Opinion ID: 2135346
Heading Depth: 1
Heading Rank: 4

Heading: Purchaser for Value

Text: As noted above, the trial court concluded that while the July 5 deed to Dion was a gift, the transfer of the 71 acres was for value. [5] It is undisputed that Dion did not pay anyconsideration at the time of the conveyance. She allegedly verbally assumed and paid the outstanding debt of approximately $45,000.00 later. The final payment, however, of approximately $21,000.00 was not paid until September 1, 1986, almost two months after Department recorded its tax lien. In United States v. Galvin, 199 F.Supp. 4 (E.D.N.Y.1961), taxpayer transferred property subject to three mortgages to her son who paid her either nothing or a merely nominal cash consideration. A year later, the son transferred the property to his wife for no consideration or nominal cash consideration. The IRS was auditing a prior return of the taxpayer prior to the first transfer, but did not serve the taxpayer with notice of a tax deficiency until after the transfer to the son. The United States argued at trial that the transfers were subject to the IRS lien even though its lien was not filed until after the first transfer because the son was not a purchaser. The son and his wife claimed that the transfers to them were based on valuable consideration in that they took the property subject to three existing real estate mortgages. The district court found the contention of the son and his wife without merit. According to the court: Section 6323(a) [] defines the persons against whom a lien is not valid until filed as any mortgagee, pledgee, purchaser, or judgment creditor. These defendants obviously were not mortgagees, pledgees, or judgment creditors. Nor were they purchasers, as defined in the case of United States v. Scovil, 348 U.S. 218, at page 221, 75 S.Ct. 244, at page 247, 99 L.Ed. 271: A purchaser within the meaning of § 3672 [of the Internal Revenue Code of 1939 (now Section 6323 of the Internal Revenue Code of 1954) ] usually means one who acquires title for a valuable consideration in the manner of vendor and vendee. [] Concededly, Irving M. Galvin paid his mother either no or a merely nominal cash consideration, so that they were hardly in the position of vendor and vendee. That was equally true of his transfer of title to his wife on June 4, 1957, after the lien had been filed. The fact that the son took the property subject to the mortgages of record was not, in my opinion, sufficient to meet the exceptions provided for in Section 6323(a)[.] Galvin, 199 F.Supp. at 6 (emphasis in original). As in Galvin, Dion paid Karras no consideration at the time of the transfer. The fact that Dion took the 71 acres subject to the indebtedness was not sufficient to meet the exceptions provided for in SDCL 10-59-11. Under these facts and circumstances, Dion was not a purchaser for value without notice of Department's sales tax lien.