JOHN M. MARSHALL; KAREN M. MARSHALL, Transferees v. Commissioner of Internal Revenue

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
JOHN M. MARSHALL; KAREN M.
MARSHALL, Transferees,
Petitioners-Appellants,
v.
COMMISSIONER OF INTERNAL
REVENUE,
Respondent-Appellee.
No. 17-72955
Tax Ct. No. 28782-11
MEMORANDUM*
MARSHALL ASSOCIATED, LLC,
Transferee,
Petitioner-Appellant,
v.
COMMISSIONER OF INTERNAL
REVENUE,
Respondent-Appellee.
No. 17-72958
Tax Ct. No. 28661-11
ESTATE OF RICHARD L. MARSHALL,
DECEASED, Patsy L. Marshall, Personal
Representative; PATSY L. MARSHALL,
No. 17-72960
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.
FILED
JUL 23 2019
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS

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Petitioners-Appellants,
v.
COMMISSIONER OF INTERNAL
REVENUE,
Respondent-Appellee.
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).

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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.

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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)).

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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.

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