Audio Investments v. Robertson

SANDERS, C.J., and SHAW, J.,

concur.

First Citizens Bank and Trust Company v. Scofield, 286 S.C. 520, 335 S.E.2d 248 (1985).

Although not cited by the United States, it can be judicially noticed that courts of the State of South Carolina have discountenanced conveyances of real estate designed to defraud creditors even if such fraudulent conveyances “worked” (ie., the creditor never learned of the fraudulent conveyances or the creditor was otherwise paid in full). See All v. Prillaman, 200 S.C. 279, 20 S.E.2d 741 (1942). In All v. Prillaman, a conveyance had been made to place property beyond the reach of a creditor during bad economic times. The grantee in All v. Prillaman, as it were, doubled-crossed the other family members, who brought suit against grantee in a Court of Common Pleas. The fraud was never brought to the attention of the creditor because the creditor was paid (thanks to the sale of a “gin lot”). Subsequently, the grantee “double-crossed” the other family members and kept the property. The Supreme Court of South Carolina refused to impose a parole trust on the property under the Statute of Frauds because the underlying conveyance had been designed to defraud creditors:

The testimony in this case to the effect that the parol understanding was that the appellant should save the parental home, if possible, for the family is not explained. It is susceptible of the inference that it was intended that the device of the conveyance would provide the escape of the property from the claims of creditors of Mrs. All who did not have mortgage liens upon it. If that was the object, she and her devisees cannot invoke the aid of equity to recover the property from the grantee, the appellant. “The resultant implied agreement, or trust, is the child of the law, and equity will support its existence and enforce its purposes. It seems but elementary to say that the law, in the exercise of its creative power, will not use the faulty material of fraudulent intent, or create a contractual structure which shelters its own masked enemy, fraud. Where the law does not attack, it will not consort with fraud, but will leave it alone.” Flesner v. Cooper, 62 Okl. 263, 162 P. 1112, 1117 (1917). “Accordingly, a parol trust cannot be ingrafted upon a deed made for the purpose of hindering, delaying, or defrauding creditors. Leland v. Chamberlin, 56 Tex. Civ.App. 256, 120 S.W. 1040 (1909).” 35 A.L.R. 287.
To the same effect is Jolly v. Graham, 222 Ill. 550, 78 N.E. 919, 920 (1906), where it was said: “The law will not permit a party to deliberately put his property out of his control for a fraudulent purpose, and then, through intervention of a court of equity, regain the same after his fraudulent purpose has been accomplished.” See also Hornbeck v. Crawford, 130 Or. 230, 279 P. 870 (1929), supra.
For the reasons above set forth it is our view that the Circuit Court erred in refusing appellant’s motion for the direction of verdict and in granting that of respondents, and further that appellant is likewise entitled to judgment for the possession of the property described in the complaint and for judgment upon the counterclaim, for the entry of which the case is reversed and remanded to the Court of Common Pleas.

*573All v. Prillaman, supra, 200 S.C. 279, 20 S.E.2d 741.

In the case at bar, the Service became aware of the fraudulent conveyances and took steps to protect its interest. In the case at bar, the property in question is a lake lot on Lake Murray with a house on the lake lot. The property in 1991 through 1993 was worth between $22,000 (the 1985 purchase price) and the $110,000 (sale price on May 29, 1998). The property and improvements obviously increased in value between 1985 and 1993. Yet, the 1993 and 1994 conveyances are for ten dollars ($10) each. In other words, property then worth more than $22,000 was being sold for twenty dollars ($20) and during this time Roger and Margaret Davenport continued to reside on the property in question, albeit under the terms of a purported lease. See Audio Investment’s memorandum in opposition (Document No. 91) to the government’s motion for summary judgment, at pages 7-10. Indeed, under the case cited by the United States, Higgins v. Smith, supra, the Supreme Court of the United States noted that actual control over property, such as Roger Davenport’s continued control over the property after September 23, 1993, can be taken into account by the Service:

On the other hand, the Government may not be required to acquiesce in the taxpayer’s election of that form for doing business which is most advantageous to him. The Government may look at actualities and upon determination that the form employed for doing business or carrying out the challenged tax event is unreal or a sham may sustain or disregard the effect of the fiction as best serves the purposes of the tax statute. To hold otherwise would permit the schemes of taxpayers to supersede legislation in the determination of the time and manner of taxation. It is command of income and its benefits which marks the real owner of property.

Higgins v. Smith, supra, 308 U.S. at 477-478, 60 S.Ct. 355.

At the time of the 1993 and 1994 conveyances, the Service was a creditor with respect to the federal income taxes due for Calendar Years 1991 and 1992. As a result, the 1993 and 1994 conveyances to Faith Davenport are void under the version of the Statute of Elizabeth then in effect in South Carolina.10

In turn, Faith Davenport’s conveyance on June 10, 1996, to Audio Investments does not insulate or “legitimize” her conveyance to Audio Investments. The Service filed its Notice of Federal Tax Lien against Roger Davenport in Saluda County on March 22, 1996, two and a half months before Faith Davenport’s purported conveyance of the property to Audio Investments.11

*574It is noteworthy that the contentions raised by Roger Davenport are being raised in the above-captioned case, which was. filed after the Service assessed and collected the taxes due for Calendar Years 1991-1993. The above-captioned case is actually an attempt by Roger Davenport to effect an “end-run” against the Anti-Injunction Act. In other words, Roger Davenport, Margaret Davenport, Faith Davenport, and Audio Investments could not have stopped the assessment or collection of the taxes due when the Service was actually assessing and collecting the taxes.

Closely on point are cases interpreting the Anti-Injunction Act and cases on the sovereign immunity of the United States. The United States cannot be sued without its express consent, and express consent is a prerequisite to a suit against the United States. United States v. Mitchell, 468 U.S. 206, 212, 103 S.Ct. 2961, 77 L.Ed.2d 580 (1983). The bar of sovereign immunity cannot be avoided by naming officers or employees as defendants. Gilbert v. Da Grosso, 756 F.2d 1455, 1458 (9th Cir.1985). Cf. Hawaii v. Gordon, 373 U.S. 57, 58, 83 S.Ct. 1052, 10 L.Ed.2d 191 (1963). Similarly, the bar of sovereign immunity cannot be avoided by the filing of a suit against a federal agency or a federal department, such as the Internal Revenue Service. See Campbell v. United States, 496 F.Supp. 36, 37-38 n. * (E.D.Tenn.1980).

Title 26 U.S.C. (I.R.C.) § 7421(a) provides that, unless certain exceptions are applicable:

[N]o suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person[J

The United States Court of Appeals for the Fourth Circuit has held that, if there is no express provision for an exception in the Anti-Injunction Act itself, a lower federal court may not create an exception. See Clark v. Baker (In re Heritage Church and Missionary Fellowship), 851 F.2d 104, 105-106 (4th Cir.1988)(the “PTL” bankruptcy case).12

The Supreme Court of the United States has indicated that the purpose of the Anti-*575Injunction Act is “the protection of the Government’s need to assess and collect taxes as expeditiously as possible with a minimum of preenforcement judicial interference, ‘and to require that the legal right to the disputed sums be determined in suit for a refund.’ ” Bob Jones University v. Simon, 416 U.S. 725, 736, 94 S.Ct. 2038, 40 L.Ed.2d 496 (1974).13 See also Rochefort v. Gibbs, 696 F.Supp. 1151, 1152-1153 (W.D.Mich.1988).

The Supreme Court of the United States has judicially created a limited exception to the Anti-Injunction Act. See Enochs v. Williams Packing & Navigation Co., 370 U.S. 1, 7, 82 S.Ct. 1125, 8 L.Ed.2d 292 (1962).14 In order to establish a claim for injunctive relief under the holding in Enochs v. Williams Packing & Navigation Co., the taxpayer must show: (1) under the most liberal view of the applicable laws and facts, it is clear that the government cannot prevail on the merits; and (2) absent an injunction, irreparable injuries will occur for which there is no adequate remedy at law. 370 U.S. at 6-7, 82 S.Ct. 1125. Unless both of these prerequisites are met, “a suit for preventive injunctive relief must be dismissed.” United States v. American Friends Service Committee, 419 U.S. 7, 10, 95 S.Ct. 13, 42 L.Ed.2d 7 (1974).

As to the second prerequisite, Roger Davenport had adequate remedies at law. All United States Court of Appeals have held that the right of a taxpayer to petition the Tax Court and his or her right, in the alternative, to pay the tax and then sue for a refund (in a federal district court) are adequate remedies at law. See, e.g., Cool Fuel, Inc. v. Connett, 685 F.2d 309, 313-314 n. 1 (9th Cir.1982)(denying injunction, even though the Service failed to mail notice of deficiency to the taxpayer’s last known address, because the taxpayer did not establish that it had no adequate remedy at law, or that irreparable injury would result from the denial of the injunction). Roger Davenport could have petitioned the Tax Court. Roger Davenport could have filed timely federal income tax returns, paid his taxes, and then started administrative, and, if necessary, judicial proceedings in a federal district court to recover a refund.

Moreover, the Declaratory Judgment Act would not give Roger Davenport the protection of its provisions because there is an exception with “respect to Federal taxes.” 28 U.S.C. § 2201(a). “The Declaratory Judgment Act’s tax exception, and the Anti-Injunction Act, work together to insure that preemptive taxpayer litigation will not frustrate the efforts of the Internal Revenue Service (the “IRS”) to assess and collect federal taxes.” Spencer v. Brady, 700 F.Supp. 601, 602 (D.D.C.1988). See also American Society of Association Executives v. Bentsen, 848 F.Supp. 245, 247-250 (D.D.C.1994).

The Anti-Injunction Act would not have allowed a federal district court to restrain the assessment or collection of the disputed taxes in this case-which obviously has been Roger Davenport's ultimate goal since 1992. Furthermore, Roger Davenport has not shown that any of the statutory or judicially created exceptions to the Anti-Injunction Act are applicable. Roger Davenport had adequate remedies at law, even though the documentary evidence *576shows that he refused to avail himself of those remedies:

Under the second prong of the Williams Packing test, the plaintiffs must show that denial of an injunction will cause them irreparable harm and that they have no adequate remedy at law. “Americans United”, 416 U.S. at 762, 94 S.Ct. at 2059. Plaintiffs have not made such a showing. A plaintiffs First Amendment rights are not implicated by a Congressional requirement that its lobbying expenses may not be paid for in part by a tax subsidy. See Taxation With Representation, 461 U.S. at 550, 103 S.Ct. at 2003; Cammarano v. U.S., 358 U.S. 498, 513, 79 S.Ct. 524, 533, 3 L.Ed.2d 462 (1959). In addition, the Supreme Court has stated that an anticipated reduction in income through contributions or dues pending the outcome of a refund suit does not suffice as irreparable injury under the Williams Packing analysis. “Americans United ”, 416 U.S. at 761-763, 94 S.Ct. 2053.
The plaintiffs’ complaint also fails to meet the second prong of the Williams Packing test because they have available alternative legal remedies. The plaintiffs have the opportunity to obtain appropriate judicial review of their claims. First, if they elect not to pay the applicable taxes, the plaintiffs, as individual taxpayers, may challenge the requirements of sections 162(e) and 6033(e) by bringing a subsequent suit in the United States Tax Court challenging any tax delinquency with which they may be assessed. See 26 U.S.C. § 6213. Second, the plaintiffs may elect to pay the taxes then bring a tax refund action in the United States District Court or the United States Court of Federal Claims. See 26 U.S.C. § 7422.
Plaintiffs assert that they have no alternative remedy to challenge the notification provisions of section 6033(e)(1)(A)(ii) because if the associations comply, their members will have no legal remedy. As was represented to the Court during the hearing on this motion, the associations could refuse to notify their members which would result in a proxy tax liability. At that point, the plaintiffs could obtain a judicial hearing before the Tax Court, the district courts or the Court of Federal Claims. “A taxpayer cannot render an available review procedure an inadequate remedy at law by voluntarily forgoing it.” “Americans United”, 416 U.S. at 762 n. 13, 94 S.Ct. at 2059 n. 13.

American Society of Association Executives v. Bentsen, supra, 848 F.Supp. at 249-250.

In cases filed by tax protesters against the Internal Revenue Service, employees or officials, federal courts have rejected similar contentions raised by Roger Davenport in the case at bar. See, e.g., Stonecipher v. Bray, 653 F.2d 398 (9th Cir. 1981), cert. denied, 454 U.S. 1145, 102 S.Ct. 1006, 71 L.Ed.2d 297 (1982); and Wise v. Commissioner of I.R.S., 624 F.Supp. 1124 (D.Mont.1986). Also, the characterization of this case as a civil action and its being filed originally in state court would not defeat the applicability of the Anti-Injunction Act. See Sato v. Peterson, 1995 U.S.Dist. LEXIS® 10093, *21-*25 (N.D.Ill., July 18, 1995)(magistrate judge’s Report and Recommendation), adopted, 1995 WESTLAW® 591460, 1995 WL 591460 (N.D.Ill., October 4, 1995).

Significantly, neither Roger Davenport nor Audio Investments sought to utilize the six-month redemption period set forth in 26 U.S.C. (I.R.C.) §§ 6337-6339, which commenced on May 29,1999. The applicable statute, 26 U.S.C. § 6337, makes the following provisions for redemption of real estate after sale:

*577(b) Redemption of real estate after sale.—
(1) Period. — The owners of any real property sold as provided in section 6835, their heirs, executors, or administrators, or any person having any interest therein, or a lien thereon, or any person in their behalf, shall be permitted to redeem the property sold, or any particular tract of such property, at any time within 180 days after the sale thereof.

26 U.S.C. (I.R.C.) § 6837.

Moreover, Roger Davenport and Audio Investments cannot use 26 U.S.C. (I.R.C.) § 7433 to challenge the assessment of federal income taxes. See Granse v. United States, 932 F.Supp. 1162 (D.Minn.1996), affirmed, Granse v. U.S. Department of the Treasury, 1997 WL 215330, 112 F.3d 513 (8th Cir.1997), which concerned a tax protester’s attempt to challenge the sale of real estate:

Plaintiff Karl G. Granse (“Granse”) commenced this nominal “quiet title” action challenging the United States Internal Revenue Service’s (“IRS”) tax jeopardy assessment, levy, and public sale of property located at 105 East 151st Street, Burnsville, Minnesota (the “Property”) following Granse’s failure to pay delinquent federal taxes owing for the period 1988 through 1993. Granse seeks an order declaring the United States’ “claims” to the Property invalid, declaring the seizure and subsequent sale of the property void, enjoining Defendant Park Drive Partnership (“Park Drive”) from receiving title to the Property, and declaring Granse owner of the Property in fee simple absolute. Currently before the Court are the Defendants’ ... motions to dismiss or for summary judgment. * * * For the reasons set forth below, the Court will grant the Defendants’ motions.
Background
Granse did not pay his federal income taxes for the period 1988 through 1993. This is Granse’s second judicial challenge to the IRS’s collection of these delinquent taxes. The IRS first made a jeopardy assessment against Granse on November 23, 1994, pursuant to 26 U.S.C. § 6861(a) [FN3] in the amount of $86,621.00. (Compl. Ex. C — 1; Mecham Decl. ¶ 3, attach, as Gov’t Ex. 1.) On December 19, 1994, the IRS levied upon the Property in order to satisfy the assessment. (Id. ¶ 6.) The IRS sent Granse notice of the levy and seizure on this same date. (McKinney Decl. ¶ 9; attach, as Gov’t Ex. 2.)
[FN3. Section 6861(a) provides that ‘‘[i]f the Secretary believes that the assessment or collection of a deficiency ... will be jeopardized by delay, he shall ... immediately assess such deficiency ..., and notice and demand shall be made by the Secretary for the payment thereof.”]
On January 4, 1995, Granse commenced the first civil action in this Court seeking judicial review of the IRS’s jeopardy assessment and an order enjoining collection or sale of the Property. The Court dismissed Granse’s complaint, concluding that the IRS’s decision to impose a jeopardy assessment and the amount of the jeopardy assessment were both “reasonable” as required by 26 U.S.C. § 7429(g). See Granse v. United States, 892 F.Supp. 219 (D.Minn.1995).
Following this Court’s March 21, 1995 Order, the IRS scheduled a public sale of the Property pursuant to 26 U.S.C. § 6335. The sale was set to take place on May 11,1995. Three days before the scheduled sale, Granse filed a petition in the United States Bankruptcy Court seeking to delay the sale under Chapter 13 of the United States Bankruptcy *578Code. Pursuant to an “automatic stay” provision in the Bankruptcy Code, 11 U.S.C. § 362, the IRS canceled the May 11 sale.
On June 12, 1995, the Bankruptcy Court lifted its stay as to the IRS in order to facilitate the sale of the Property. (Compl.KV.) The IRS subsequently conducted a public sale and sold the property to Defendant Park Drive. (Id.; McKinney Decl. ¶ 19, attach, as Gov’t Ex. 2.) Upon payment, the IRS issued a “certificate of sale” to Park Drive as provided for under 26 U.S.C. § 6338(a). The certificate of sale was recorded in the Dakota County Recorder’s office on November 8, 1995, and the proceeds of the sale were applied to offset Granse’s delinquent tax liabilities for the years 1985-1993. (Compl. HV; McKinney Decl. ¶21, attach, as Gov’t Ex. 2.) The IRS District Director issued a quitclaim deed to Park Drive on January 10, 1996. (McKinney Decl., Ex. 2-F, attach, as Gov’t Ex. 2.)
Granse commenced this second action on January 3, 1996. He currently claims that the jeopardy assessment was unlawful, that the IRS had no authority to levy on the Property, and that the sale did not comply with statutory requirements. Granse further claims the IRS violated his “due process right to appeal” under the Administrative Procedures Act, 5 U.S.C. § 702 et seq. because it did not respond to a “protest” he filed with the IRS opposing its initial jeopardy assessment or his request for the “taxing statute” upon which the IRS’s tax assessments were based.
The IRS and Park Drive have moved to dismiss this action or for summary judgment. The IRS claims (1) this Court does not have subject matter jurisdiction over this action and that it should accordingly be dismissed under Rule 12(b)(1) of the Federal Rules of Civil Procedure. The IRS and Park Drive also claim (2) the tax assessment and levy procedures at issue were legal and conveyed full title to the Property to Park Drive.
Discussion
I. Jurisdiction
Granse alleges jurisdiction over this action under 28 U.S.C. §§ 1331, 1361, 1340, and 2410; 26 U.S.C. § 7433 and 5 U.S.C. § 702. The IRS argues that these statutes do not provide jurisdiction and that the Federal Defendants, as sovereign, are immune from the present suit. The IRS’s argument is predicated on a fundamental principle of law which Granse has ignored: the United States is immune from suit except to the extent the Congress has expressly waived that immunity. See United States Dept, of Energy v. Ohio, 503 U.S. 607, 112 S.Ct. 1627, 118 L.Ed.2d 255 (1992). That principle, together with the limitations on federal court jurisdiction, dispose of the vast majority of issues in this case.
At the outset, and separate and apart from the jurisdictional statutes discussed below, the Court finds no jurisdictional basis for granting the declaratory relief Granse seeks in his Complaint. The law in this area is unequivocal. Congress has specifically provided that, subject to limited exceptions not applicable here, federal courts do not have jurisdiction to grant declaratory relief in cases involving federal taxes. 28 U.S.C. § 2201(a). Thus the remainder of this discussion is limited to Granse’s request to quiet title in his name, to set aside seizure and sale of the Property, and for damages.
A. 28 U.S.C. § 1881, mo and 1361
Sections 1331, 1340, and 1361 of Title 28 do not waive the federal govern*579ment’s sovereign immunity for suit challenging an administrative tax levy. See Fostvedt v. United States, 978 F.2d 1201, 1203 (10th Cir.1992), cert. denied, 507 U.S. 988, 113 S.Ct. 1589, 123 L.Ed.2d 155 (1993). As the Ninth Circuit recently recognized in a similar case, “a mere assertion that general jurisdictional statutes apply” “cannot waive the government’s sovereign immunity.” Hughes v. United States, 953 F.2d 531, 539 n. 5 (9th Cir.1992) (citing Lonsdale v. United States, 919 F.2d 1440, 1443-44 (10th Cir.1990); Gilbert v. DaGrossa, 756 F.2d 1455, 1458 (9th Cir.1985)). Thus these general jurisdictional statutes do not provide a basis for an action against the IRS here.
B. 26 u.s.c. § nss
Section 7433 similarly does not provide jurisdiction in this case. This section provides that:
If, in connection with any collection of Federal tax with respect to a taxpayer, any officer or employee of the Internal Revenue Service recklessly or intentionally disregards any provision of this title, or any regulation promulgated under this title, such taxpayer may bring a civil action for damages against the United States in a district court of the United States.
26 U.S.C. § 7433. This section does not provide jurisdiction for improper assessment of taxes. Miller v. United States, 66 F.3d 220, 223 (9th Cir.1995), cert, denied, 517 U.S. 1103, 116 S.Ct. 1317, 134 L.Ed.2d 471 (1996). It provides jurisdiction only for improper collection activities. Id. In the present case, it is clear Granse’s Complaint is directed primarily to contesting the assessment of his taxes. Second, to the extent Granse’s claim is based on the IRS’s collection activities, Granse is specifically precluded from obtaining recovery because he has not contested the procedures with the IRS by filing an administrative action for a refund. Section 7422 explicitly provides:
(a) No suit prior to filing claim for refund. — No suit or proceeding shall be maintained in any court for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed. or collected, or of any penalty claimed to have been collected without authority, or of . any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Secretary....
26 U.S.C. § 7422. As a result, Granse’s claims, insofar as they seek damages for the alleged improper assessment and collection procedures employed under § 7422, must'be dismissed.

Granse v. United States, supra, 932 F.Supp. at 1164-1167.

Hence, since Roger Davenport and Audio Investments did not seek to redeem the property under 26 U.S.C. § 6337-6339 during the automatic six-month period following the sale, their claims fail in the above-captioned case. Moreover, there is no indication that Roger Davenport ever timely filed an administrative claim for a refund as to the monies collected by virtue of the sale of the property.15

*580The failure of Roger Davenport, other Davenport family members, and Audio Investments to redeem the property within the six month period caused title to pass to Dewey Robertson, Sr., on December 7, 1998. Babb v. Lindvig, 947 F.Supp. 405, 409 (W.D.Wis.1996)(“Section 6338 does not vest title in the tax sale purchaser until the period of redemption has expired; therefore redemption does not take title away from the tax sale purchaser.”). Indeed, Section 6339(b)(2) states explicitly that a deed operates as “a conveyance of all the right, title, and interest the party delinquent had in and to the real property thus sold at the time the Ken of the United States attached thereto.” In other words, the issuance of the deed on December 7, 1998, by the Service conveyed title in the property in question to Dewey Robertson, Sr. See Babb v. Lindvig, supra, 947 F.Supp. at 408-410; and 26 U.S.C. (I.R.C.) § 6339, which specifically provides:

§ 6339. Legal effect of certificate of sale of personal property and deed of real property
(b)Deed of real property. — In the case of the sale of real property pursuant to section 6335—
(1) Deed as evidence. — The deed of sale given pursuant to section 6338 shall be prima facie evidence of the facts therein stated; and
(2) Deed as conveyance of title. — -If the proceedings of the Secretary as set forth have been substantially in accordance with the provisions of law, such deed shall be considered and operate as a conveyance of all the right, title, and interest the party delinquent had in and to the real property thus sold at the time the lien of the United States attached thereto.
(c) Effect of junior encumbrances. — A certificate of sale of personal property given or a deed to real property executed pursuant to section 6338 shall discharge such property from all liens, encumbrances, and titles over which the Ken of the United States with respect to which the levy was made had priority.
(d) Cross references.—
(1) For distribution of surplus proceeds, see section 6342(b).
(2) For judicial procedure with respect to surplus proceeds, see section 7426(a)(2).

26 U.S.C. § 6339.

In short, despite the tax protester activities of Roger Davenport and the assistance provided to Roger Davenport by Faith Davenport and Audio Investments, the property in question still could have been redeemed for payment of the taxes plus interest during the six months after the tax sale. Babb v. Lindvig, supra. The issuance of the deed by the Service on December 7, 1998, passed title to Dewey Robertson, Sr. As a result, Roger Davenport, Margaret Davenport, Faith Davenport, and Audio Investments are entitled to any reKef regarding the sale of the property in question. Traver v. Weisberg, 1994 WL 578467 (D.Or., October 18, 1994)(denying relief similar to that requested by Audio Investments and Roger Davenport in this case), appeal dismissed, in paid, 73 F.3d 370 (9th Cir.1995), summary judgment granted, Traver v. United States, 79 A.F.T.R.2d 97-1697 (D.Ore.1997).

In light of the availability of the redemption process, Roger Davenport’s medical exhibits concerning his prostate cancer in 1993 provide no basis for relief in the above-captioned case. Roger Davenport’s prostate cancer did not prevent him from *581executing the deed of September 23, 1993, to Faith Davenport. Roger Davenport’s “ ‘prostate cancer’ defense” appears to be premised on an invalid deduction of fact, which is best articulated in the maxim “Post hoc, ergo propter hoc.” This maxim is usually translated as “After this, 'therefore, on account of this.” Most federal courts have rejected the validity of that maxim in determining whether a causal connection exists. See, e.g., the order of the Honorable Charles E. Simons, Jr., United States District Judge, in Orr v. Gardner, 261 F.Supp. 39, 41 n. 1 (D.S.C. 1966)(“Posi hoc, ergo propter hoc in logic is usually intended as ‘the fallacy of arguing from mere temporal sequence to cause and effect relationship.’ ”); and Loyd v. Bullhead City, 1991 WL 70735, *6, 931 F.2d 897 (9th Cir.1991), where the United States Court of Appeals for the Ninth Circuit commented: “Loyd’s argument presents a classic example of the logical fallacy known as post hoc, ergo propter hoc, ie., that a cause-and-effect relationship can be shown from a mere temporal sequence.” Although a district court, when evaluating a pleading under 28 U.S.C. § 1915, must assume that the allegations in the pleading are true, a district court is not required to accept unwarranted deductions of fact. See Gersten v. Rundle, 833 F.Supp. 906, 910 (S.D.Fla.1993); and Clegg v. Cult Awareness Network, 18 F.3d 752, 754-755 (9th Cir.1994)(district court not required to accept conclusions that cannot be reasonably drawn from facts alleged). See also Morgan v. Church’s Fried Chicken, 829 F.2d 10, 12 (6th Cir.1987)(district court “not required to ‘accept as true legal conclusions or unwarranted factual inferences’ ”); Bender v. Suburban Hospital, Inc., 159 F.3d 186,192 (4th Cir.1998); and cf. Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986)(“Although for the purposes of this motion to dismiss we must take all the factual allegations in the complaint as true, we are not bound to accept as true a legal conclusion couched as a factual allegation.”).

In his affidavit (Document No. 92), Roger Davenport appears to be contending that the undersigned United States Magistrate Judge has no jurisdiction over this matter. Under the Local Civil Rules of this district court, pro se cases are referred to a United States Magistrate Judge. See Local Civil Rule 73.02(b)(2)(e). Moreover, as pointed out on the last page of this Report and Recommendation, the final decision in this matter will be made by a United States District Judge. See Mathews v. Weber, 423 U.S. 261, 270-271, 96 S.Ct. 549, 46 L.Ed.2d 483 (1976); and Estrada v. Witkowski, 816 F.Supp. 408, 410 (D.S.C.1993).

Roger Davenport even contends, in his affidavit filed on January 23, 2002 (Document No. 93), that the United States District Court for the District of South Carolina lacks jurisdiction over this case. Section § 1346 of Title 28, United States Code, specifically, gives the federal district courts jurisdiction over cases where the United States is a defendant. Moreover, the above-captioned case is also clearly within the scope of 28 U.S.C. § 1346(a)(1).

Roger Davenport’s reliance on Jack Cole Co. v. MacFarland, 206 Tenn. 694, 10 McCanless 694, 337 S.W.2d 453 (1960), is misplaced. See Roger Davenport’s Affidavit (Document No. 84). At the time Jack Cole Co. v. MacFarland was decided, Tennessee’s Constitution prohibited a tax on income. See “old” Article II, Section 28 of the Constitution of Tennessee, which was amended in 1973. Secondly, Jack Cole Co. v. MacFarland is not relevant on the issue of federal income taxes.

Roger Davenport’s attention is directed to 26 U.S.C. (I.R.C.) § 61. See also Unit*582ed States v. Koliboski, 782 F.2d 1328 (7th Cir.1984):

Although not raised in his brief on appeal, the defendant’s entire case at trial rested on his claim that he in good faith believed that wages are not income for taxation purposes. Whatever his mental state, he, of course, was wrong, as all of us already are aware. Nonetheless, the defendant still insists that no case holds that wages are income. Let us now put that to rest: WAGES ARE INCOME. Any reading of tax cases by would-be tax protesters now should preclude a claim of good-faith belief that wages — or salaries — are not taxable.

United States v. Koliboski, supra, 732 F.2d at 1330 n. 1. Hence, it was not necessary for the Service to respond to Roger Davenport’s delaying tactics, which are mentioned on page 2 of his affidavit (Document No. 84), “for information establishing him [Roger Davenport] liable under the Law.” See also Roger Davenport’s affidavit filed on January 23, 2002 (Document No. 93), wherein he describes himself as a person “who at the time of ownership transfer6 was not liable for any income taxes[.]” (Document No. 93, at page 3).

Roger Davenport, according to Government’s Exhibit 1 (to Document No. 79), had the following amounts of adjusted gross income over the tax years in question:

Tax Year_Adjusted Gross Income
1991_$122,602.00
1992_$127,384,00
1993$ 54,077.00

It strains credulity to believe that an individual (or couple) with adjusted gross income exceeding $100,000.00 would not owe any federal income tax. Gersten v. Rundle, supra, 833 F.Supp. at 910 (although a district court, when evaluating a pleading under 28 U.S.C. § 1915, must assume that the allegations in the pleading are true, a district court is not required to accept unwarranted deductions of fact).

The undersigned does not agree with the Service’s characterization of Audio Investments as Roger Davenport’s alter ago. This conclusion, however, is not fatal to the United States’ motion for summary judgment because the fraudulent conveyances to Faith Davenport in 1993 and 1994 are the dispositive transactions at issue, not the 1996 conveyance to Audio Investments. In any event, Audio Investments is a sham trust. William L. Comer Family Equity Trust v. United States, supra. Moreover, the 1993 and 1994 conveyances to Faith Davenport are in Audio Investments’ purported chain of title.

Roger Davenport and Margaret Davenport’s failure to file timely tax returns precludes them from use of the transferee “safe harbors” set forth in 26 U.S.C. § 6901, which provides:

§ 6901. Transferred assets
(a) Method of collection. — The amounts of the following liabilities shall, except as hereinafter in this section provided, be assessed, paid, and collected in the same manner and subject to the same provisions and limitations as in the case of the taxes with respect to which the liabilities were incurred:
(1) Income, estate, and gift taxes.—
(A) Transferees. — The liability, at law or in equity, of a transferee of property—
(i) of a taxpayer in the case of a tax imposed by subtitle A (relating to income taxes),
(ii) of a decedent in the case of a tax imposed by chapter 11 (relating to estate taxes), or *583(iii) of a donor in the case of a tax imposed by chapter 12 (relating to gift taxes),

in respect of the tax imposed by subtitle A or B.

(B) Fiduciaries. — The liability of a fiduciary under section 3713(b) of title 31, United States Code * * * in respect of the payment of any tax described in subparagraph (A) from the estate of the taxpayer, the decedent, or the donor, as the case may be.
(2) Other taxes. — -The liability, at law or in equity of a transferee of property of any person liable in respect of any tax imposed by this title (other than a tax imposed by subtitle A or B), but only if such liability arises on the liquidation of a partnership or corporation, or on a reorganization within the meaning of section 368(a).
(b) Liability.- — Any liability referred to in subsection (a) may be either as to the amount of tax shown on a return or as to any deficiency or underpayment of any tax.
(c) Period of limitations. — The period of limitations for assessment of any such liability of a transferee or a fiduciary shall be as follows:
(1) Initial transferee. — In the ease of the liability of an initial transferee, within 1 year after the expiration of the period of limitation for assessment against the transferor;
(2) Transferee of transferee. — In the case of the liability of a transferee of a transferee, within 1 year after the expiration of the period of limitation for assessment against the preceding transferee, but not more than 3 years after the expiration of the period of limitation for assessment against the initial transferor;
except that if, before the expiration of the period of limitation for the assessment of the liability of the transferee, a court proceeding for the collection of the tax or liability in respect thereof has been begun against the initial transferor or the last preceding transferee, respectively, then the period of limitation for assessment of the liability of the transferee shall expire 1 year after the return of execution in the court proceeding. (3) Fiduciary. — In the case of the liability of a fiduciary, not later than 1 year after the liability arises or not later than the expiration of the period for collection of the tax in respect of which such liability arises, whichever is the later.
s|s ;|s sjs
(g) Address for notice of Lability. — In the absence of notice to the Secretary under section 6903 of the existence of a fiduciary relationship, any notice of liability enforceable under this section required to be mailed to such person, shall, if mailed to the person subject to the liability at his last known address, be sufficient for purposes of this title, even if such person is deceased, or is under a legal disability, or, in the case of a corporation, has terminated its existence.
(h) Definition of transferee. — As used in this section, the term “transferee” includes donee, heir, legatee, devisee, and distributee, and with respect to estate taxes, also includes any person who, under section 6324(a)(2), is personally liable for any part of such tax.

26 U.S.C. § 6901.

The failure to file tax returns by Roger Davenport and Margaret Davenport (irrespective of whether Margaret Davenport was required to file an income tax return) disqualifies them from the “safe harbors” of 26 U.S.C. § 6901 because the commencement of the limitations period is triggered by the filing of a return. In *584other words, the “safe harbor” for a transferee of a transferee set forth in 26 U.S.C. § 6901(c)(2) is not available to Audio Investments because the limitations period never began to run as to Roger Davenport and Margaret Davenport by virtue of their failure to file federal income tax returns for 1991, 1992, and 1993. See 26 U.S.C. (I.R.C.) § 6501(c)(3)(“In the case of failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time.”). Also, the substitute returns made by the Service under 26 U.S.C. § 6020(b) did not cause the limitations period to begin running. See 26 U.S.C. § 6501(b)(3). Moreover, it is well settled that “[s]ervice of notice of levy need not be made upon potential third party owners of levied-upon property to satisfy the notice provisions of the federal tax law.” William L. Comer Family Equity Trust v. United States, supra, 732 F.Supp. at 760, citing Douglas v. United States, 562 F.Supp. 593 (S.D.Ga.1983).

It is not clear from the record why Audio Investments and Margaret Davenport did not commence an action under 26 U.S.C. (I.R.C.) § 7426, which provides:

§ 7426. Civil actions by persons other than taxpayers
(a) Actions permitted.—
(1) Wrongful levy. — If a levy has been made on property or property has been sold pursuant to a levy, any person (other than the person against whom is assessed the tax out of which such levy arose) who claims an interest in or lien on such property and that such property was wrongfully levied upon may bring a civil action against the United States in a district court of the United States. Such action may be brought without regard to whether such property has been surrendered to or sold by the Secretary.

26 U.S.C. § 7426(a)(1). Federal district courts have jurisdiction over such cases. New Fairview, Inc. v. United States, 2001 WL 953799 (D.Mass., May 9, 2001).

Suits under 26 U.S.C. § 7426, however, are subject to a nine-month limitations period. See 26 U.S.C. (I.R.C.) § 6532(c):

(c) Suits by persons other than taxpayers.—
(1) General rule.' — Except as provided by paragraph (2), no suit or proceeding under section 7426 shall be begun after the expiration of 9 months from the date of the levy or agreement giving rise to such action.
(2) Period when claim is filed. — -If a request is made for the return of property described in section 6343(b), the 9-month period prescribed in paragraph (1) shall be extended for a period of 12 months from the date of filing of such request or for a period of 6 months from the date of mailing by registered or certified mail by the Secretary to the person making such request of a notice of disallowance of the part of the request to which the action relates, whichever is shorter.

26 U.S.C. § 6532(c).

Since the record shows no formal request by Margaret Davenport or Audio Investments under 26 U.S.C. (I.R.C.) § 6343(b),16 the nine-month limitations pe*586riod was not extended. The levy took place on February 9, 1998, and the seizure occurred on March 16, 1998. Audio Investments and Margaret Davenport had until November 9, 1998, to bring suit under 26 U.S.C. § 7426. Courts have held that the nine-month limitations period in 26 U.S.C. § 6532(c) is jurisdictional. See Becton Dickinson and Company v. Wolckenhauer, 215 F.3d 340, 343-354 (3rd Cir. 2000), cert, denied, Becton Dickinson and Co. v. Internal Revenue Service, 531 U.S. 1071, 121 S.Ct. 761, 148 L.Ed.2d 663 (2001). See also BSC Term of Years Trust v. United States, 2000 WL 33155870 (W.D.Texas, December 28, 2000)(untimely suits by family trusts).

As a result, notwithstanding the matter mentioned in footnote 7 of this Report and Recommendation, Margaret Davenport’s failure to bring suit within nine months of February 9, 1998, precludes her from obtaining title to her former half-interest in the property in this civil action. Becton Dickinson and Company v. Wolckenhauer, supra, 215 F.3d at 343-354.17

Recommendation

Accordingly, I recommend that the District Court grant the Motion for Summary Judgment filed by the United States (Document No. 76-1) and issue a finding that the title to the property in question passed to Dewey Robertson, Sr., on December 7, 1998, under 26 U.S.C. (I.R.C.) § 6339. It is also recommended that the following motions — the USA’s Motion, in Alternative, to Dismiss (Document No. 76-2), Audio Investments’ Motion for Partial Summary Judgment (Document No. 70), Audio Investments’ Motion to Remand to State Court (Document No. 16), Roger Davenport’s Motion to Remand to State Court (Document No. 19), Audio Investments’ Motion to Certify Question (Document No. 56), and Audio Investments’ Motion to Deny Claim of Privilege (Document No. 58) — be denied.

In light of the nationwide increase in tax protester activities and the likelihood that similar cases may arise in other federal judicial districts, it is also recommended that the District Court, in its discretion, consider publishing, in Federal Rules De*587cisions, its Order of August 27, 2001 (Document No. 20 in this case file), wherein it denied the motion to appear pro hac vice by Milton H. Baxley, II. Thereby, other federal district courts may be apprised of tax protester litigation in the District of South Carolina. The parties’ attention is directed to the notice on the next page.

January 25, 2002.

. Had Roger Davenport and Margaret made such conveyances to Faith Davenport under normal circumstances (i.e., if there had been no federal income tax arrearages for Roger Davenport and Margaret Davenport in 1993), bona fide conveyances might have had gift tax consequences. Although no gift tax would have been due, both Roger Davenport and Margaret Davenport would have likely “used up” portions of their unified credit (for estate and gift taxes) because the value of the property conveyed exceeded the annual gift tax exclusion of $10,000. Moreover, since both Roger Davenport and Margaret Davenport have continued to reside on the property, their remaining on the property constitutes a "retained life estate.” A retained life estate would disqualify them from use of the $10,000 annual gift tax exclusion (which applies only to “present interests” in property).

. The property in question is located in Salu-da County, although it has a “Leesville” mailing address. The "Leesville” mailing address is, apparently, caused the Service to file the federal tax liens in Lexington County on October 22, 1995. In other words, the first tax liens were filed in the wrong county.

*574The former Town of Leesville (now part of Batesburg-Leesville) is located in Lexington County. But the “Leesville” mailing area includes western Lexington County and eastern Saluda County.

The confusion caused by a discrepancy between geographical location and mailing address is not limited to "Leesville.” It can be judicially noticed that other portions of northeastern Saluda County have a "Prosperity” mailing address even though the Town of Prosperity is located in Newberry County.

In the Upstate, an analogous situation affects a prison. The Perry Correctional Institution is actually located in southern Green-ville County but has a Pelzer mailing address. The Town of Pelzer is in Anderson County.

. One distinguished commentator (now deceased) noted:

Section 6213(a) is no mere technicality. Prior to establishment in the mid-1920’s of the Board of Tax Appeals (now the Tax Court), one could litigate a tax assessment only by paying the tax and suing for a refund in a district court or the Court of Claims (now the U.S. Claims Court). With the advent of the Board of Tax Appeals, one could litigate without paying. The keystone of the new system was a restraint on assessment until the taxpayer's right to petition the Board was exercised or waived or lapsed, and, thereafter, if the right was exercised, while litigation was proceeding. Violation of the rule by the Service was made one of the few exceptions to the Anti-Injunction statute now found in section 7421. Taxpayers retain the right to pay the tax and litigate in a federal district court or the Claims Court, but, not surprisingly, the vast majority of litigated cases (80 to 90 percent) follow the Tax Court route.

Charles S. Lyon, Disclosure of Grand Jury Materials: Why the Supreme Court Was Wrong in Baggot, 39 Tax Law Review 215, 216-217 (1984).

. Portions of the Court's holding in Bob Jones University v. Simon were modified by South Carolina v. Regan, 465 U.S. 367, 372-382, 104 S.Ct. 1107, 79 L.Ed.2d 372 (1984).

. The doctrine enunciated in Enochs v. Williams Packing & Navigation Co. was partially modified by South Carolina v. Regan, supra, 465 U.S. at 372-382, 104 S.Ct. 1107, which is cited in footnote 13, supra.

. Roger Davenport and Audio Investments could have had a third-party redeem the property. See Babb v. Lindvig, 947 F.Supp. 405 (W.D.Wis.1996), where the Service sold property for unpaid taxes. In Babb v. Lindvig, the taxpayer executed a power of attorney on behalf of a relative. The relative tender a check plus 20% interest to the Service during the statutory redemption period.. The court in Babb v. Lindvig held that the redemption by the relative was proper and declined to *580give title to the purchaser of the property at the tax sale.

. See BSC Term of Years Trust v. United States, 2000 WL 33155870 (W.D.Texas, Dec. 28, 2000), for how a third-party can properly invoke 26 U.S.C. § 6343(b):

Section 6532(c) provides for two separate limitations periods, depending on whether a potential litigant makes a proper written request for return of the property levied upon. See I.R.C. § 6532(c). The general
*585rule is that a section 7426 claim must be filed within nine months from the date of the levy. See I.R.C. § 6532(c)(1); 26 C.F.R. § 301.6532-3(a) (2000). But if an entity makes a proper written request for return of the property, the filing period is extended for a period of twelve months from the date the request was filed or six months from the date the IRS denies the request, whichever is shorter. See I.R.C. § 6532(c)(2); 26 C.F.R. § 301.6532-3(b).
Here, the IRS levied on the Plaintiffs' Chase Bank account on September 10, 1999. Plaintiffs filed this suit on September 7, 2000, almost one year after the date of the levy. Consequently, Plaintiffs' section 7426 claim is untimely unless they extended the limitations period by making a proper written request for return of the property under section 6532(c)(2). See Amwest Sur. v. U.S., 28 F.3d 690, 694-95. Plaintiffs contend that the courtesy copy of their letter to John Wood, incorrectly addressed to the IRS District Director, constitutes a proper request for return of their property under section 6532(c)(2). The Court disagrees.
In order for Plaintiffs' letter to pass muster under section 6532(c)(2), it must strictly comply with the requirements set out in 26 C.F.R. § 301.6343-2(b). [FN2] See 26 C.F.R. § 301.6343-2(c); Amwest Sur., 28 F.3d at 695-97; Winebrenner v. United States, 924 F.2d 851, 856 (9th Cir.1991); LaBonte v. United States, No. 99-C-1129, 2000 WL 1203514, at *1 (E.D.Wis. Jan. 18, 2000); Edwards Mach. Prods. Co. v. United States, Civ., A. No. 94-1254MAC(DF), 1994 WL 757526, at *2 (M.D.Ga. Oct. 31, 1994). Plaintiffs' letter fails to meet these requirements.
[FN2. “Request for return of property. A written request for the return of property wrongfully levied upon must be addressed to the district director (marked for the attention of the Chief, Special Procedures Staff) for the Internal Revenue district in which the levy was made. The written request must contain the following information-
(1) The name and address of the person submitting the request;
(2) A detailed description of the property levied upon;
(3) A description of the claimant’s basis for claiming an interest in the property levied upon; and
(4) The name and address of the taxpayer, the originating Internal Revenue district, and the date of the levy as shown on the notice of levy form, or levy form, or, in lieu thereof, a statement of the reasons why such information cannot be furnished.” 26 C.F.R. § 301.6343-2(b).] Plaintiffs' letter was not properly ad-
dressed to the district director of the internal revenue district in which the levy was made. See 26 C.F.R. § 301.6343-2(b). Plaintiffs sent a courtesy copy of their letter to "District Director, Department of the Treasury, Internal Revenue Service, Austin, Texas 73301.” But the correct address for the IRS District Director is "300 E. Eighth Street, Austin, Texas 78701.” Consequently, Plaintiffs’ letter failed to strictly meet the requirements of 26 C.F.R. § 301.6343-2(b) and, therefore, did not constitute a written request for return of the property under section 6532(c)(2). Cf. Amwest Sur., 28 F.3d at 696 (holding that letters to the plaintiff's revenue agent requesting return of the property did not satisfy the requirement that plaintiff send the request to the district director); LaBonte, 2000 WL 1203514, at *1 (same); Fanning v. United States, No. 1:95-CV-222-RCF, 1996 WL 343462, at *2-3 (N.D.Ga. Apr. 30, 1996) (holding that request for return of the property addressed to district director but never delivered by United Parcel Service did not satisfy the requirement that plaintiff send the request to the district director).
Further, the Government offers competent summary judgment evidence that the District Director never had actual knowledge of Plaintiffs' letter. In Amwest Surety, the Seventh Circuit suggested that it might have held the plaintiff's letter sufficient if the district director had actual knowledge of that letter. See Amwest Sur., 28 F.3d at 697-98; Small and Small, P.A. v. United States, 1995 WL 674996, at *1-2 (S.D.Fla. Nov. 3, 1995). Here, the Government demonstrates that the IRS District Director did not have actual knowledge of Plaintiffs’ letter. Accordingly, Plaintiffs cannot show any circumstances that would potentially excuse their failure to strictly comply with the requirements of 26 C.F.R. § 301.6343-2(b).
Because Plaintiffs' letter did not extend the limitations period under, section 6532(c)(2), their section 7426 claim is barred by section 6532(c)(1). Accordingly, the Court must dismiss Plaintiffs' suit for lack of subject matter jurisdiction. See Towe Farms, Inc. v. I.R.S., Civ. A. No. H-*58693-3318, 1994 WL 739448, at *2 (S.D.Tex. Aug.24, 1994).

. If the Service had based its tax liability for Roger Davenport on the basis of a married filing separately status, Margaret Davenport's assets, presumably, would not have been affected. See footnote 8 of this Report and Recommendation, supra. Indeed, there is nothing in the case record to suggest that Margaret Davenport is a tax protester.

Had Margaret Davenport not made the conveyance of March 28, 1994, to Faith Davenport, she would have certainly been entitled to cotenant protection under 26 U.S.C. § 7403. Moreover, even if one were to assume that Margaret Davenport retained title to her half-interest in the property (because the March 28, 1994, conveyance violated the Statute of Elizabeth), the limitations periods of 26 U.S.C. § 6532 bar any action by Mrs. Davenport for the levy on February 9, 1998, on what had been her half-interest in the property. I.e., had Margaret Davenport timely commenced suit under 26 U.S.C. § 7426(a)(1), it is likely that Margaret Davenport would have prevailed with respect to her former half-interest in the property.

Yet, no action was taken by Margaret Davenport (who, in any event, is not a party to Civil Action No. 8:00-2847-20BG) during the nine-month period prescribed by 26 U.S.C. § 6532(c). The United States Court of Appeals for the Fifth Circuit has commented on the purpose and effect of statutes of limitations:

* * * Limitations statutes, however, are not cadenced to paper tidiness and litigant convenience. Time dulls memories, evidence and testimony become unavailable, and death ultimately comes to the assertions of rights as it does to all things human.

United States v. Newman, 405 F.2d 189, 200 (5th Cir.1968) (citation omitted from quotation).