the tax liabilities at issue by instead asserting the Fifth Amendment

typically allows the court to draw the negative inference that the testimony would have

supported Plaintiff's position. See United States v. Sullivan, 274 U.S. 259, 264 (1927)

(holding that a taxpayer may not, by silence, "draw a conjurer's circle around the whole

matter" of his or her tax liability); Chaffin, 689 P.2d at 688-89 (holding that adverse

inferences were permissible in the face of defendants' repeated invocation of Fifth

Amendment privilege in discovery responses); accord Libutti v. United States, 107 F.3d

110, 121 (2nd Cir. 1997) (holding that a court may draw an adverse inference from a party's

failure to testify in a civil action). 

Here, Defendants are attempting to do precisely that—draw a ‘conjurer's circle’

around any determination of their tax liability for the years at issue by refusing to respond

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 23 of 36
-24-

to document requests and by pleading Fifth Amendment protection in response to nearly

every question asked at their depositions. See Chaffin, 689 P.2d at 688-89; see also

Sullivan, 274 U.S. at 264; see Robert Heidt, The Conjurer's Circle-The Fifth Amendment

Privilege in Civil Cases, 91 Yale L.J. 1062 (1982). Defendant Welch’s deposition, for

example, included ten pages of questions about specific business transactions, bank

deposits, and sources of income, complete with precise dollar amounts, for the tax years

in question. Watson Ex. A, Dep. of Welch [#66-1] at 12-21. Defendant Welch avoided

responding to any of these questions by pleading Fifth Amendment protection. Id.; see

Sullivan, 274 U.S. at 264. However, the Court notes that this is the only place on record

where figures are offered as evidence of Defendant Welch’s 1999 income. Watson Ex. A,

Dep. of Welch [#66-1] at 12-21. Although the government included a Form 5278 for 1998,

detailing Defendant Welch’s income for that year, there is no accompanying Form 5278 for

1999 to corroborate the figures listed in the deposition. Id.; Routledge Ex. D, Income Tax

Examination Charges [#65-4]; see United States v. McMullin, 948 F.2d 1188, 1192 (10th

Cir. 1991) (“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.”) (emphasis added).

Plaintiff has provided Forms 4340 for the years in question. Routledge Ex. B, Form

4340 for 1998 Liability [#65-2]; Routledge Ex. E, Form 4340 for 1999 Liability [#65-5];

Routledge Ex. H, Form 4340 for 1998 Penalties [#65-8]; Routledge Ex. I, Form 4340 for

1999 Penalties [#65-9]. Accordingly, the government’s assessment is entitled to a

presumption of correctness. See McMullin, 948 F.2d at 1192 (holding that a presumption

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 24 of 36
-25-

of correctness attaches to the Commissioner's assessment, once some substantive

evidence is introduced demonstrating that the taxpayer received unreported income); but

see Doyal v. Commissioner of Internal Revenue, 616 F.2d 1191, 1192 (10th Cir. 1980)

(citing Helvering v. Taylor, 293 U.S. 507, 515 (1935), for the holding that it was proper to

remand a case in which the taxpayer had proved the amount of the Commissioner's

assessment to be arbitrary and excessive). These notices also satisfy 26 U.S.C. § 6203,

the requirement that the IRS provide a copy of the record of the assessment. Novotny, 90

A.F.T.R.2d at 2002-5694. However, upon a closer analysis of the Forms 4340 presented

by Plaintiff, the Forms 668 presented by Defendants, the INTSTD program evidence

presented by Plaintiff, and the figures cited in Plaintiff’s Motion, the Court is unable to

assure itself that the outstanding balance claimed in Plaintiff’s Motion is clear on the face

of the Forms 4340. Motion [#63] at 23; Routledge Ex. A, INTSTD Calculations of Liability

[#65-1]; Routledge Ex. B, Form 4340 for 1998 Liability [#65-2]; Routledge Ex. E, Form 4340

for 1999 Liability [#65-5]; Routledge Ex. H, Form 4340 for 1998 Penalties [#65-8];

Routledge Ex. I, Form 4340 for 1999 Penalties [#65-9]; Response Ex. 2, 668(y) Forms

[#95-2]. 

The sum of $6,601,594.09 seems to be from the Declaration of Lee Routledge,

Technical Advisor of the Internal Revenue Service, who determined the figure using the

INTSTD computer program to compute the tax liability, penalties, and applicable interest.

Routledge Decl. [#65] ¶¶ 3-4. As far as the Court can determine, the Balance Due for

each year’s INTSTD calculation is the sum of the figures under “Assessed Totals” and

“Total Accruals.” Routledge Ex. A, INTSTD Calculations of Liability [#65-1] at 2, 8. The

“Assessed Total” figures for 1998 and 1999 each seem to be drawn from the “Balance”

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 25 of 36
-26-

figure on the corresponding Form 4340. See Routledge Ex. A, INTSTD Calculations of

Liability [#65-1] at 2,8; compare Routledge Ex. B, Form 4340 for 1998 Liability [#65-2] at

7, with Routledge Ex. E, Form 4340 for 1999 Liability [#65-5] at 6. The interest accruals

from 1998 seem to begin with the September 23, 2003, “Quick Assessment” figure from the

corresponding Form 4340, less the ”Estimated Tax Declarations” from the same form.

Compare Routledge Ex. A, INTSTD Calculations of Liability [#65-1] at 3, with Routledge Ex.

B, Form 4340 for 1998 Liability [#65-2] at 3. It appears that two penalties, the quick

assessment of an “IRC 6662 Accuracy Penalty” and a “Late Filing Penalty,” factor into

interest calculations beginning in September of 1990. Compare Routledge Ex. A, INTSTD

Calculations of Liability [#65-1] at 3, with Routledge Ex. B, Form 4340 for 1998 Liability

[#65-2] at 3, 4. However, the Court was unable to verify that the interest accruals in the

following pages of the INTSTD calculations actually amount to the 1998 figure listed under

“Total Accruals.” See Routledge Ex. A, INTSTD Calculations of Liability [#65-1] at 3-7.

Similarly, the 1999 interest accruals seem to begin with the “Tax & Penalty” figure, which

is the sum of the 1999 quick assessment of the “IRC 6662 Accuracy Penalty,” the

September 11, 2003, “Quick Assessment,” and the “Late Filing Fee” found in the Form

4340 for 1999. Compare Routledge Ex. A, INTSTD Calculations of Liability [#65-1] at 8,

with Routledge Ex. E, Form 4340 for 1999 Liability [#65-2] at 3. This calculation still fails

to produce the 1999 figure listed under “Total Accruals.” See Routledge Ex. A, INTSTD

Calculations of Liability [#65-1] at 8-12.

Had Plaintiff demonstrated in a transparent manner how the liability it requests

follows from the valid assessments presumed from the Forms 4304, the Court would be

prepared to find fully in Plaintiff’s favor regarding the amount of the valid tax lien. However,

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 26 of 36
-27-

without knowing that these figures are accurately and directly drawn from the presumptively

valid assessment figures found in the Forms 4840, the Court hesitates to presume that the

INTSTD Calculations of Liability are alone sufficient to determine the proper amount of

liability. “Judges are not like pigs, hunting for truffles buried in briefs,” and the Court

declines to speculate as to the legitimacy of such a high figure without confidence that the

liability is correct on the face of valid tax assessments. Gross v. Burggraf Constr. Co., 53

F.3d 1531, 1546 (10th Cir. 1995). 

In the absence of such certainty, the Court declines to make a summary

determination of the government's entitlement to interest and penalties. See, e.g., United

States v. Holmes, No. 08-02446, 2011 WL 1158675, at *6 (D. Colo. 2011) (declining to

make a summary determination of the government's entitlement to interest and penalties

where there were two separate time periods during which interest could be calculated and

awarded, and where the government did not fully clarify their calculations of interest under

applicable authority). However, the Court will permit Plaintiff to submit another dispositive

motion for determination of the total amount of liability in light of these concerns for

accuracy on the face of a valid assessment. Defendants may respond in accordance with

the Federal Rules of Civil Procedure and the Local Rules of this Court. 

C. Taxpayer Interest in the Properties Sought to be Foreclosed

A valid tax lien attaches to any property owned by the taxpayer. 26 U.S.C. §§ 6321,

6322. Plaintiff asserts that Defendant Welch is the effective owner of the Real Property

under two theories. First, Plaintiff argues that Defendant Graff is a nominee of Defendant

Welch and that Defendant Welch is the true beneficial owner of the Real Property. Motion

[#63] at 18. In the alternative, Plaintiff contends that the various transfers of the Real

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 27 of 36
-28-

Property were fraudulent conveyances under the Colorado Uniform Fraudulent

Conveyance Act. Id. at 19; Colo. Rev. Stat. § 38-8-105(1). Essentially, Plaintiff contends

that the transfer of the title of the Real Property to Defendant Graff was a sham transfer for

the purpose of shielding the Real Property from being used to satisfy Defendant Welch’s

outstanding tax debt. Motion [#63] at 20. As such, Plaintiff argues that the IRS is entitled

to foreclose on these properties to satisfy Defendant Welch’s outstanding tax liability. 

“A nominee is one who holds bare legal title to property for the benefit of another.”

Scoville v. United States, 250 F.3d 1198, 1202 (8th Cir. 2001). It is a well-settled principle

that the “Government may foreclose on property held by a nominee of a taxpayer in order

to collect the taxpayer’s debt.” United States v. Schaeffer, 245 B.R. 407, 415 (D. Colo.

1999) (citing G.M. Leasing Corp. v. United States, 429 U.S. 338, 351 (1977)). Courts

consider several factors to determine whether a title holder should be given nominee

status, the most important of which is the taxpayer’s ability to exert control, either directly

or indirectly, over the property at issue. See id. (citing Valley Fin., Inc. v. United States,

629 F.2d 162, 172 (D.C. Cir. 1980)). The following considerations are relevant to the

Court’s determination of whether an individual holds property as the nominee of another:

(1) the lack of consideration paid by the nominee; (2) the control exercised

over the property by the transferor while the title is in the nominee’s name;

(3) the close relationship between the transferor and the nominee; (4) the use

by the transferor of the transferred property; and (5) the lack of interference

in transferor’s use of property by the nominee . . . Additionally, courts

sometimes consider whether the property was placed in the name of a

nominee in anticipation of a suit or the occurrence of liabilities.

Novotny, 90 A.F.T.R.2d at 2002-5695 through -5696 (emphasis added) (citations omitted).

Plaintiff argues that the facts in evidence, together with permissible adverse inferences,

clearly show that Defendant Graff is a mere nominee of her father, Defendant Welch.

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 28 of 36
-29-

Most clear is the fact that there is a close relationship between Defendants Welch

and Graff. Amra Graff, previously Amra Welch, is the daughter of Jim D. Welch. Watson

Ex. B, Dep. of Graff [#66-2] at 9:15. No one contests this fact. There is also no dispute

that Defendant Welch was the sole and executive trustee of Celestial Pursuits Trust, the

bogus trust ordered to be liquidated in 1999 which originally held title to the Real Property.

Roybal Decl. [#64] ¶¶ 5-6; see Routledge Ex. O, Quitclaim Deed [#65-15]. Thus, an

uncontested close relationship exists between the parties. 

 As to the issue of consideration, the Court is convinced that little to no

consideration was paid for the transfer of the deed from Defendant Welch to Defendant

Graff. The deed lists a mere $10 as the consideration paid, and there is no evidence this

sum was ever paid by Defendant Graff. Routledge Ex. O, Quitclaim Deed [#65-15].

Defendants Welch and Graff were asked for information concerning what, if any,

consideration was paid in conjunction with the purported transfer of the Real Property to

Defendant Graff by quitclaim deed. Declaration of Rick Watson (“Watson Decl.”) [#66] 5;

Watson Ex. D, Jim D. Welch's Responses to United States' Interrogatories and Document

Requests [#66-4]; Watson Ex. F, Amra Welch's Responses to United States' Interrogatories

and Document Requests [#66-6]. In their responses to interrogatory requests, requests for

production of documents, and at their depositions, both refused to answer this question,

instead invoking their rights against self-incrimination under the Fifth Amendment. Watson

Ex. A, Dep. of Welch [#66-1]; Watson Ex. B, Dep. of Graff [#66-2]; Watson Ex. D, Jim D.

Welch's Responses to United States' Interrogatories and Document Requests [#66-4];

Watson Ex. F, Amra Welch's Responses to United States' Interrogatories and Document

Requests [#66-6]. “Silence is often evidence of the most persuasive character.” United

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 29 of 36
-30-

States ex rel. Bilokumsky v. Tod, 263 U.S. 149, 153-154 (1923). Thus, “[f]ailure to contest

an assertion . . . is considered evidence of acquiescence . . . if it would have been natural

under the circumstances to object to the assertion in question.” United States v. Hale, 422

U.S. 171, 176 (1975)). Given Defendants’ silence on the issue of consideration, combined

with the fact that the deed lists a mere $10 as the consideration paid, the Court accepts the

uncontradicted evidence on the face of the deed and makes the adverse inference against

Defendants that either little or no consideration was exchanged in this transfer. See

Routledge Ex. O, Quitclaim Deed [#65-15]. 

The Court also considers evidence of the Defendants’ respective control over the

Real Property. Plaintiff asserts that Defendant Graff did not interfere with Defendant

Welch’s use of or control over the property. Motion [#63] at 13,18. Although Defendant

Welch has not admitted to residing at the Real Property, he admits that his mother and

grandchildren currently reside there. Watson Ex. A, Dep. of Welch [#66-1] at 25:19-27:11.

Defendant Graff admits to living at the Real Property in 2003. Watson Ex. B, Dep. of Graff

[#66-2] at 8:16. However, according to her deposition, Defendant Graff and her husband

are now stationed in Anchorage, Alaska. Watson Ex. B, Dep. of Graff [#66-2] at 7:13.

Additionally, the depositions suggest that Defendant may have maintained a close

relationship with the Real Property, including a possible mortgage in his name, not the

name of his daughter, and a possible loan with the Real Property as collateral. Watson Ex.

A, Dep. of Welch [#66-1] at 41; Watson Ex. B, Dep. of Graff [#66-2] at 19:19-25; see

Novotny, 90 A.F.T.R.2d at 2002-5696 through -5697. Adverse inferences may be drawn

against a party who refuses to testify in response to probative evidence offered against

him, and Defendant Welch’s silence when confronted at deposition with what appears to

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 30 of 36
-31-

be evidence of mortgages and loans is particularly suggestive to the Court. Mitchell, 526

U.S. at 327; Baxter, 425 U.S. at 319 (quoting Hale, 422 U.S. at 176 (1975)). 

Notably, every Form 668 presented by Defendants in this case lists the Real

Property as Defendant Welch’s residence, and rather than contesting Plaintiff’s assertions

or correcting the information in these forms, Defendant Welch has pled Fifth Amendment

privilege to every substantive question about the Real Property. Response Ex. 2, 668(y)

Forms [#95-2]. Additionally, every interrogatory and document request on the docket was

sent to Defendant Graff in Alaska, while Defendant Welch was still receiving mail at the

Real Property. Watson Ex. D, Jim D. Welch’s Responses to United States’ Interrogatories

and Document Requests [#66-4] at 20, 28; Watson Ex. F, Amra Welch’s Responses to

United States’ Interrogatories and Document Requests [#66-6] at 13,19. On February 27,

2012, more than eight years after the alleged transfer, Defendant Welch filed a Freedom

of Information Request which listed his return address as in care of the Real Property.

Response Ex. 6, Feb. 27, 2012 FOIA Request [#95-6] at 3. On March 26 and April 30th,

2012, Defendant again listed his return address as in care of the Real Property, twice in

each of two subpoenas to produce documents. Response Ex. 7, Subpoena to Produce

Documents for Maureen Green [#95-7] at 1,3; Response Ex. 8, Subpoena to Produce

Documents for Sally Kilpatrick [#95-8] at 1,4. He sent additional copies of the Forms 668

with each of these information requests, never noting the improper addresses on any of the

five forms or alleging that the IRS records needed to be changed. Id. His only comment

on these mailing addresses is to draw the Court’s attention to a USPS Publication #221 for

“foreign” address formatting. Response Ex. 7, Subpoena to Produce Documents for

Maureen Green [#95-7] at 3; Response Ex. 8, Subpoena to Produce Documents for Sally

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 31 of 36
-32-

Kilpatrick [#95-8] at 4. This reference to a non-binding advisory pamphlet seems to

challenge not the mailing address, but whether or not the address places him “within the

United States.” See Response [#95] ¶ 14. Combined with Defendants’ refusal to affirm or

deny Defendant Welch’s use of the Real Property, the Court finds that an adverse

inference that Defendant Welch still exercises considerable control over the Real Property

and benefits from its use is justified. Similarly, Defendant Graff has refused to present

evidence of any limitations she may have placed on the use of the Real Property,

suggesting to the Court that if Defendant Welch does indeed continue to use the Real

Property, his use is unlimited. Watson Ex. B, Dep. of Graff [#66-2] at 19:19-25. 

The Court also considers the possibility that this transfer was an attempt to avoid tax

liability. At the time of the purported transfer of the real property to Defendant Graff,

Defendant Welch had recently been made aware that he had outstanding tax liabilities to

the IRS. Specifically, Welch was sent a notice of deficiency by the IRS on August 12, 2003.

 Routledge Decl., Ex. G. Notice of Deficiency [#65-7]. This document notified him that it

was the intent of the IRS to assess federal income tax liabilities against him for both 1998

and 1999, unless he filed a petition with the tax court within 90 days. Id. A mere four

months later, Defendant Welch transferred the property to his daughter. Routledge Decl.,

Ex. O, Quitclaim Deed [#65-15]. Under the undisputed facts of this case, Defendant Welch

knew that he was indebted to Plaintiff for the federal income tax liabilities at the time of the

purported transfer of the Real Property to his daughter, and after the purported transfer of

the Real Property, it is undisputed that Defendant Welch no longer possessed any assets

to pay these federal tax liabilities. Declaration of Roybal Decl. [#64] ¶ 8. Under these

undisputed facts, and in the face of Defendants’ resilient silence on the matter, the Court

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 32 of 36
-33-

is permitted to infer that this transfer was made in anticipation of litigation or other collection

action concerning his federal tax debts. Mitchell, 526 U.S. at 327; Baxter, 425 U.S. at 319

(quoting Hale, 422 U.S. at 176 (1975)). 

After weighing these factors, all of which tend to support a nominee theory, the Court

finds that Plaintiff has submitted evidence to establish every element of its claim with regard

to whether Defendant Graff is a nominee of Defendant Welch. The burden now shifts to

Defendants to go beyond their pleadings and tender admissible, relevant evidence to show

that summary judgment is not proper. Celotex Corp., 477 U.S. at 324.

 As previously noted, rather than advancing facts and evidence contesting the

assertions of Plaintiff’s motion, Defendants have pled Fifth Amendment privilege in

response to every interrogatory, every document request, and almost every question at

deposition. On February 13, 2012, Plaintiff served on Defendants Requests for Production

of Documents and Interrogatory Requests requesting information related to this matter.

Watson Decl. [#66] ¶¶ 4, 6. On May 12, 2012, Defendant Welch responded to the United

States Discovery Requests, refusing to provide any information or documents in response

to the requests and instead invoking his rights against self-incrimination under the Fifth

Amendment of the United States Constitution. Id. ¶ 5; Watson Ex. D, Jim D. Welch’s

Responses to United States’ Interrogatories and Document Requests [#66-4]. On May 14,

2012, Defendant Graff also responded to the United States Discovery Requests by invoking

her rights against self-incrimination under the Fifth Amendment. Watson Decl. [#66] ¶ 7;

Watson Ex. F, Amra Welch’s Responses to United States’ Interrogatories and Document

Requests [#66-6]. On August 16, 2012, Plaintiff deposed Defendant Graff. Watson Decl.

[#66] ¶ 2. Defendant Graff refused to answer any substantive question, invoking her rights

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 33 of 36
-34-

against self incrimination under the Fifth Amendment of the United States Constitution.

Watson Ex. B, Dep. of Graff [#66-2]. On April 17, 2012, the United States deposed

Defendant Welch. Watson Decl. [#66] ¶ 1. Defendant Welch also refused to answer any

substantive question. Watson Ex. A, Dep. of Welch [#66-1]. 

"[T]he claim of [Fifth Amendment] privilege is not a substitute for relevant evidence."

Rylander, 460 U.S. at 761; accord United States v. Certain Real Prop. & Premises, 55 F.3d

78, 83 (2d Cir. 1995) ("[T]he claim of privilege will not prevent an adverse finding or even

summary judgment if the litigant does not present sufficient evidence to satisfy the usual

evidentiary burdens in the litigation."). In other words, "[a] party who asserts the privilege

against self-incrimination must bear the consequence of lack of evidence." $148,840.00

in U.S. Currency, 521 F.3d at 1274 (citation omitted). Thus, despite Defendants’ invocation

of Fifth Amendment privilege, this Court may infer that Plaintiff’s facts are uncontroverted

where Defendants have offered no rebuttal evidence. Id. 

In this case, Defendants provide no information refuting the factual allegations of

Plaintiff’s Motion concerning the Real Property in this case, and instead assert simply that

Defendant Welch “has no interest in the property. . . [that i]t was never intended to be his,

never has been his, and has never been treated as his.” Response [#95] ¶ 62. Because

neither Defendant Graff not Defendant Welch submitted competent evidence in satisfaction

of their burdens, there is nothing to refute Plaintiff’s evidence that these were sham

transfers made for the purpose of avoiding tax liability. Therefore, the Defendants’

submissions in this regard do not raise an issue of material fact requiring a trial of this

issue. This Court will not allow Defendants to wield Fifth Amendment protection as a

means of shirking their burden of producing evidence of a genuine issue of fact. See

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 34 of 36
4

 Having found that Defendant Graff is a nominee of Defendant Welch, the Court need not

consider Plaintiff’s alternative argument that the transfer of title of the Real Property was a

fraudulent conveyance.

-35-

Rylander, 460 U.S. at 758. Therefore, the Court finds that Plaintiff has established that

Defendant Graff is a nominee of Defendant Welch for the purpose of foreclosing a federal

tax lien against the Real Property.4

There is no admissible evidence to refute Plaintiff’s presentation of the facts

establishing that (1) it had a valid tax lien and that (2) Defendant Graff held the Real

Property as a nominee of Defendant Welch. Although Defendants briefly dispute the

interpretation of the facts presented by Plaintiff, they offer only frivolous arguments and

conclusory claims in an attempt to satisfy their burden as the nonmoving parties and do not

sufficiently satisfy their burden of going beyond the arguments in their pleadings and

providing “specific facts showing there is a genuine issue for trial.” Celotex Corp., 477 U.S.

at 324. Plaintiff has met its burden of showing that no genuine issue of material fact exists

and that it is entitled to judgment as a matter of law concerning the validity of the tax lien

and Defendant Graff’s status as nominee of Defendant Welch. Because Plaintiff has met

its burden as the party with the ultimate burden of proof at trial, summary judgment should

be entered in its favor, excepting only the accuracy of the precise amount of tax liability

requested. Accordingly, the Court recommends that Plaintiff’s Motion be GRANTED IN

PART and DENIED without prejudice IN PART.

IV. Conclusion

For the reasons stated above, the Court respectfully RECOMMENDS that Plaintiff’s

Motion for Summary Judgment [#63] be GRANTED IN PART and DENIED without

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 35 of 36
-36-

prejudice IN PART. The United States is entitled to judgment as a matter of law

concerning both the validity of the tax lien and the authority of the United States to

foreclose said lien against the Real Property. However, the Motion is DENIED IN PART

as to the full amount sought by the government ($6,601,594.09), without prejudice to the

government's filing another dispositive motion to establish the amount to which it is entitled.

IT IS HEREBY ORDERED that within 21 days of the District Judge’s resolution of

this Recommendation, Plaintiffs shall file either: (1) a motion for summary judgment

regarding the amount of Defendant Welch’s liability, or (2) a motion to set Final Pretrial

Conference.

IT IS FURTHER ORDERED that pursuant to Fed. R. Civ. P. 72, the parties shall

have ten (10) days after service of this Recommendation to serve and file any written

objections in order to obtain reconsideration by the District Judge to whom this case is

assigned. A party’s failure to serve and file specific, written objections waives de novo

review of the Recommendation by the District Judge, Fed. R. Civ. P. 72(b); Thomas v. Arn,

474 U.S. 140, 147-48 (1985), and also waives appellate review of both factual and legal

questions. Makin v. Colo. Dep’t of Corr., 183 F.3d 1205, 1210 (10th Cir. 1999); Talley v.

Hesse, 91 F.3d 1411, 1412-13 (10th Cir. 1996). A party’s objections to this

Recommendation must be both timely and specific to preserve an issue for de novo review

by the District Court or for appellate review. United States v. One Parcel of Real Prop., 73

F.3d 1057, 1060 (10th Cir. 1996). 

Dated: March 13, 2013

Case 1:11-cv-02292-CMA-KLM Document 101 Filed 03/13/13 USDC Colorado Page 36 of 36