Court Opinion

ID: 4331908
Source: CourtListenerOpinion
Date Created: 2018-11-14 00:24:00.141191+00
Date Added: 2024-06-11T14:47:42.196133
License: Public Domain

111 T.C. No. 6

                UNITED STATES TAX COURT

     PETER J. BRESSON, TRANSFEREE, Petitioner v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 22824-96.                    Filed August 19, 1998.

     In July 1990, J, a corporation, transferred to
petitioner, its sole shareholder, real property situated
in California (the Alhambra property) without receiving
a reasonably equivalent value in exchange therefor.
Immediately thereafter, petitioner sold the Alhambra
property for $329,000 to an unrelated third party.
Petitioner kept the proceeds from the sale. On Mar. 5,
1993, J filed a tax return for its fiscal year ended Feb.
28, 1991, reporting a capital gain of $194,705 from the
sale of the Alhambra property and a tax due of $49,683,
which was not paid. On Aug. 1, 1993, petitioner executed
a promissory note to J for repayment of a purported
obligation owed by petitioner to J.

     On Aug. 2, 1996, respondent issued a notice of
transferee liability to petitioner as a transferee under
sec. 6901, I.R.C. Respondent determined, on the basis of
California's    Uniform    Fraudulent    Transfer    Act
(California's UFTA), that petitioner was liable for J's
                                - 2 -

     taxes resulting    from   the   transfer   of   the   Alhambra
     property.

          Petitioner asserts that the period of limitations
     for   filing   fraudulent    conveyance   actions   under
     California's UFTA expired before the issuance of the
     notice of transferee liability. Respondent maintains that
     the Federal Government is not bound by State statutes of
     limitations under the rule in United States v. Summerlin,
     310 U.S. 414 (1940). Petitioner counters that the period
     of limitations in California's UFTA is not a statute of
     limitations, but rather is an element of the cause of
     action, which provides for the complete extinguishment of
     the fraudulent conveyance claim if the time limit is not
     satisfied, relying on United States v. Vellalos, 780 F.
     Supp. 705 (D. Haw. 1992), appeal dismissed 990 F.2d 1265
     (9th Cir. 1993).

          1.   Held: Respondent has established that the
     Alhambra property was fraudulently conveyed under
     California law.

          2.   Held, further, respondent is not bound by the
     limitations period in California's UFTA. United States
     v. Summerlin, supra, applied.

          3.   Held, further, respondent issued petitioner a
     notice of transferee liability within the limitations
     period for assessments prescribed by sec. 6901(c), I.R.C.

     Willard D. Horwich, for petitioner.

     Robert H. Schorman, Jr., for respondent.

     JACOBS, Judge:    By means of a notice of transferee liability

dated August 2, 1996, respondent determined that petitioner is

liable under section 6901 as a transferee of property from Jaussaud

Enterprises, Inc. (hereinafter referred to as Jaussaud Enterprises

or the corporation), for unpaid Federal corporate income taxes and
                                      - 3 -

additions to tax due from Jaussaud Enterprises, as follows:

                                            Additions to Tax
Year Ended     Income Tax     Sec. 6651(a)(1) Sec. 6651(a)(2)          Sec. 6654
  2/28/91       $41,965           $9,803           $10,716               $2,487

      Unless indicated otherwise, all section references are to the

Internal     Revenue   Code    for   the    year   in   issue,   and   all   Rule

references are to the Tax Court Rules of Practice and Procedure.

      The disputed transferee liability arises as a result of the

conveyance of certain real property from Jaussaud Enterprises to

petitioner during 1990.        We must herein decide whether petitioner

is liable as a transferee under section 6901 as a result of that

conveyance.     In resolving this issue, we must decide whether by

virtue of section 3439.09 of the California Civil Code (West 1997)

the   period   of   limitations      for   assessing    transferee     liability

against petitioner expired before respondent's issuance of the

notice of transferee liability.            Subsumed in this latter issue is

the question of whether the Commissioner is bound by a State

limitations period when relying on State law to collect unpaid

taxes.

                               FINDINGS OF FACT

      Some of the facts have been stipulated and are so found.                The

stipulations of facts and the attached exhibits are incorporated

herein by this reference.

      At the time the petition was filed, petitioner resided in Los

Angeles, California.        Petitioner is unmarried.         He filed his tax
                                          - 4 -

returns on a calendar year basis.

Jaussaud Enterprises

     Jaussaud Enterprises is a California corporation with a fiscal

year ending February 28. At all relevant times, petitioner was the

sole shareholder and sole officer of Jaussaud Enterprises.

     Jaussaud Enterprises operated an equipment leasing business,

providing      trash    cans     and    containers    for    the   rubbish      pickup

industry.        The    corporation's          principal    customer    was    PJB,   a

corporation all the stock of which was owned by petitioner and his

mother    (who    died      in   1988,     leaving    petitioner       as   the   sole

shareholder      of    PJB).     By    1991,    Jaussaud   Enterprises'       business

activity was minimal.

Transfer of Real Property

     Jaussaud Enterprises was the owner of improved real property

located   at     905   N.   Hidalgo      Avenue,     Alhambra,     California     (the

Alhambra property).         Located on the Alhambra property was a house

in which petitioner resided.

     Petitioner decided to sell the Alhambra property. A potential

buyer of the Alhambra property was found, and on June 11, 1990,

petitioner, on behalf of Jaussaud Enterprises, executed escrow

instructions at Atla Escrow Corp. (Atla Escrow) pursuant to which

the Alhambra property was to be sold for $329,000 to Ming Eo

Jessica Sung, an unrelated third party. The escrow instructions

were amended on June 12 and 20, 1990, to account for various
                                     - 5 -

details and contingencies relating to the anticipated sale.                       On

July 5, 1990, the escrow instructions were again amended to change

the identification of the seller to "PETER J. BRESSON, an unmarried

man".

     On July 5, 1990, Jaussaud Enterprises executed a grant deed

conveying the Alhambra property to petitioner.1                   On the same date

petitioner executed a grant deed conveying the Alhambra property to

Ms. Sung.

     On July 25, 1990, Atla Escrow sent petitioner a closing

statement   with   regard   to   the    sale    of   the    Alhambra       property,

together with a check in the amount of $266,680.44, representing

the net proceeds due the seller.         Petitioner kept the $266,680.44.

     The    closing   statement      indicated       that    $38,900       had   been

transferred   by   wire   to   "Western      Pacific    Escrow      #16848".2    The

balance of the consideration paid by Ms. Sung was disbursed for a

realtor's   commission,     taxes,     escrow   fees,       and    other   expenses

related to the sale of the Alhambra property.

        1
          The deed reported no transfer tax due, and stated:
"This conveyance changes the manner in which title is held,
grantor(s) (Corporation) and Grantee(s) remain the same and
continue to hold the same proportionate interest, R & T 11911."
          Pursuant to California law, no transfer tax is due
where the consideration exchanged is $100 or less. Cal. Rev. &
Tax. Code sec. 11911 (West 1994).
        2
          The record is void of any explanation for the wire
transfer or the purpose of the Western Pacific escrow account.
                               - 6 -

Reporting Sale of Alhambra Property

     On its U.S. Corporation Income Tax Return, Form 1120, for tax

year ended February 28, 1991, filed on March 5, 1993, Jaussaud

Enterprises reported a capital gain of $194,7053 from the sale of

the Alhambra property.    Jaussaud Enterprises also reported gross

receipts of $1,210, which resulted in a reported Federal income tax

liability of $49,683 for the tax year ended February 28, 1991,

which was not paid.      The return was signed by petitioner, as

corporate president.

     Petitioner did not report any gain from the sale of the

Alhambra property on his U.S. Individual Income Tax Return, Form

1040, for any year.

Promissory Note

     At an undisclosed time following the sale of the Alhambra

property, petitioner sought professional advice with respect to the

tax consequences of Jaussaud Enterprises' transfer of the Alhambra

property to him and the subsequent sale of that property.   On July

15, 1993, petitioner, as president of Jaussaud Enterprises, called

a special meeting of the board of directors (which consisted solely

of himself) and determined that he owed the corporation $125,000.

(The record is void of any explanation as to how the amount of

petitioner's debt to Jaussaud Enterprises was determined to be

     3
          The gain on the sale of the Alhambra property was
calculated as follows: $329,000 (gross proceeds) + $28,130
(depreciation previously allowed) - $162,425 (basis) = $194,705.
                                 - 7 -

$125,000.) To repay this debt, petitioner agreed to execute a note

providing for monthly installments of $798.32 each for 30 years,

with interest at 6.6 percent per annum.4            On August 1, 1993,

petitioner executed such a note.          Beginning August 4, 1993, and

continuing through September 11, 1996, petitioner made the required

monthly payments to Jaussaud Enterprises.          After September 1996,

petitioner made no further payments on the note.

Internal Revenue Service Actions

     The   Internal   Revenue   Service    (IRS)   sent   several   billing

notices to Jaussaud Enterprises.     These notices mistakenly listed

the tax period involved as the year ended February 29, 1992.             On

July 25, 1994, the IRS recorded in Los Angeles County a Notice of

Federal Tax Lien for Jaussaud Enterprises.         The Notice of Federal

Tax Lien listed $117.73 as being owed for employment taxes for the

tax year ended December 31, 1993, and $79,207.53 as being owed for

corporation income taxes for the tax year ended February 28, 1992.5

     William Ryland, an IRS revenue officer, was assigned to

     4
          The corporation adopted a resolution at the July 15,
1993, meeting which stated:

     RESOLVED, that the corporation shall accept a
     promissory note from Peter J. Bresson, payable $798.32
     a month, the first payment to be made on August 1,
     1993, and said note to continue for 30 years at an
     interest rate of 6.6%.

     5
          The corporation made a payment of $1,603.76 on Aug. 24,
1993, and received a credit against its assessment.
                                   - 8 -

collect the taxes owed by Jaussaud Enterprises.            He attempted to

locate assets of Jaussaud Enterprises, but his efforts proved

unsuccessful. At an undisclosed time, a representative of Jaussaud

Enterprises, presumably Willard D. Horwich (petitioner's counsel),

offered to satisfy the corporation's tax liability by way of a

"long-term" installment plan.       Revenue Officer Ryland rejected the

proposed arrangement because the period of limitations to collect

the delinquent taxes would have expired prior to full collection

under the proposed plan.       Ultimately, in a Report of Investigation

of Transferee Liability dated September 21, 1994, Revenue Officer

Ryland recommended that the IRS seek to collect the delinquent

taxes from petitioner as a transferee.

        No notice of deficiency was issued to Jaussaud Enterprises for

the tax year ended February 28, 1991,        but an assessment was made

against Jaussaud Enterprises for that year on February 28, 1996.

        Respondent sent a notice of transferee liability to petitioner

dated    August   2,   1996,   determining   that   he   was   liable   as   a

transferee of the Alhambra property for Jaussaud Enterprises' tax

year ended February 28, 1991.

     In October 1996, the collection file was assigned to Revenue

Officer Donald Dinsmore.         He searched for assets which the IRS

could levy against.      He checked IRS internal sources for financial

and other information concerning Jaussaud Enterprises; he also

searched Department of Motor Vehicles and real property records.
                                    - 9 -

He   found   no   assets   which   could    be   used   to   collect   the   tax

liabilities from Jaussaud Enterprises.

      On November 13, 1996, the IRS issued a final demand letter

which was received and signed for (but not responded to) by

Jaussaud Enterprises.

                                   OPINION

Evidentiary Matters

      Preliminarily, we address various evidentiary matters.

      At trial, petitioner contended that respondent assessed taxes

against Jaussaud Enterprises for the wrong year.                 Respondent's

witness, Vicki McIntire, credibly testified about the error, which

occurred as a result of the filing of corporate income tax returns

for fiscal years ended February 28, 1991, and February 29, 1992, at

approximately the same time in 1993, and the subsequent correction

of the error by respondent.        In that vein, petitioner objected to,

as hearsay, the admission into evidence of Exhibit AA, Summary

Record of Assessments, and Exhibit BB, Certificate of Assessments

and Payments, to prove the existence of Jaussaud Enterprises' tax

liability.

      Rule 803 of the Federal Rules of Evidence provides numerous

exceptions to the hearsay rule.        As pertinent herein, rule 803(8)

provides an exception for:

           (8) Public records and reports.--Records, reports,
      statements, or data compilations, in any form, of public
      offices or agencies, setting forth (A) the activities of
      the office or agency, or (B) matters observed pursuant to
                                            - 10 -

      duty imposed by law as to which matters there was a duty
      to report * * * unless the sources of information or
      other circumstances indicate lack of trustworthiness.

Exhibits AA and BB are both public records or reports prepared by

respondent pursuant to a duty imposed by law.

      Exhibit AA does not indicate the taxpayer's name.                        Thus, we

conclude that this document lacks trustworthiness.                       Consequently,

we sustain petitioner's objection to Exhibit AA.

     Exhibit BB reflects that an audit deficiency assessment of

$43,569 was made for the year ended February 28, 1991, and a

reported tax return assessment of $49,683 was made for the year

ended February 29, 1992--which was later abated because no tax was

owing for that year.          The record contains no explanation as to why

an audit deficiency assessment was made (nor the basis for it) for

the year ended February 28, 1991, or as to why a tax return

assessment       (of    $49,683)       was    not     made   for   that    same   year.

Petitioner contends on brief that without the admission of Exhibits

AA   and   BB,    there      is   no   evidence       to   demonstrate    an   existing

liability     in       the   form      of    an     assessment     against     Jaussaud

Enterprises--and         thus     respondent         can   not   establish     that   the

transferor owes taxes for which petitioner may be liable as a

transferee.        Petitioner also asserts that even if Exhibit BB is

admitted, the audit deficiency assessment for the year ended

February 28, 1991, was improper under section 6213 because no

notice of deficiency for that year was issued to the transferor.
                                          - 11 -

     Exhibit      BB,    which      was    certified      as    true   and    to    which

respondent's witness credibly testified,                       shows an      assessment

against Jaussaud Enterprises for the year ended February 28, 1991.

We find the information in the document accurately reflects the

existence    of    a    tax    liability     owed    by    Jaussaud       Enterprises.

Accordingly, we overrule petitioner's objection to the admission of

Exhibit BB.       Further, respondent's failure to issue a notice of

deficiency against Jaussaud Enterprises is immaterial. A notice of

deficiency need not be issued in order for the Commissioner to

assess a taxpayer for a reported tax liability on a tax return.

See sec. 6201(a)(1). Moreover, the Commissioner is not required to

issue a notice of deficiency or to make an assessment against the

transferor    where     efforts      to    collect     delinquent      taxes       from   a

transferor would be futile.           Gumm v. Commissioner, 93 T.C. 475, 484

(1989), affd. without published opinion 933 F.2d 1014 (9th Cir.

1991), and cases cited therein; see also O'Neal v. Commissioner,

102 T.C. 666, 675-676 (1994). In this regard, respondent presented

two witnesses, both IRS revenue officers, who credibly testified as

to their searches for assets owned by the corporation and their

inability    to    find       any   such   assets    or    any     evidence        of   the

corporation's capacity to pay the taxes owed.                          Consequently,

whether an audit deficiency (or tax return) assessment was made

against     Jaussaud      Enterprises        is     not    relevant.           Jaussaud

Enterprises' income tax return for the year ended February 28,
                                       - 12 -

1991, clearly indicates taxes owed of $49,683 (which have not been

paid except for a $1,603.76 payment made on August 24, 1993).

Thus, respondent has established the existence of a liability owing

by Jaussaud Enterprises for which petitioner may be held liable as

a    transferee.    See    sec.    6901(b)       (providing     that   transferee

liability may relate either to the amount shown on a tax return or

to any deficiency).

       Finally, petitioner objected to the admission of Exhibit HH,

a letter from Willard D. Horwich, petitioner's counsel, to James

Canny, petitioner's accountant.          Petitioner claims that the letter

is   inadmissible   because       it   falls    within    the   attorney-client

privilege.     We   need   not     decide       whether   the   attorney-client

privilege is applicable (and we did not consider Exhibit HH)

because the admission, or exclusion, of Exhibit HH is moot inasmuch

as we hold petitioner is liable as a transferee under section 6901

for the reasons set forth infra.

Transferee Liability

       The issue for decision is whether petitioner is liable for

taxes owed by Jaussaud Enterprises as a result of the corporation's

transfer to petitioner of the Alhambra property.

       Respondent suggests two bases for claiming that Jaussaud

Enterprises owes taxes as the result of the transfer of the

Alhambra property to petitioner.          One is that Jaussaud Enterprises

was the seller of the Alhambra property to the unrelated third
                                 - 13 -

party and petitioner served merely as the straw man.            The second is

that   Jaussaud   Enterprises   made   a    distribution   of    appreciated

property to petitioner with respect to Jaussaud Enterprises stock,

in which case the corporation must recognize gain on the transfer

as if the corporation sold the property to petitioner.                  Sec.

311(b).    We need not decide which basis applies because in either

scenario Jaussaud Enterprises would realize the same amount of

income.

       Section 6901(a)(1)(A) authorizes the assessment of transferee

liability in the same manner as the taxes in respect of which the

tax liability was incurred.      It does not create a new liability,

but merely provides a remedy for enforcing the existing liability

of the transferor. Coca-Cola Bottling Co. v. Commissioner, 334 F.2d

875, 877 (9th Cir. 1964), affg. 37 T.C. 1006 (1962); Mysse v.

Commissioner, 57 T.C. 680, 700-701 (1972).          The Commissioner has

the burden of proving all the elements necessary to establish the

taxpayer's liability as a transferee except for proving that the

transferor was liable for the tax.         Sec. 6902(a); Rule 142(d).     In

the case at hand, the existence and the amount of the transferor's

tax liability have been established.

       We examine State law to determine the extent of a transferee's

liability for the debts of a transferor.          Commissioner v. Stern,

357 U.S. 39, 45 (1958); Hagaman v. Commissioner, 100 T.C. 180, 183-

185 (1993); Gumm v. Commissioner, supra at 479-480.              Because the
                               - 14 -

conveyance of the Alhambra property occurred in California, we

examine California law.   See Adams v. Commissioner, 70 T.C. 373,

389 (1978), affd. in part without published opinion and dismissed

in part 688 F.2d 815 (2d Cir. 1982).

     In 1986, California adopted the Uniform Fraudulent Transfer

Act (UFTA), which applies to transfers made or obligations incurred

on or after January 1, 1987.    Cal. Civ. Code sec. 3439.12 (West

1997).   The transfer at issue in this case--the conveyance of the

Alhambra property from Jaussaud Enterprises to petitioner--occurred

in July 1990.   Thus, the UFTA applies herein.

     California's UFTA contains two provisions for determining

whether a fraudulent conveyance occurred. The provision we believe

applicable in this case is section 3439.046 of the California Civil

Code (1997), which provides:

          A transfer made or obligation incurred by a debtor
     is fraudulent as to a creditor, whether the creditor's
     claim arose before or after the transfer was made or the
     obligation incurred, if the debtor made the transfer or
     incurred the obligation as follows:

          (a) With actual intent to hinder, delay, or defraud
     any creditor of the debtor.

     6
          The other potentially applicable provision is Cal. Civ.
Code sec. 3439.05 (West 1997), which relates to constructive
fraud that occurs after a creditor's claim arises. Arguably,
that is not the case here because the transfer from Jaussaud
Enterprises to petitioner created respondent's claim for tax, and
that transfer occurred before respondent's claim arose. However,
we need not decide this issue because either Cal. Civ. Code sec.
3439.04(b)(1) or (2) (West 1997) provides other bases for finding
constructive fraud.
                                 - 15 -

          (b) Without receiving a reasonably equivalent value
     in exchange for the transfer or obligation, and the
     debtor:

          (1) Was engaged or was about to engage in a
     business or a transaction for which the remaining assets
     of the debtor were unreasonably small in relation to the
     business or transaction; or

          (2) Intended to incur, or believed or reasonably
     should have believed that he or she would incur, debts
     beyond his or her ability to pay as they became due.

     The record is void of any evidence to support a finding that

petitioner (who entirely controlled Jaussaud Enterprises) had the

requisite intent to satisfy section 3439.04(a) of the California

Civil Code.     Petitioner lacked any knowledge of taxes or the

preparation of tax returns.     He relied entirely on his accountant,

James Canny, for preparing his tax returns.

     In addition, it is clear that petitioner did not understand

the tax consequences of the transfer of the Alhambra property from

Jaussaud Enterprises to himself followed by the sale to the third

party.   Petitioner credibly testified that he caused the transfer

of the property to himself because he was told by the title company

that the title had to be in an individual's name for the sale to be

completed. When petitioner's accountant learned of the transaction

nearly a year later, the accountant told petitioner that he might

be   indebted   to   Jaussaud   Enterprises.      The   accountant   told

petitioner to seek further tax advice.         Nearly 3 years after the

transaction, petitioner executed a promissory note in favor of

Jaussaud Enterprises, apparently to prevent the appearance of a
                                  - 16 -

corporate distribution or some other event that would impose tax

liability on either the corporation or petitioner.

     The record, however, supports a finding that the conveyance

from Jaussaud Enterprises to petitioner satisfies the requirements

for constructive fraud under section 3439.04(b)(1) and/or (2) of

the California Civil Code.       Jaussaud Enterprises did not receive

reasonably equivalent value in exchange for the transfer of the

Alhambra property to petitioner; in fact, Jaussaud Enterprises

received nothing for the property (which was sold for $329,000 in

an arm's-length transaction on the same day).           Moreover, we do not

believe the note which petitioner executed in favor of Jaussaud

Enterprises represented a quid pro quo for the transfer of the

Alhambra property:    (1) The promissory note was executed 3 years

after   the   conveyance   to   petitioner   on   the    advice   of   a   tax

professional (and the face amount of the note ($125,000) was

approximately $200,000 less than the amount realized ($329,000)

from the sale of the Alhambra property); (2) petitioner did not

understand that his receipt of the Alhambra property (or the sale

proceeds) constituted a loan from the corporation; and (3) we do

not believe the corporation ever intended to enforce the note's

terms (for example, the corporation took no legal action after

petitioner stopped making monthly payments).

        On Schedule L, Balance Sheets, of the income tax return

belatedly filed by Jaussaud Enterprises for the tax year ended
                                       - 17 -

February 28, 1991, there were only two items listed as assets

existing as of the end of the tax year:               $264 in cash and $192,3087

as "other current assets" which was identified as "note receivable-

-P.   Bresson".      When     asked    about    this    receivable,    petitioner

testified:    "I really don't know what that is." In petitioner's

initial    brief,    petitioner       treats    the    purported   receivable     as

"consideration from Bresson back to the corporation for whatever

Bresson received, whether it be the property or whether it be the

proceeds of sale."

      Schedule L also reflects that Jaussaud Enterprises had current

liabilities as of February 28, 1991, in the amount of $67,450

($49,683 as Federal tax payable and $17,767 as State tax payable)

and retained earnings of $125,122.

      We   believe   the    purported     $192,308      receivable    was   merely

bookkeeping legerdemain.         The purported receivable was created by

Mr. Canny, petitioner's accountant, long after the transfer of the

Alhambra    property    and    without     petitioner's      knowledge      of   its

existence or import.        Accordingly, we find the purported $192,308

receivable was not an asset of the corporation.                    Thus, the only

asset remaining after the transfer of the Alhambra property ($264

in cash) was insufficient for the corporation to pay its debts.

Consequently, we hold that respondent has established that the

      7
          Apparently, the $125,000 note executed on Aug. 1, 1993,
was intended to replace this $192,308 purported receivable.
                               - 18 -

transfer to petitioner was in constructive fraud of creditors under

section 3439.04(b)(1) and/or (2) of the California Civil Code.

     Although this holding would appear to resolve this case,

petitioner raises an issue that at first glance "seems overly

ambitious".   See Bankers Life & Cas. Co. v. United States, 142 F.3d

973, 974 (7th Cir. 1998).    We shall now address this issue.

Period of Limitations

     Petitioner argues that even if a fraudulent conveyance is

deemed to have occurred under the UFTA, the period of limitations

for filing actions under the UFTA expired before respondent's

issuance of a notice of transferee liability.    This, according to

petitioner, would preclude respondent from using section 6901 as a

remedy to collect the delinquent taxes of Jaussaud Enterprises. On

the other hand, respondent maintains that State limitations periods

may not cut short the time the Federal Government has to assess and

collect the tax liability of petitioner as a transferee under

section 6901.     For the reasons set forth below, we agree with

respondent.

     Section 6901(c) provides that the Commissioner may assess a

transferee for taxes owed by a transferor within 1 year after the

expiration of the period of limitations for assessment against the

transferor.     In the case at bar, Jaussaud Enterprises filed its

Federal corporation income tax return for the tax year ended

February 28, 1991, on March 5, 1993. (Generally, under section
                                     - 19 -

6501, the period of limitations for assessments against a taxpayer

is 3 years from the filing of the tax return.)                 Therefore, the

period of limitations for making an assessment against Jaussaud

Enterprises expired on March 5, 1996, and the Commissioner could

assess petitioner's transferee liability at any time up to March 5,

1997.      The notice of transferee liability to petitioner from

respondent was dated August 2, 1996.            Thus, pursuant to section

6901(c), respondent's notice of transferee liability to petitioner

was timely.

     Section 3439.09 of the California Civil Code provides:

          A cause of action with respect to a fraudulent
     transfer or obligation under this chapter is extinguished
     * * *:

          (a) Under subdivision (a) of Section 3439.04,
     within four years after the transfer was made or the
     obligation was incurred or, if later, within one year
     after the transfer or obligation was or could reasonably
     have been discovered by the claimant.

             (b) Under subdivision (b) of Section 3439.04 or
        Section 3439.05, within four years after the transfer was
        made or the obligation was incurred.

        Petitioner asserts that the UFTA limitations period applies,

rather than the limitations period under section 6901(c), and

therefore     the   period   of   limitations     for   assessment    against

petitioner expired prior to respondent's issuance of the notice of

transferee liability to petitioner. Petitioner further claims that

even if     respondent   did   not   originally    know   of   the   transfer,

respondent obtained such knowledge by September 1994, the date of
                                 - 20 -

Revenue Officer Ryland's transferee liability report discussing the

conveyance.    (This assumes, of course, that section 3439.04(a) of

the California Civil Code is applicable, which we have found supra

it was not.)    Thus, 1 year from the date of respondent's knowledge

of the transfer would have been no later than September 1995, still

nearly 1 year short of the date of the notice of transferee

liability against petitioner.          Accordingly, we are required to

determine which period of limitations, Federal or State, controls

the time for assessing transferee liability.

       The Supreme Court has stated that the United States is not

bound by State statutes of limitations in enforcing its rights,

whether the action is brought in Federal or State court.             United

States v. Summerlin, 310 U.S. 414, 416 (1940), and cases cited

thereat. Petitioner contends, however, that section 3439.09 of the

California Civil Code is not a statute of limitations, but rather

is an element of the cause of action which provides for the

complete extinguishment of the fraudulent conveyance claim (and

thus   the   transferee   liability)    where   the   time   limit   is   not

satisfied.

       Petitioner relies on United States v. Vellalos, 780 F. Supp.

705 (D. Haw. 1992), appeal dismissed 990 F.2d 1265 (9th Cir. 1993),

in arguing that California's UFTA limitations period requires an

outcome different than that in United States v. Summerlin, supra.

In Vellalos, the United States District Court for Hawaii examined
                                    - 21 -

Hawaii's     UFTA   statute,     which    is    identical   to   the   relevant

California statute now before us. Therein, nearly 1 year after the

limitations period expired under the Hawaii UFTA, the Federal

Government      sought   to   foreclose    on    property   conveyed    to   the

defendant. (The United States proceeded directly under the UFTA to

obtain its remedy because the limitations period under section

6901(c) for transferee liability had expired.)              The United States

argued that it was not bound by the Hawaii UFTA limitations period

because of the rule in United States v. Summerlin, supra.

     The court interpreted the UFTA's limitations period not as a

statute    of    limitations     with    respect    to   Federal   transferee

liability, but rather as an element of the cause of action for

fraudulent conveyance which would be entirely extinguished if not

timely filed. In applying the UFTA's limitations period, the court

rejected the Government's argument, stating that "There is an

important distinction between cases involving the government's

common law right to collect on a debt and cases involving a

carefully delimited state statutory right."                 United States v.

Vellalos, supra at 707.           The court distinguished the Florida

statute in Summerlin from Hawaii's UFTA on the basis that the

latter contained an extinguishment provision for a State-created

cause of action whereas the former imposed a limitations period on

an action arising out of a Federal statute (the Act of June 27,

1934, 48 Stat. 1246).         The court noted the explicit intent of the
                                      - 22 -

drafters of the UFTA in their commentary to avoid the rule of

Summerlin       through    the    creation     of   the    claim       extinguishment

provision:

     "This section is new. Its purpose is to make clear that
     lapse of the statutory periods prescribed by the section
     bars the right and not merely the remedy.... The section
     rejects the rule applied in the United States v.
     Gleneagles Inv. Co., 565 F. Supp. 556, 583 (M.D. Pa.
     1983) (state statute of limitations held not to apply to
     action by United States based on Uniform Fraudulent
     Conveyance Act)."

United States v. Vellalos, supra at 707 (quoting Uniform Fraudulent

Transfer Act sec. 9 (Commentary), 7A U.L.A. 665-666 (1984)).                    (The

same language appears in the Legislative Committee Comment of the

California Assembly in its 1986 adoption of the UFTA.                      Cal. Civ.

Code sec. 3439.09 (Legislative Committee Comment--Assembly).)                       The

court    went    on   to   find   that   the    State     had    the    authority   to

extinguish the cause of action, referring to the 10th Amendment to

the United States Constitution.           The court stated that the Federal

Government was seeking to extend Summerlin beyond its holding to

cover all State laws which could be affected by the common law

right of the Government to collect its debts.                   The court suggested

the Government create its own Federal fraudulent conveyance statute

with an unlimited limitations period to remedy the problem.8

     8
          We are mindful that as part of the Crime Control Act of
1990, Pub. L. 101-647, sec. 3611, 104 Stat. 4959, Congress
created provisions for voiding fraudulent transfers as to debts
to the United States, and established applicable limitations
periods. The effective date of the fraudulent transfer
                                                   (continued...)
                              - 23 -

     The decision in United States v. Vellalos, supra, has been the

subject of much discussion and has been generally rejected by other

District Courts in tax collection cases where the Government has

sought to foreclose on property transferred to third parties. See,

e.g., United States v. Cody, 961 F. Supp. 220 (S.D. Ind. 1997);

United States v. Kattar, 97-1 USTC par. 50,132 (D.N.H. 1996);

United States v. Smith, 950 F. Supp. 1394 (N.D. Ind. 1996); United

States v. Zuhone, 78 AFTR 2d 96-5106, 96-2 USTC par. 50,366 (C.D.

Ill. 1996); United States v. Hatfield, 77 AFTR 2d 96-1969, 96-2

USTC par. 50,342 (N.D. Ill. 1996); Flake v. United States, 76 AFTR

2d 95-6957, 95-2 USTC par. 50,588 (D. Ariz. 1995); Stoecklin v.

United States, 858 F. Supp. 167 (M.D. Fla. 1994).     The District

Court for the Eastern District of California, however, approved the

reasoning of Vellalos in examining California's UFTA provisions,

but held for the Government on other grounds.     United States v.

Wright, 76 AFTR 2d 95-7526, 96-1 USTC par. 50,005 (E.D. Cal. 1995),

affd. without published opinion 87 F.3d 1325 (9th Cir. 1996).

     The Court of Appeals for the Ninth Circuit, the court to which

an appeal in this case lies, recognized the issue raised in

Vellalos, but found it did not have the occasion to address it

(although the court did conclude that the UFTA contained a claim

extinguishment provision).   United States v. Bacon, 82 F.3d 822

     8
      (...continued)
provisions therein is subsequent to the date of the transfer
involved in the instant case.
                                     - 24 -

(9th Cir. 1996) (considering the UFTA as adopted by the State of

Washington). Other Courts of Appeals, however, have addressed this

issue (albeit without great elaboration) and have applied the rule

in   Summerlin   to     actions    under   the   UFTA    or   other    statutory

provisions, as well as actions under common law.              See United States

v. Wurdemann, 663 F.2d 50 (8th Cir. 1981); United States v. Fernon,

640 F.2d 609 (5th Cir. 1981); see also United States v. Moore, 968

F.2d 1099 (11th Cir. 1992).         (The District Court in United States

v. Vellalos, supra at 708 n.3, criticized the decisions in Fernon

and Wurdemann as "an overly mechanical application of the dicta in

Summerlin     without    serious     consideration       of   the   significant

implications such a rule has for state sovereignty".)

      The situation in Vellalos is factually distinguishable from

the situation herein.       In Vellalos, the Government was unable to

invoke section 6901 because it missed the limitations period

prescribed by subsection (c).              Therefore, it relied on State

foreclosure    proceedings    as    a   means    for    collection.9     (It   is

unclear whether the District Court in Vellalos would have reached

its same conclusion had the Government proceeded timely under

section 6901.)        Here, however, respondent has proceeded timely

      9
          In United States v. California, 507 U.S. 746, 758
(1993), the Supreme Court recognized that it is "a difficult
question" whether a State law action brought by the United States
is subject to Federal or State limitations periods. See Santiago
v. United States, 884 F. Supp. 45 (D.P.R. 1995); United States v.
Perrina, 877 F. Supp. 215, 218 n.5 (D.N.J. 1994).
                                  - 25 -

under section 6901 and is using that section rather than State law

to assert a claim against petitioner as transferee. (In this

regard, we disagree with the dissent's assertion that respondent's

claim against petitioner is not created under Federal law, but

rather    under   California's    UFTA.    See   Dissenting    op.   p.   33.)

Therefore, petitioner's reliance on Vellalos is misplaced.10

     Further, the Court of Appeals for the Ninth Circuit has not

affirmatively     approved   of   the   District   Court's     exception   in

Vellalos to the general rule of United States v. Summerlin, 310

U.S. 414 (1940), with respect to limitations periods in transferee

liability cases.11    United States v. Bacon, supra.      Accordingly, we

are not bound to follow any such exception.                   See Golsen v.

Commissioner, 54 T.C. 742 (1970), affd. 445 F.2d 985 (10th Cir.

     10
          The dissent's reliance on Custer v. McCutcheon, 283
U.S. 514 (1931), is similarly misplaced. Dissenting op. p. 34.
Like the situation in United States v. Vellalos, 780 F. Supp. 705
(D. Haw. 1992), in Custer the United States pursued its remedies
under State law rather than under Federal law. Therefore, the
situation in Custer is distinguishable from the situation herein.
Moreover, it should be noted that Custer was decided several
years before United States v. Summerlin, 310 U.S. 414 (1940).
     11
          The Court of Appeals for the Ninth Circuit has created
an exception to the general rule of United States v. Summerlin,
supra, "[such] that a state statute which provides a time
limitation as an element of a cause of action or as a condition
precedent to liability applies to suits by the United States even
if there is an otherwise applicable federal statute of
limitations." United States v. California, 655 F.2d 914, 918
(9th Cir. 1980) (citing United States v. Hartford Accident &
Indem. Co., 460 F.2d 17, 19 (9th Cir. 1972)). The Court of
Appeals for the Ninth Circuit, however, has never applied this
exception in transferee liability cases.
                                  - 26 -

1971).     Consequently, the situation before us is one of first

impression, and we are free to adopt our own interpretation of the

rule in United States v. Summerlin, supra.

     In United States v. Summerlin, supra, the Supreme Court

addressed a claim of the United States against an estate in

Florida.   (A   county   judge   in   Florida   denied   the   Government's

petition to allow the claim, which arose under a Federal statute,

determining that the claim was "void" because it was not filed

within 8 months from the time of the first publication of the

notice to creditors as required by Florida law.)               The Supreme

Court, in holding that the United States was not bound by State

statutes of limitations (or subject to the defense of laches) in

enforcing its rights, stated that "When the United States becomes

entitled to a claim, acting in its governmental capacity and

asserts its claim in that right, it cannot be deemed to have

abdicated its governmental authority so as to become subject to a

state statute putting a time limit upon enforcement."           Id. at 417.

The Court then recognized that the Florida statute was not even

considered a statute of limitations, but was referred to as a

statute of "non-claim".12 Regardless, the Court rejected the notion

     12
          The Court concluded that this interpretation was drawn
from language in the statute which provided that a claim not
filed within the specified period "'shall be void even though the
personal representative has recognized such claim or demand by
paying a portion thereof or interest thereon or otherwise.'"
United States v. Summerlin, supra at 417.
                                 - 27 -

that claims of the United States could be invalidated because they

were not filed within the prescribed period of time.           The Court

reasoned:

           If this were a statute merely determining the limits
      of the jurisdiction of a probate court and thus providing
      that the County Judge should have no jurisdiction to
      receive or pass upon claims not filed within the eight
      months, while leaving an opportunity to the United States
      otherwise to enforce its claim, the authority of the
      State to impose such a limitation upon its probate court
      might be conceded. But if the statute, as sustained by
      the state court, undertakes to invalidate the claim of
      the United States, so that it cannot be enforced at all,
      because not filed within eight months, we think the
      statute in that sense transgressed the limits of state
      power.

Id.

      We do not read Summerlin as requiring a distinction between a

statute of limitations and a limitations period that is an element

of a cause of action, and we hold that no such distinction is

relevant in this case.      The Supreme Court in Summerlin did not

recognize   the   Florida   limitations    period   as   a   statute   of

limitations, and there is no language in that case limiting its

holding to such statutes.    See FSLIC v. Landry, 701 F. Supp. 570,

573 (E.D. La. 1988). The persuasive case law supports our holding.

See United States v. Cody, 961 F. Supp. at 221.

      Moreover,   the   public   policy   for   exempting    the   Federal

Government from the application of State statutes of limitations is

not furthered by carving out exceptions where the State integrates

the limitations period as an element of the cause of action which
                                    - 28 -

could then be barred if untimely.       See Guaranty Trust Co. v. United

States, 304 U.S. 126, 136 (1938). The preservation and protection

of public rights, revenues, and property from the negligence of

public officers deteriorates when exceptions are made for time

limitations that have the same purpose as statutes of limitations

but in a different form.      And the extinguishment provision of the

UFTA was created precisely to circumvent the rule in United States

v. Summerlin, supra, a provision that the Court of Appeals for the

Ninth Circuit described as a "dressed-up statute of limitations".

United States v. Bacon, 82 F.3d at 824 n.2; see Dillman v.

Commissioner, 64 T.C. 797, 806 (1975) ("If the State statute

attempts to abrogate or void the existing claim of the United

States by use of a different timetable it will be attempting to

reach beyond its powers.      By whatever name such a statute might be

called it would be in effect a statute of limitations not binding

on the United States.").      While a State may limit the jurisdiction

of its own courts for private claimants, time limitations imposed

on   the   United   States'   efforts       to    collect   its   taxes   would

"transgress   the   limits    of    state    power."        United   States    v.

Summerlin, supra at 417.

      Federal revenue law requires national application that is not

displaced   by   variations    in    State       law.   Tax   assessment      and

collection against a transferee in transferee liability cases is a

difficult task; to complete such a task within arbitrary time
                                     - 29 -

constraints    of   State    law   would   be   an   even    greater      burden,

particularly where, as in the case herein, the transferor is

delinquent in filing its tax return.

     Additionally, the Supreme Court has consistently held that,

although State law is controlling as to the nature and extent of

the property rights in applying a Federal revenue act, Federal law

determines the consequences of those rights.                United States v.

National Bank of Commerce, 472 U.S. 713, 722-723 (1985); Aquilino

v. United States, 363 U.S. 509, 513 (1960).           "'[O]nce it has been

determined that state law creates sufficient interests in the * *

* [taxpayer] to satisfy the requirements of * * * [the statute],

state law is inoperative,' and the tax consequences thenceforth are

dictated by federal law."            United States v. National Bank of

Commerce, supra at 722 (quoting United States v. Bess, 357 U.S. 51,

56-57 (1958)).

     In the situation before us we are concerned only with whether

the Alhambra property was fraudulently conveyed to petitioner under

California's UFTA; we are not concerned with whether the UFTA would

permit the Federal Government to assess petitioner for transferee

liability as a result of the fraudulent conveyance.                  The latter

issue, including the time within which to assess, is resolved by

Federal revenue law, not State property law.              See sec. 6901.

     Thus, we hold that respondent is not bound by the limitations

period   in   California's    UFTA    in   seeking   to     assert   or   assess
                               - 30 -

transferee   liability   against   petitioner   under   section   6901.

Conclusion

     In conclusion, we hold that section 6901(c) is the applicable

limitations period to which respondent is bound in asserting

transferee liability against petitioner for the unpaid taxes of

Jaussaud Enterprises.     For purposes of petitioner's transferee

liability under section 6901, California's limitations period does

not control.   As a result, we hold that respondent timely issued

the notice of transferee liability and has established petitioner's

liability as a transferee.

     To reflect the foregoing,

                                            Decision will be entered

                                      for respondent.

Reviewed by the Court.

     COHEN, CHABOT, SWIFT, GERBER, PARR, WELLS, RUWE, COLVIN,
CHIECHI, LARO, GALE, and MARVEL, JJ., agree with this majority
opinion.
                                    - 31 -

       HALPERN, J., dissenting:

I.    Introduction

       The majority’s conclusion that respondent has a right under

the   California     Uniform    Fraudulent    Transfer     Act   to    enforce   a

liability against petitioner fails to recognize and apply the

distinction between statutes of limitations, which set maximum time

periods during which certain actions can be brought or rights

enforced,     and    temporal    rights   created     by    State      statutes.

Therefore, I dissent.

II.   Section 6901

       To use the courts to enforce a liability, the Government, like

any   other   creditor,   must    establish    a   basis    in   law    for   that

liability.     Section 6901 does not provide any such basis.1                  See

Commissioner v. Stern, 357 U.S. 39, 42 (1958) (interpreting section

311, I.R.C. 1939, the predecessor of section 6901).                      Section

6901(a) merely establishes the deficiency procedure as a mechanism

for collecting certain existing, enumerated liabilities.                  One of

the enumerated liabilities is the liability of a transferee of

property of a taxpayer in the case of the income tax.                         Sec.

6901(a)(1)(A)(i).      Section 6901(c) imposes a period of limitations

for the assessment of the enumerated liabilities.                Granting that

       1
           Unless otherwise indicated, all section references are
to the Internal Revenue Code in effect for the year in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
                                        - 32 -

petitioner is the transferee of property of a taxpayer, the first

question we must address is whether there is any basis in law for

respondent’s claim that petitioner has some liability to respondent

on account thereof.

III.   California Uniform Fraudulent Transfer Act

       A.    Introduction

       As the majority acknowledges, with the exception of proving

that the taxpayer (Jaussaud) was liable for the tax, respondent has

the burden of proving all of the elements necessary to establish

petitioner’s        liability   as     the   transferee   of   property      of   the

taxpayer. Sec. 6902(a); Rule 142(d). The majority is also correct

in stating that we must examine the law of California to determine

petitioner’s liability, if any.                Majority op. p. 13.       Respondent

argues, and petitioner and the majority agree, that the applicable

law of California is the California Uniform Fraudulent Transfer

Act,   Cal.    Civ.     Code    sec.    3439    through   3439.12    (West    1997)

(hereafter, CUFTA and section 3439.xx, respectively).                    The CUFTA

provides remedies to creditors with respect to fraudulent transfers

made by debtors.         Section 3439.04 defines a fraudulent transfer,

and section 3439.07 provides remedies to creditors. Those remedies

delimit both the right of the creditor to demand something from a

transferee and the offsetting duty (liability) of the transferee to

comply      (that    duty   hereafter    being     referred    to   as   transferee

liability).         Section 3439.09 sets forth certain time limits within
                               - 33 -

which an action must be brought and provides for the extinguishment

of the cause of action created by the CUFTA if those time limits

are exceeded.    In the case of a fraudulent transfer within the

meaning of section 3439.04(b), the cause of action is extinguished

unless an action is brought or a levy is made pursuant to section

3439.07 within 4 years after the fraudulent transfer is made.

     B.   Section 3439.09

     Section 3439.09 is part of the CUFTA and, like the section

3439.07 remedies, it delimits the right (and offsetting transferee

liability) created by the CUFTA.   It delimits that right, however,

not in terms of specifying the available remedies, as does section

3439.07 but, rather, in terms of specifying the temporal dimension

of the right.   Section 3439.09 is not a statute of limitations.    It

does not operate by making the judicial mechanism unavailable to

enforce the right. Rather, it delimits the existence of the State-

created right; thus, the question of enforcement is moot.          The

distinction between a statute of limitations and a temporally

delimited right is widely recognized.      See, e.g., Crandall v.

Irwin, 39 N.E.2d 608, 610 (Ohio 1942), in which the Supreme Court

of Ohio held:

     A wide distinction exists between pure statutes of
     limitation and special statutory limitations qualifying
     a given right. In the latter instance time is made an
     essence of the right created, and the limitation is an
     inherent part of the statute or agreement out of which
     the right in question arises, so that there is no right
     of action whatever independent of the limitation.     A
     lapse of the statutory period operates, therefore, to
                               - 34 -

      extinguish the right altogether.

      C.   Respondent’s Failure To Carry the Burden of Proof

      The Government did not demonstrate that the transfer occurred

within 4 years of the date of the notice of transferee liability

against petitioner.    Majority op. p. 18.    Therefore, I conclude

that the Government has not sustained its burden of proving that

petitioner was liable as a transferee under California law.

IV.   The Summerlin Issue

      A.   Quod Nullum Tempus Occurrit Regi

      The majority rests its holding on the ancient rule of quod

nullum tempus occurrit regi--"that the sovereign is exempt from the

consequences of its laches, and from the operation of statutes of

limitations".    See Guaranty Trust Co. v. United States, 304 U.S.

126, 132 (1938).   The majority explains that the Supreme Court has

already addressed the distinction between statutes of limitations

and "non-claim" statutes in United States v. Summerlin, 310 U.S.

414 (1940).   The majority applies Summerlin here to dispose of the

case on the theory that section 3439.09 amounts to a nonclaim

statute, and that is the equivalent of a statute of limitations.

The Supreme Court in Summerlin held that "if the statute * * *

undertakes to invalidate the claim of the United States, so that it

cannot be enforced at all, because not filed within * * * [the

statutory period], we think the statute in that sense transgressed

the limits of state power."    Id. at 417.
                                       - 35 -

     The distinction between "pure" statutes of limitations and

"non-claim" statutes relates to how the statute achieves the

limitation.2        The Supreme Court held that such a distinction is

irrelevant     if    the   result   is    that   the    sovereign's     claim   is

invalidated.        Id.    That is not, however, a relevant distinction

here.

     The issue here is not how the statute limits a right (i.e., by

denying the means of enforcing the right or by extinguishing the

right), but rather upon what right the limitation acts. The United

States’   claim      in    Summerlin     arose   when   the   Federal    Housing

Administrator became the assignee of a claim against a decedent’s

estate.   The Government had an existing right that would have been

invalidated by the provisions of a State statute had the State

statute been held applicable.            To the contrary, respondent's CUFTA

claim against petitioner, as a transferee, is not created by

Federal or common law.        Respondent makes no claim except under the

CUFTA, and, therefore, the issue is whether respondent has any

rights as a creditor under the CUFTA.              The issue here does not

involve an extension or modification of the Summerlin doctrine,

     2
          A "pure" statute of limitations merely limits or
restricts the time within which a right, otherwise unlimited, may
be enforced. Vaughn v. United States, 43 F. Supp. 306, 308 (E.D.
Ark. 1942). A "non-claim" statute operates by extinguishing the
underlying substantive right. See United States v. Summerlin,
310 U.S. 414 (1940). Both "pure" statutes of limitations and
"non-claim" statutes are, however, statutes of limitations in
that they are statutes that limit causes of action. Beach v.
Mizner, 3 N.E.2d 417, 419 (Ohio 1936).
                                - 36 -

where the Supreme Court refused to apply a State statute of

limitations to cut off the Government’s existing cause of action.

Rather,   the    Summerlin    doctrine     is   inapposite   to   these

circumstances.

     B.   The Supreme Court

     The Supreme Court has held that temporal limitations contained

in State statutory rights are not statutes of limitations that are

subject to the rule of quod nullum tempus occurrit regi.            See

Custer v. McCutcheon, 283 U.S. 514 (1931).       In Custer, the Supreme

Court reversed the decision of the Court of Appeals for the Ninth

Circuit (Ninth Circuit) affirming a judgment of the District Court

for Idaho in favor of a U.S. marshal.        The marshal had levied an

execution against Custer upon a judgment entered in favor of the

United States 9 years earlier.      The Idaho statute governing the

execution process, which applied to proceedings in the District

Court as if Congress had enacted the statute, provided that "[t]he

party in whose favor judgment is given, may, at any time within

five years after the entry thereof, have a writ of execution issued

for its enforcement."   Id. at 515.      The Supreme Court, recognizing

that absent specific provisions to the contrary, statutes of

limitations do not bind the sovereign, held that the statute was

not a statute of limitations.    Rather, the Court held that it was

a statute granting a right of execution, and the time element is an
                                   - 37 -

integral part of the statutory right conferred.              Id. at 516-517.

Although the marshal argued that, on grounds of public policy, the

sovereign ought not be subject to restrictions binding on private

suitors, the Supreme Court saw no valid reason for making such an

exception:

     The time limit for issuing executions is, strictly
     speaking, not a statute of limitations. On the contrary,
     the privilege of issuing an execution is merely to be
     exercised within a specified time, as are other
     procedural steps in the course of a litigation after it
     is instituted. * * *

Id. at 519.

     The Supreme Court has also recognized that the right of the

Government to be free from statutes of limitations does not mean

the Government can pursue a cause of action where none exists

under State law or otherwise.           See United States v. California,

507 U.S. 746 (1993); Guaranty Trust Co. v. United States, supra.

     C.    The Court of Appeals for the Ninth Circuit

     The Ninth Circuit has similarly recognized that the Summerlin

doctrine is inapplicable to State statutes that provide a time

limitation as an element of a cause of action.             See United States

v. California, 655 F.2d 914 (9th Cir. 1980).              In California, the

Ninth     Circuit   held   that   the    claim   filing     requirements   of

California Government Code section 911.2, which required that all

claims for money or damages for which the State is liable be

presented within 1 year of the date that the claim arose, was

applicable to the Federal Government. The Government was pursuing
                                - 38 -

a claim against the State of California pursuant to California

Health and Safety Code section 13009 for the Government’s expense

of fighting a fire negligently set to a national forest.           The

majority     conveniently   dismisses    such   relevant    precedent,

relegating its mention to a footnote, and noting that the Ninth

Circuit has never applied this exception in transferee liability

cases.     The majority does not, however,

provide any reasoning as to why there is a relevant distinction

between substantive claims provided for by California State law

that regard transferee liability versus liability in connection

with the expenses incurred for fighting negligently set fires.

     Another relevant Ninth Circuit case is United States v.

Hartford Accident & Indem. Co., 460 F.2d 17, 18 (9th Cir. 1972).

There, the Ninth Circuit held that the United States "was barred

from recovery because of its failure to comply with the California

Insurance Code" requiring suit to be brought within 1 year.        Id.

The Ninth Circuit recognized that United States v. Summerlin, 310

U.S. 414 (1940), provided "clear authority for the proposition

that an action vested in the United States cannot be defeated by

a state statute of limitations".         United States v. Hartford

Accident & Idem. Co., supra at 19.       However, the Ninth Circuit

determined that neither Summerlin nor its progeny "hold that

considerations of federal supremacy can create a cause of action

where none exists under state law or otherwise."           Id. (citing
                                      - 39 -

United States v. Summerlin, supra at 417).              Therefore, the Ninth

Circuit distinguished pure statutes of limitations from State-

created temporal rights.

     D.   Distinguishing a Temporal Right From a Temporal
          Limitation

     The cases cited from the Courts of Appeals by the majority in

order to further its approach do not address the issue of whether

a State can provide a limited temporal right, as opposed to

temporally limiting the sovereign from exercising a right that is

not otherwise so limited.          See United States v. Moore, 968 F.2d

1099 (11th Cir. 1992) (holding without citation to the Georgia

statute   in    issue    that   the    statute   is     a    State    statute    of

limitations); United States v. Wurdemann, 663 F.2d 50 (8th Cir.

1981) (holding      without     any   analysis   that       State    "statutes   of

limitation" do not apply to the sovereign); United States v.

Fernon, 640 F.2d 609 (5th Cir. 1981) (interpreting Florida statute

section 95.11(6) to be a statute of limitations, and not an

element of a State-created right).             I agree with the criticisms

made in United States v. Vellalos, 780 F. Supp. 705, 708 n.3 (D.

Haw. 1992), appeal dismissed 990 F.2d 1265 (9th Cir. 1993), that

these cases are "an overly mechanical application of the dicta in

Summerlin      without   serious      consideration     of     the    significant

implications such a rule has for state sovereignty."3

     3
            There are numerous cases that deal with the question of
                                                     (continued...)
                                 - 40 -

     It is true that we are not bound to follow United States v.

Vellalos, supra.    The majority, however, attempts to distinguish

it by noting that, in Vellalos, the Government was "unable to

invoke section 6901 because it missed the limitations period

prescribed by subsection (c).       Therefore, it relied on State

foreclosure proceedings as a means for collection."       Majority op.

p. 24.   The majority explains that it is not clear whether the

District Court in Vellalos would have reached its same conclusion

had the Government proceeded timely under section 6901, which is

the case here.     I disagree.   The District Court in Vellalos was

explicit in holding that

          The   Tenth  Amendment      to   the   United    States
     Constitution provides:

          3
           (...continued)
whether, in substance, a temporal limitation should be treated as
a temporally limited right. See, e.g., Fairbanks-Morse & Co. v.
Alaska Palladium Co., 32 F.2d 233, 234 (9th Cir. 1929) (quoting
Partee v. St. Louis & S.F.R. Co., 204 F. 970, 972 (8th Cir.
1913)):

          A statute which in itself creates a new liability,
     gives an action to enforce it unknown to the common
     law, and fixes the time within which that action may be
     commenced, is not a statute of limitations. It is a
     statute of creation, and the commencement of the action
     within the time it fixes is an indispensable condition
     of the liability and of the action which it permits.
     Such a statute is an offer of an action on condition
     that it be commenced within the specified time. If the
     offer is not accepted in the only way in which it can
     be accepted, by the commencement of the action within
     the specified time, the action and the right of action
     no longer exist, and the defendant is exempt from
     liability.
                                    - 41 -

          The powers not delegated to the United States by the
     Constitution, nor prohibited by it to the States, are
     reserved to the States respectively, or to the people.
          U.S. Const. amend. X. The law of real property has
     traditionally been within the province of the states.
     The government has cited no federal statute that would
     restrict the states' rights to legislate in the area of
     fraudulent real estate transfers.
          Here, the government is seeking to take advantage of
     a right that is entirely within the domain of the state.
     This right was created by a state statute and
     specifically limited by the text of that statute. This
     is not a straightforward question of debt collection
     under the common law as was addressed by the Supreme
     Court in Summerlin. * * *

United States v. Vellalos, supra at 707-708.

      Further, the majority's review of United States v. Bacon, 82

F.3d 822 (9th Cir. 1996), ignores a significant holding.                 The

issue in Bacon was whether Washington State's Uniform Fraudulent

Transfer Act (WSUFTA) may be applied retroactively.             The Ninth

Circuit concluded that it is precisely because the WSUFTA contains

an extinguishment provision, rather than a remedial or procedural

limitation, that it does not apply retroactively absent an express

provision to the contrary.

V.   Conclusion

      For the foregoing reasons, I believe that the time period

contained   in    CUFTA   section     3439.09   is   not   a   statute   of

limitations, but rather is an inherent element of the right

created.    Although the effect of the provision is one of "non-

claim" (i.e., it extinguishes the underlying substantive right),

rather than a mere bar to enforcement, this difference is not
                               - 42 -

controlling.   What is dispositive is that the right that the

Government claims to possess against petitioner as a transferee is

nonexistent but for the provisions of California State law, and

California has decided to provide only a temporal right against

transferees in these instances.    Respondent and the majority may

regret that California did not provide a different rule than it

did, but it is not our province to legislate on behalf of the

States. In limited circumstances, as illustrated by the Summerlin

doctrine, we may ignore State statutes of limitations, but that is

the extent of our authority.   To hold otherwise is an encroachment

on State sovereignty and raises problematic constitutional issues.

     WHALEN, BEGHE, and THORNTON, JJ., agree with this dissenting

opinion.