Cheung Inc v. United States

I. FACTUAL AND PROCEDURAL BACKGROUND

Dr. Steven Cheung, an economics professor and consultant, formed the Company on July 5, 1977, as a Washington State 1 Unless otherwise indicated, all statutory references are to the Internal Revenue Code (26 U.S.C.). CHEUNG v. UNITED STATES 13461 corporation. Originally, the Company issued 100 shares of stock, all of which were owned by Cheung. On July 1, 1994, Cheung transferred 49 of his shares to Linda Su, Ronald Cheung, and Cecile Cheung as joint tenants with the right of survivorship. On August 1, 1995, Cheung transferred another 49 shares to the same parties.

On February 5, 2003, pursuant to § 6861(a),2 the Internal Revenue Service (“IRS”) issued a jeopardy assessment against Cheung for income tax liability for the year 1993. The assessment identified Cheung’s tax liability as $396,861, plus a penalty in the amount of $293,327 and statutory interest in the amount of $776,730, totaling $1,466,918. The same day, the IRS, believing the Company was a nominee of Cheung, issued and served a notice of jeopardy levy on the Company pursuant to § 6331(a).3 Pursuant to the levy, the IRS collected $353,575.93 from a…