John Marshall v. Cir

• Court: Court of Appeals for the Ninth Circuit
• Decided: July 23, 2019
• Docket: 17-72955
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS JUL 23 2019 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

JOHN M. MARSHALL; KAREN M. No. 17-72955 MARSHALL, Transferees, Tax Ct. No. 28782-11 Petitioners-Appellants,

v. MEMORANDUM*

COMMISSIONER OF INTERNAL REVENUE,

Respondent-Appellee.

MARSHALL ASSOCIATED, LLC, No. 17-72958 Transferee, Tax Ct. No. 28661-11 Petitioner-Appellant,

v.

ESTATE OF RICHARD L. MARSHALL, No. 17-72960 DECEASED, Patsy L. Marshall, Personal Representative; PATSY L. MARSHALL, Tax Ct. No. 27241-11

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Petitioners-Appellants,

Appeals from Decisions of the United States Tax Court

Argued and Submitted July 11, 2019 Portland, Oregon

Before: TASHIMA, GRABER, and OWENS, Circuit Judges.

Petitioners John, Karen, Richard, and Patsy Marshall (“the Marshalls”) and

Marshall Associated, LLC (“MA, LLC”) appeal from the Tax Court’s decisions on

their petitions challenging notices of transferee liability regarding unpaid taxes by

Marshall Associated Contractors, Inc. (“MAC”). We have jurisdiction under 26

U.S.C. § 7482. We review the Tax Court’s conclusions of law de novo and its

factual findings for clear error. Slone v. Comm’r, 810 F.3d 599, 604 (9th Cir.

2015) (Slone I). We affirm.

1. The Tax Court properly held that the Marshalls and MA, LLC are

liable for MAC’s unpaid taxes under 26 U.S.C. § 6901 and the Oregon Uniform

Fraudulent Transfer Act (“OUFTA”). See id. at 604-05 (setting forth two-pronged

Stern test).

2 For the state-law prong, the Tax Court properly determined that, under

OUFTA, the multiple steps in the transaction through which the Marshalls sold

their MAC stock could be “collapsed” and deemed a “transfer” from MAC to the

Marshalls if the Marshalls had at least constructive knowledge that MAC’s taxes

would not be paid. See Or. Rev. Stat. §§ 95.200(12) (defining “[t]ransfer” broadly

as “every mode, direct or indirect, absolute or conditional, voluntary or

involuntary, of disposing of or parting with an asset or an interest in an asset”),

95.290 (providing that “the principles of . . . equity” supplement OUFTA’s

provisions), 95.300 (providing that OUFTA “shall be applied and construed to

effectuate its general purpose to make uniform the law with respect to the subject

of [OUFTA] among states enacting it”); Slone v. Comm’r, 896 F.3d 1083, 1085-88

(9th Cir. 2018) (Slone II) (holding that a similar stock sale could be collapsed

under the comparable Arizona UFTA if the former shareholders had at least

constructive knowledge of the tax-avoidance purpose), cert. denied, 139 S. Ct.

1348 (2019); Diamond Fruit Growers, Inc. v. Goe Co., 409 P.2d 909, 910 (Or.

1966) (holding that a court of equity may “look through the form of the transaction

to the substance”).

The Tax Court did not clearly err in finding that the Marshalls had at least

constructive knowledge that MAC’s taxes would be unpaid following the stock

sale. See Mark v. State ex rel. Dep’t of Fish & Wildlife, 84 P.3d 155, 163 (Or. Ct.

3 App. 2004) (holding that, under Oregon law, “[c]onstructive knowledge exists

when a person is aware of ‘information as would lead a prudent man to believe that

the fact existed, and that if followed by inquiry must bring knowledge of the fact

home to him’” (citation omitted)); see also Slone II, 896 F.3d at 1087-88.

In addition, the “transfer” from MAC to the Marshalls and MA, LLC was

constructively fraudulent under OUFTA because the federal tax claim arose before

the stock sale, MAC did not receive “a reasonably equivalent value in exchange,”

and MAC was left insolvent. Or. Rev. Stat. § 95.240(1).

For the federal-law prong, the Tax Court properly determined, looking

through the form of the MAC stock sale to its substance, that it lacked any business

purpose other than tax avoidance and that the transaction lacked any economic

substance other than the creation of tax benefits. See Slone I, 810 F.3d at 605-06;

see also Slone II, 896 F.3d at 1086.

2. The Tax Court also properly determined the amount owed by the

Marshalls and MA, LLC. The Tax Court did not clearly err in finding that the

Marshalls failed to show that MAC’s tax liability should be reduced by refreshing

MAC’s expired net operating losses. See Boyd Gaming Corp. v. Comm’r, 177

F.3d 1096, 1098 (9th Cir. 1999) (“The determination that a taxpayer failed to

produce sufficient evidence to support a deduction constitutes a factual finding

subject to the ‘clearly erroneous’ standard of review.” (citation omitted)).

4 Further, the Tax Court properly determined that, under Oregon law, the

Marshalls are liable for pre-notice interest. See Or. Rev. Stat. § 82.010(1)(a)

(providing that interest is payable on “[a]ll moneys after they become due”);

Strawn v. Farmers Ins. Co. of Or., 297 P.3d 439, 458 (Or. 2013) (noting that the

justification for interest under Or. Rev. Stat. § 82.010(1)(a) is that “[o]nce due, the

debtor has the use of money to which the debtor is not entitled, while the delay in

payment deprives the creditor of that use”).

Finally, the Tax Court did not improperly double count the noncash assets as

a transfer to both the Marshalls and MA, LLC because they are jointly and

severally liable for MAC’s unpaid tax liabilities and the noncash assets will be

considered only once in collecting against the Marshalls and MA, LLC. See Or.

Rev. Stat. § 95.270(2) (generally limiting transferee liability to “the value of the

asset[s] transferred”).

AFFIRMED.