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Tax Protestor Cases Exhibit
("Damn, We Lost Again! And why is it that people who sell
tax protestor materials file their tax returns anyway . . .")

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U.S. DISTRICT COURT,
NO. DIST. ILL.,
EAST. DIV.

February 25, 2000

[1] ZAGEL, JUDGE: This is a civil tax case in which the United States seeks summary judgment. The individual defendants have filed no response. The corporate defendants are in default and judgments should be entered against them. The United States has abandoned its claims against Florence E. Stout (and abated the income tax assessments against her). This leaves the case of Paul R. Stout for decision. Part of it has already been decided. By order and opinion of October 27, 1997, I granted summary judgment against Mr. Stout for his unpaid income taxes from 1973 through 1980. The amount of that is proven to be $442,093.68 plus interest and statutory additions since October 6, 1998. What is in issue now is the foreclosure of the tax lien on certain real property located at 150 North Main Street, Lombard, Illinois.

[2] The property was jointly owned by Paul and Florence Stout and transferred by them to Tioga and Cambridge, the corporate or non- individual defendants. The United States claims the transfer was fraudulent, as it clearly is shown to be under prevailing Illinois law which has adopted the Uniform Fraudulent Convevance Act. See 740 ILCS 160/5(b) and Gendron v. CNW, 139 Ill.2d 422, 564 N.E.2d 1207 (1990).

[3] The transfer was a sham. Mr. Stout is president of Cambridge Trust Company, Ltd. and operates it. Cambridge controls and operates Tioga Home Co. of which Mr. Stout too is president. Mr. Stout resided at the property before and after the conveyance which was made for the grand consideration of $10.00. The purpose for the transfer I infer from the fact that the transfer was made shortly after the Tax Court ruled that Mr. Stout owed a lot of money. After the conveyance Mr. Stout had no money to pay his debts. The Tax Court found that the same property had previously been subject to a sham transfer to avoid tax. The whole process impairs the rights of creditors, most prominently, the United States.

[4] The United States has the lawful right to demand sale of the entire property though I can refuse to allow this in order to protect a co-owner who is not liable. See United States v. Rodgers [83-1 USTC paragraph 9374], 461 U.S. 677 (1983)[.] Considering the circumstances here, I decline to forfend sale of the entire property. Two possible non-liable co-owners (Tioga and Cambridge) have not defended this action and appear to be sham entities. Treating Florence E. Stout as the co-owner does not change the result. She participated in the fraudulent transfer herself. If she acted in good faith, then she has abandoned her claims to the property. If she did not, then she has no legal or equitable claim against foreclosure.

[5] Judgment in favor of the United States is awarded.

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