United States District Court, W.D. Washington, Tacoma
ORDER GRANTING IN PART AND RENOTING PLAINTIFF'S
MOTION FOR SUMMARY JUDGMENT AND DENYING DEFENDANT'S
BENJAMIN H. SETTLE, UNITED STATES DISTRICT JUDGE.
matter comes before the Court on Plaintiff the United States
of America's (the “Government”) motion for
summary judgment and Defendant Doran R. Kraus's
(“Kraus”) motion to dismiss. Dkts. 68, 69. The
Court has considered the pleadings filed in support of and in
opposition to the motions and the remainder of the file and
hereby (1) grants in part and renotes the Government's
motion and (2) denies Kraus's motion.
8, 2016, the Government filed its complaint against Kraus to
reduce to judgment tax assessments for the years 2001-2004.
Dkt. 1. On December 14, 2016, the Government moved to amend
its complaint in order to add additional tax assessments for
the years 2001-2007, foreclose federal tax liens on real
property, and name additional parties, including Defendant
Leanne V. Lao (“Lao”), who may claim an interest
to the foreclosure as defendants. Dkt. 18. On January 26,
2017, the Court granted leave to amend. Dkt. 22. On January
27, 2017, the Government filed its amended complaint. Dkt.
29, 2017, Kraus filed a motion to dismiss. Dkt. 57. On June
14, 2017, the Government responded. Dkt. 60. On July 27,
2017, Kraus filed an updated motion to dismiss. Dkt. 61. On
August 11, 2017, the Government responded. Dkt. 62. On August
16, 2017, the Court entered an order denying Kraus's
motions to dismiss. Dkt. 63.
January 31, 2018, the Government moved for summary judgment.
Dkt. 68. Also on January 31, 2018, Kraus filed a cross-motion
for summary judgment, which he titled a “Dispositive
Motion for Settlement.” Dkt. 69. On February 16, 2018,
the Government responded to Kraus's motion. Dkt. 71. On
February 20, 2018, Kraus replied on his motion and responded
to the Government's motion. Dkts. 72, 73. On February 21,
Lao responded to the Government's motion. Dkt. 74. On
February 27, 2018, the Government replied to Lao's
response. Dkt. 78. On March 21, 2018, Kraus filed a
“revamped-updated” response to the
Government's motion. Dkt. 79.
March 26, 2018, the Government filed a notice of a reduction
in the amount in tax assessments it seeks to reduce to
judgment for the years 2001-2004. Dkt. 80.
and Lao married in 1988. They divorced in 2010. They have
three children who are 16, 24, and 27 years old. For most of
the marriage, Kraus provided the marriage's only income.
Lao stopped working around 1991 after the birth of their
first child. Throughout the marriage, Kraus handled all of
the family's finances. They had a joint bank account, and
Kraus had a credit card, but Lao did not have her own bank
account or credit cards or write checks. Kraus gave cash to
Lao to pay for household expenses.
also handled all tax matters during the marriage. Lao
discovered Kraus had not been paying taxes when the IRS
delivered letters to their house. Kraus told Lao that he
would “take care of it” and Lao never tried to
contact the IRS herself.
the mid-1980s until 2006, Kraus was an equal partner with his
brother Tad Kraus in running a retail jewelry store, Kraus
Diamond Specialty, located in Lakewood, Washington. After the
store closed in 2006, Kraus began making money through
various temporary jobs.
stopped filing tax returns in 1999. He has claimed that tax
returns are voluntary and only persons who are employed by
the federal government or fill out a Form 1040 are required
to pay taxes. Kraus did not file federal income tax returns
for the years 2001-2004. Kraus Diamond Specialty did not file
federal partnership returns for the years 2001-2004.
2003, Kraus and Lao sold their primary residence and moved to
the subject property in this lawsuit: 590116th Street Court
NE, Tacoma, Washington 98422, also known as Pierce County
Parcel Number 602296-003-0, with a legal description as
indicated in the Amended Complaint. They bought the subject
property for $280, 000 in 2003. They paid $116, 000 using
proceeds from the sale of their previous residence and Kraus
payed an additional down payment with money earned from Kraus
Diamond Specialty. The deed conveyed the subject property to
“Doran Kraus and Leanne Kraus, Husband and Wife.”
April 8, 2005, Kraus and Lao signed a Land Trust Agreement
that purported to create Trust No. K9L7K5D3-48-89999-B with
“G. Michael” as trustee. The trust agreement
stated that Mr. Kraus and Lao were each 50 percent
beneficiaries of the trust. Kraus and Lao also signed a
quitclaim deed conveying the subject property to the trust,
which was recorded with the county auditor on April 19, 2005.
26, 2005, Kraus and Lao executed an assignment of a
beneficial interest in the trust purporting to assign their
beneficial interest to “Fairview, a private contractual
company.” Fairview's listed address was the same as
that of the subject property. Larell H. Baldwin signed the
document on Fairview's behalf as the “Authorized
Signatory for Sentinel Systems, Curator for Fairview.”
The assignment was never recorded.
the trust nor Fairview paid anything in exchange for the
transfers of interest in the subject property, while Kraus
and Lao retained the “benefit” of residing there.
At deposition, Baldwin testified that the transfers were
Kraus's idea and he simply assisted Kraus by assembling
the paperwork. Baldwin also testified that he would reconvey
the property to Kraus at any time upon request. Kraus
continued to make all decisions related to the property and
pay all associated bills. The transfers placed no
restrictions on Kraus or Lao's use of the property. Kraus
and Lao have continued to live at the property and their
children also continue to reside there.
Kraus who suggested that the subject property should be
placed in the names of the trust and Fairview. While Lao
signed the documents, she did not understand them and signed
only because Kraus asked her to do so. Lao did not inquire as
to why. At deposition, Kraus and Lao say the transfers were