California Court of Appeal Holds Transfer by Mother to her Son is not Fraudulent Because There was no Intent to Defraud Any Creditor – Los Angeles Asset Protection Planning and Income Tax Litigation Attorney Bruce Givner

by Bruce Givner on August 15, 2013

Dr. and Mrs. Johnson sued the Plaintiff, Mr. Hasso, and received a multi-million dollar judgment. Hasso then sued the Johnsons and was awarded several default judgments. Before Plaintiff received the default judgments, Mrs. Johnson bought homes for her children. After receiving the default judgments, the Plaintiff sued the Johnsons and their children claiming the Johnsons home purchases for the Johnson Children were fraudulent transfers to avoid the later default judgments. The Johnson Children and the Plaintiff then entered into a settlement agreement for all the homes bought except the home bought for son, Jesse Johnson, which went to trial.

After testimony, the Superior Court of Riverside County held that the home purchase for Jesse was not a fraudulent transfer because:

1. At the time of the home purchase, the Johnsons were worth approximately $11 million;
2. Mrs. Johnson also had a $2.8 million judgment against Plaintiff;
3. The value of the home purchased for Jesse was less than 2% of Mrs. Johnson’s wealth;
4. For the two years that Mrs. Johnson held a note on the home purchased for Jesse, Jesse timely made the note payments;
5. The gift did not have a significant impact on the Johnsons’ lifestyle or solvency;
6. Mrs. Johnson had made similar gifts to the other Johnson Children; and
7. At the time of the gift to Jesse, the Plaintiff was on trial as a federal criminal defendant for having "knowingly devised and intended to devise a scheme in artifice fraud to obtain money by means of false and fraudulent pretenses, misrepresentations, promises including the intentional concealment of material facts from Robert and Odette Johnson...."

The court discounted the fact that when the home was gifted to Jesse, the value of Plaintiff’s pending lawsuits against Mrs. Johnson exceeded her total assets since the Plaintiff previously had not been a successful litigant in his actions against the Johnsons. The Plaintiff appealed. The Court of Appeal, 4th District, Division 2, California upheld the lower court decision. Hasso v. Johnson.

Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, estate planning, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles, Orange, Ventura, San Bernardino, Riverside and Santa Barbara Counties. Call Los Angeles Estate Planning and Asset Protection Plan Attorneys Givner & Kaye at (310) 207-8008 today.

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