United States v. Gora

Background

The United States sued to collect federal income-tax assessments owed by Curtis J. Olson and Kathleen M. Olson and to hold Joanie Gora responsible for not complying with a levy issued by the Internal Revenue Service. The claims against the Olsons had previously been resolved by summary judgment, with a judgment of $263,747.45 plus statutory fees and interest. The remaining claims against Gora were tried to the bench with the parties’ consent.

Gora rented the Olsons’ property under a month-to-month lease and was paying $1,150 per month when the Internal Revenue Service issued a Notice of Levy on September 23, 2020. The notice and cover letter instructed her to send future rent payments to the United States Treasury. The government sought $24,150 for rent from November 2020 through July 2022, plus interest, and a 50% penalty for failing to surrender the rent payments.

Gora argued that the levy could not reach future payments because her lease was month-to-month and, in her view, no sufficiently fixed obligation existed when the levy was issued.

Findings about compliance

The court found that the lease was signed in February 2019 and required monthly rent. It found that Gora understood by October 2020 that she had to send future rent payments to the Internal Revenue Service and understood the possible 50% penalty for failing to comply.

Gora testified that she mailed rent checks to the Internal Revenue Service for several months and later paid rent in cash to Olson. The court found this testimony not credible. It also found that purported bank records and other documents Gora provided were not reliable, including documents she admitted were personal Word documents, false statements, or doctored emails. The court found that the Internal Revenue Service never received payments from Gora and that she knew by January 2021, and certainly by July 2021, that the payments were not reaching the agency.

Legal conclusions

A federal tax levy is a government demand that a person holding property or payment rights connected to a taxpayer surrender that property or those rights to the government. The court explained that a levy reaches property or obligations existing when the levy is issued, including obligations that are fixed and measurable even if payment is due later.

The court concluded that Gora’s possession of the Olsons’ property was enough for the levy to attach. It also concluded that the month-to-month lease created rent obligations that were sufficiently fixed and measurable for the levy to cover the rent due from November 2020 through July 2022. The court therefore did not accept Gora’s argument that the month-to-month nature of the lease prevented the levy from reaching those payments.

The court further concluded that Gora lacked reasonable cause for failing to honor the levy. It noted that she knew of her duty to comply, did not raise her legal objection with the Internal Revenue Service before the litigation, and provided misleading or incorrect documents concerning payment.

Disposition

Judge John F. Docherty ordered that Gora was liable to the United States on Counts II and III. He ordered personal liability of $24,150 plus interest under 26 U.S.C. § 6332(d)(1), and a 50% penalty of $12,075 plus 50% of the recoverable interest under § 6332(d)(2). The parties were ordered to confer and file a proposed interest calculation within 14 days, after which the court would enter an amended judgment.