The opinion of the court was delivered by: Richard G. Kopf, Chief District Judge.
I. FINDINGS OF FACT AND CONCLUSIONS OF LAW
This is an action brought pursuant to 28 U.S.C. § 2410 to determine whether the Internal Revenue Service ("IRS") has issued a valid lien against plaintiff Baum Hydraulics Corporation ("Baum-Nebraska"*fn1). Following a bench trial on the merits of this case, I now issue my findings of fact and conclusions of law in accordance with Federal Rule of Civil Procedure 52(a).*fn2
In May 1991, the IRS began an examination regarding unpaid estate taxes and estate income tax liabilities relating to Sloan Allen, who died on March 8, 1987.*fn3 The Page 2 IRS's examination resulted in personal tax assessments in the amount of $26,009,568.99 against Sloan Allen's son, David Allen, on the theory that David Allen was the fiduciary and transferee of his father's estate, but he failed to pay estate taxes and estate income taxes relating to his father's assets.
Because the IRS was unable to satisfy the full personal tax assessment against David Allen, the IRS filed a lien against plaintiff Baum-Nebraska on July 5, 2001,*fn4 claiming that Baum-Nebraska is the nominee or alter ego of David Allen and, therefore, the IRS should be able to pierce Baum-Nebraska's corporate veil and satisfy David Allen's personal obligation with Baum-Nebraska's assets.*fn5 (Trial Ex. 50.)
A. Baum-Nebraska and Christiania Corporation
Plaintiff Baum-Nebraska was incorporated in Nebraska in 1906 under the name The Omaha Iron Store Company. At that time, it acquired the business of The Baum Iron Company, which itself began operations in 1857 and was incorporated on August 16, 1888. From 1916 to 2000, the company amended its articles and changed its name five times, the most recent being April 3, 2000, when the company changed its name to Baum Hydraulics Corporation after an asset sale. Page 3
Baum-Nebraska's business — located in downtown Omaha for over 100 years — primarily involved retail sales of precision machinery components utilized for farm, construction, mining, off-road vehicles, and industrial and factory equipment. As of February 2000, Baum-Nebraska had over 1,000 customers across the country and employed approximately 60 people. Of its average yearly gross revenues of between $7,000,000 and $8,000,000, Baum-Nebraska generated only $21,278 in gross receipts outside the United States in Canada, Puerto Rico, Bolivia, Trinidad, and Honduras since 1994. (Filing 18, Answer to Interrogatory No. 9 & Ex. C; Trial Ex. 71; Trial Tr. at 76.)
Baum-Nebraska had various shareholders since its incorporation in 1906. As of 1977, David Allen was the sole shareholder with 1,184 shares of stock. Beginning in 1993, Baum-Nebraska issued 117,216 shares of stock to Christiania*fn6 Corporation, which was incorporated in 1993 in Vaduz, Liechtenstein. Also in 1993, Christiania Corporation issued a proxy agreement authorizing David Allen to vote all its shares in Baum-Nebraska. On September 1, 1994, David Allen gifted his 1,184 shares of stock in Baum-Nebraska to Christiania Corporation, making Christiania the sole shareholder of Baum-Nebraska.*fn7
Although Christiania Corporation owned Baum-Nebraska at that point, David Allen's key employees at Baum-Nebraska did not know who owned Christiania, nor did they know the names of any principals or other contacts at Christiania. David Allen indicated to his employees that communication with Christiania should go through him and he would "take care of it." (Depo. Beverly A. Randall at 38-39; Page 4 Depo. Gordon Gilbertson at 29-34.) Because of a proxy agreement between Christiania Corporation and Baum-Nebraska, David Allen controls all the shares of Christiania. (Trial Ex. 21.) Christiania Corporation has never filed a federal tax return, and the Internal Revenue Service does not have a federal identification number for Christiania. (Trial Tr. 158.)
B. Baum-Delaware and Hydraulics Baum, S.A.
On February 8, 2000, David Allen incorporated a new Baum Hydraulics Corporation in the state of Delaware ("Baum-Delaware"). (Trial Ex. 63.) The new corporation's shareholders were certain long-time former employees of Baum-Nebraska. On February 22, 2000, Baum-Nebraska sold its assets to Baum-Delaware in exchange for a promissory note in the amount of $550,000,*fn8 and Baum-Delaware began operating its business on that date. (Trial Ex. 38.) Immediately upon the asset sale, and at David Allen's request, the Baum-Delaware employee-owners issued voting trusts in favor of David Allen which gave Allen voting rights with respect to the employee-owners' shares. (Depo. Beverly A. Randall at 37-38 & 108.) Those voting trusts were revoked on April 1, 2002, leaving 100 percent ownership and control of Baum-Delaware with the employee-owners. (Trial Ex. 57.) David Allen was no longer affiliated with Baum-Delaware after his March 26, 2002, resignation.*fn9 (Depo. Beverly A. Randall at 36.) Page 5
Baum-Delaware made monthly payments*fn10 on the $550,000 note from January 2001 to August 2002 to an account entitled "Baum Hydraulics Nebraska" in Switzerland.*fn11 Because David Allen did not open this Swiss account until October 2001, Baum-Delaware kept the January 2001 to September 2001 checks in its vault pursuant to David Allen's direction, after which it mailed them to Allen for placement in the newly-opened Baum-Nebraska bank account in Switzerland. After October 2001, Baum-Delaware wired the monthly payments to the Baum-Nebraska account in Switzerland. (Trial Tr. 120-123, 127-128.) After August 2002, Baum-Delaware has applied what would have been payments on the note against a receivable that David Allen owed Baum-Delaware for various expenses that Allen incurred and Baum-Delaware funded. (Depo. Beverly A. Randall at 50; Trial Tr. 93-99, 102-104, 124-126.)
Hydraulics Baum, S.A., was incorporated in 1988 in Switzerland, where it also maintains its business office. Hydraulics Baum, S.A., entered into an Agency Agreement, Consulting Agreement, and Management Agreement with Baum-Nebraska between 1988 and 1990. The Agency Agreement stated that Hydraulics Baum, S.A., would "perform all the services and functions required . . . for the furtherance and establishment of Baum Iron Company's presence in Greater Europe. . . ." Under the Consulting Agreement, "David S. Allen [was to] provide consulting and management and other services to Hydraulics Baum, S.A. and through Hydraulics Baum, S.A. provide consulting, management, and agency services to Baum Iron Company, (A Nebraska Corporation)." The Management Agreement provided that Hydraulics Baum, S.A., would "perform all the management systems and management services and functions required or needed by Baum Iron Company or its successor corporations." (Depo. Beverly A. Randall, Ex. 29; Trial Exs. 30-36.) Page 6
David Allen, who moved to Switzerland in the early 1990s, is the president, chairman, and direct and general manager of Hydraulics Baum, S.A., and is employed as a consultant for that business, although Allen is and was "not set up on the payroll to get a paycheck per se" for those consulting services. (Depo. Debra M. ...