Full opinion text
MEMORANDUM AND ORDER YOUNG, District Judge. In this case equity and common sense war against the needs of the IRS, in a largely voluntary tax system, ruthlessly to grind down tax cheats. So it is that the IRS, by manipulating penalty and interest payments, can use a decades old tax debt (the principal of which has been fully paid and then some) to evict an innocent widow and her son from the family home. This case concerns the conveyances by a husband, Salvatore J. Mazzeo (“Mazzeo”), to his wife, Mary Ellen Margaret Mazzeo (“Mrs. Mazzeo”), of a home, of money used for substantial construction on that home, and of other money, all while Mazzeo owed substantial tax liabilities to the United States government (“United States”). The United States charges that the initial transfer of the home, the construction and improvements, and the other transfers were part of an intentional scheme to defraud the United States as a creditor, and should be set aside as fraudulent conveyances. 1. BACKGROUND AND FACTS A. Causes of Action and the Relevant Statutes On April 22, 1998, the United States, pursuant to 26 U.S.C. §§ 7401 and 7403, brought an action in this Court, seeking a declaration that Mazzeo’s transfer of the home to Mrs. Mazzeo was null and void as against the United States, and to foreclose tax liens allegedly attaching to that property. Compl. [Doc. No. 1]. In Count I of the United States’ Amended Complaint [Doc. No. 90], the United States seeks to set aside the December 11, 1985 conveyance of the home in East Williston from Mazzeo to Mrs. Mazzeo as constructively and actually fraudulent under New York State Debtor and Creditor Law §§ 273 and 276. The United States contends that because this transfer rendered Maz-zeo insolvent, or because he was insolvent when he made it, and because it was made with the actual intent to hinder, delay, or defraud the United States, his creditor, it should be set aside under Sections 273 and 276. The United States thus asks this Court to declare this transfer null and void as against the United States. In Count II, the United States seeks to declare null and void as against the United States as a creditor of Mazzeo the transfers by Mazzeo, through nominee corporations that he controlled, to Mrs. Mazzeo of funds to improve the subject real property. The United States specifically seeks to set aside numerous distinct transactions with different subcontractors regarding all the construction work done at the home in East Williston from 1994 to 1997. The United States contends that all of these transactions were payments by Mazzeo that, while ostensibly done to improve the home, were actually an attempt to avoid paying these monies to his creditors, and can all be traced into the home. In addition, the United States seeks to void transactions in which Mazzeo paid for personalty that is currently located at the property (elephant tusks, an antique shield, etc.), again arguing that these transfers were constructively and actually fraudulent. The United States therefore seeks a judgment from this Court impressing a lien against the house for the total amount of these transactions. Lastly, in Count III, the United States seeks to declare null and void under Sections 273 and 276 certain transfers of funds by Mazzeo, through nominee corporations that he controlled, to and for the personal benefit of Mrs. Mazzeo, including but not limited to: the transfers of funds to Long Island Savings Bank and its successor, the Astoria Federal Savings and Loan Association (“Astoria Savings and Loan”), for the payment of the mortgage loan obligations of Mrs. Mazzeo; the transfer of funds to various life insurance companies for the payment of life insurance premiums insuring Mazzeo’s life; and transfers of funds directly to Mrs. Mazzeo. In doing so, the United States seeks to set aside numerous distinct transactions and seeks a money judgment or equivalent for the total amount of these transactions. The United States seeks to declare all the subject conveyances “null and void,” and is proceeding under Section 278(l)(b)’s election of remedies to levy execution directly on the property. B. Factual and Procedural Background On June 28, 1985, Mazzeo purchased a home valued at $335,000 at 41 Post Avenue, East Williston, New York, (“the home”) with a down payment of $100,000, and he took a mortgage from the Dime Savings Bank. Pl.’s Ex. 2 & 5. Mazzeo was then working at Creative Securities, a brokerage firm owned by his father, Fred Mazzeo. Two months later, in August 1985, this brokerage firm imploded and Mazzeo was out of a job. Nevertheless, on September 22 of that year, he married Mrs. Mazzeo. In December 1985, Mazzeo transferred the home, by deed, to his wife. Pl.’s Ex. 3. At the time of this transfer, Mazzeo owed a considerable amount of federal income tax to the United States for the tax year 1984' — approximately $57,000 in assessed taxes, not including accrued interest and late penalties. See Pl.’s Ex. 31 & 33. Regarding the state of his business affairs at the time he conveyed the home to his wife, Mazzeo testified in a deposition taken during his later bankruptcy proceedings that: the value of Creative Securities capital went from $28 million to $0 in three days, PL’s Ex. 39, at 25; after Creative Securities went out of business, almost all of his personal stock, purchased on margin, was worthless and he was forced to write off his losses in these stocks, but remained liable for the margin calls, id. at 41; and from the end of 1985 he was “blackballed” from the securities industry, and in the second half of 1985 he earned only $11,000 working for Shelter Rock Securities, id. at 26-27; Pl.’s Ex. 50-51. Mazzeo’s personal income tax returns for the years 1985 and 1986 support these assertions, as he reported a “total income” of negative $6,993 in 1985 and negative $57,832 in 1986. Pl.’s Ex. 50-51. As for his assets at the time of the transfer, Mazzeo’s deposition testimony shows that he had partnership interests in four limited partnerships: 1) Immunomed-ics, 2) Higgins-Rosemont, 3) Thornhill, and 4) 100 Randall Associates, and the Court infers from that testimony that the value of these interests in December 1985 was approximately $320,000. See Pl.’s Ex. 39, at 44-48. Mazzeo testified further that in December 1985, he owned a fully furnished condominium in Florida, which he had purchased roughly three years before for $107,000, subject to a five-year $90,000 note. See id. at 18. The Court finds that $40,000 is a reasonable estimate for the equity that Mazzeo had in the condominium as of December 1985. The Court also credits Mazzeo’s testimony that as of December 1985 he owned a new boat with a purchase price of $50,000. See id. at 17. The Court also finds that Mazzeo owned an Audi at that time, and was owed an indeterminate but substantial sum of money by Creative Securities. See id. at 14, 40, 64, 71. Mrs. Mazzeo refinanced the original mortgage on the home on July 16, 1987, through Long Island Savings Bank, whose successor in interest by merger is Astoria Savings and Loan, and obtained new mortgage financing totaling $261,800. Pursuant to Judge Seybert’s April 27, 2001 Stipulation and Order' [Doc. No. 107] in this case, Astoria Savings and Loan still has a valid first mortgage lien on the home. Mrs. Mazzeo took a second mortgage on the home on February 12, 1988, in the amount of $58,000, from Capital Homeowner Services Corporation, who later assigned its interest to Marine Midland Bank. Pl.’s Ex. 6. This mortgage has been satisfied. On October 5, 1987, Mazzeo filed his 1984 U.S. Individual Tax return with the Internal Revenue Service, reporting a total tax liability of $57,377, plus $3,725 in penalties for failure to pay. PL’s Ex. 33. Mazzeo paid $10,000 to the IRS on this date, leaving an unpaid balance due of $51,102, not including interest and penalties. PL’s Ex. 31. On November 9, 1987, a delegate of the Secretary of the Treasury made assessments against Mazzeo and demanded payment in the amount of $101,161.99 for the 1984 taxable year, comprising $57,377 in 1984 income tax, $3,607.34 in Estimated Tax Penalty (I.R.C. § 6654), $12,909.83 in Late Filing Penalties (I.R.C. § 6651(a)(1)), $8,843.43 in Failure to Pay Tax Penalties (I.R.C. § 6651(a)(2) & (3)), and $19,424.39 in interest (I.R.C. § 6601). Id. Payments of this debt have been made in the amount of $136,904.03, culminating in a payment of $50,000 on December 6, 2000, and the unpaid assessed balance of Mazzeo’s 1984 tax liability is now $0. Id. The United States still claims that it is owed $134,551.57 in accrued interest on this debt as of June 30, 2002, see PL’s Prop. Findings of Fact [Doc. No. 156] ¶ 7, a claim that is of real significance in this case, as will be discussed below. Beginning in June 1994, the house and garage on the property in East Williston were razed and rebuilt. From June 1994 to July 1997, various other improvements were made on the property as well. The primary general contractors who did most of this work were the firm Curto & Curto, pursuant to a contract between themselves and Mazzeo, made in April 1995, PL’s Ex. 8(A), though various subcontractors were used. In addition to the construction work done on the property, Mazzeo, through the entities listed below, also made extensive purchases of personalty, most of which were then used as decorations at the home in East Williston. Payments to these contractors and for the personalty were made principally by SLMP Holding Corporation (“SLMP”). Mazzeo was the president of SLMP at all relevant times and had check-signing authority. Mazzeo owned the shares of SLMP until 1995, when those shares were transferred to Unitek Consultants, Inc. (“Unitek”), which was wholly owned by Charles Leonhardt. Mazzeo has testified in a deposition conducted by the United States that he also “owned” 30% of the entity United Acquisitions III Corporation (“United”). Pl.’s Ex. 39, at 88-90. In addition to SLMP, Unitek and United made payments for the improvements and construction done at the property. Mazzeo testified that the cost for this new construction totaled approximately $550,000, of which an estimated $300,000 was paid for by his “own earnings,” and roughly an additional $250,000 was borrowed. See id. at 84-87, 92; Pl.’s Ex. 40, at 118. The United States contends that the total of the transfers used for the home improvements was $847,375.59, of which $555,049 was paid to Curto & Curto directly. Pl.’s Prop. Findings of Fact ¶ 14. Mazzeo also made payments during the relevant period, through the corporate entities listed above, that benefitted Mrs. Mazzeo personally. These included payments for premiums on a life insurance policy insuring Mazzeo’s life, mortgage payments on the property to Long Island Savings Bank, and cash transfers to Mrs. Mazzeo, allegedly totaling approximately $60,000. Pl.’s Ex. 24, 25, 27-29. On December 21, 1995, one day before a notice of deficiency for unpaid New York state withholding taxes was due to ripen into an assessment against him, Mazzeo filed a voluntary petition in bankruptcy under Chapter 13; he did not include any tax liabilities on the bankruptcy schedule, and additional alleged unreported debts were later uncovered. See In re Mazzeo, 131 F.3d 295, 299 (2d Cir.1997). This Chapter 13 case was dismissed for lack of jurisdiction, because Mazzeo exceeded the statutory unsecured’ debt limit. In re Mazzeo, 213 B.R. 625 (E.D.N.Y.1996), aff'd 131 F.3d 295 (2d Cir.1997). Mazzeo was a stockholder and officer of Westfield Financial Corp. (“Westfield”), a corporation that failed to pay its withholding tax liability to the IRS and to the State of New York in 1994. See Mazzeo, 131 F.3d at 299; Pl.’s Ex. 32. On November 27, 1996, the United States assessed Mazzeo a 100% penalty in the amount of $999,305.08, later adjusted to $740,098.30, a “Responsible Person Assessment” pursuant to 26 U.S.C. § 6672, by reason of his willful failure to collect, truthfully account for, or pay over withheld income and Federal Insurance Contributions Act taxes due and owing from Westfield for the periods ending March 31, through December 31, 1994. See Pl.’s Ex. 31, 31(a), 32; see also PL’s Ex. 39, at 32 (reproducing deposition testimony by Mazzeo that Westfield went out of business at the end of 1994). On the date of the November 9, 1987 assessment, a lien arose in favor of the United States and attached to all property and rights to property of Mazzeo under 26 U.S.C. § 6321. A similar thing occurred on the date of the November 27, 1996 assessment, although matters are complicated by the fact that Mazzeo had filed a Chapter 11 bankruptcy petition on November 15, 1996. Under 11 U.S.C. § 362(b)(9)(D), although the IRS may assess taxes during the automatic stay’s pen-dency: [A]ny tax lien that would otherwise attach to property of the estate by reason of such an assessment shall not take effect unless such tax is a debt of the debtor that will not be discharged in the case and such property or its proceeds are transferred out of the estate to, or otherwise revested in, the debtor. Id. The lien still attached to any property Mazzeo acquired after he filed his Chapter 11 case, as such property was not property of the estate. The estate’s property was, by definition, not Mazzeo’s. A special Notice of Federal Tax Lien with respect to all of the tax liabilities described above was filed by the United States under the name of “Marry Ellen Mazzeo as the fraudulent grantee of Salvatore J. Mazzeo” with the Nassau County Clerk’s Office on April 2, 1998, in order to ensure that a reasonable inspection of the tax lien index would reveal that the tax liens against Mazzeo attach to the subject property even though title had already been conveyed to Mrs. Mazzeo. As will become apparent, the precise status of the 1994 tax liability lien at the time of the November 27, 1996 assessment and during the period leading up to the present day is irrelevant for purposes of resolving this case, so the Court takes no position on that question. According to the United States, after application of credits including amounts paid or collected during this lawsuit, Maz-zeo’s 1994 tax liability totals $538,895.90 plus accrued (un-assessed) interest of $384,536.93 as of June 30, 2002, and accrued (assessed) interest of $9,783.85, for a total liability of $933,216.68 as of that date (on which interest continues to accrue). See Pl.’s Prop. Findings of Fact ¶ 8. The Chapter 11 bankruptcy case was converted to a Chapter 7 liquidation case on October 27, 1997. United States v. Mazzeo, 245 B.R. 435, 438 (E.D.N.Y.1999). On October 14, 1997, the Bankruptcy Court issued an Order which relieved the United States from the automatic stay with respect to its Responsible Person Claim against Mazzeo; this Order allowed the United States to undertake an action to determine the extent of Mazzeo’s liabilities under this Responsible Person Claim. It provided that if such action was commenced in the Eastern District of New York, the issues would be completely resolved as between the debtor and third parties over which the Bankruptcy Court had no jurisdiction, and that resolution of this issue in another forum should not impede the continuation of the debtor’s bankruptcy case. Id. Consistent with this Order, the United States instituted an action in this district, Case No. CV-97-6325, before Judge Wexler. That case was dismissed without prejudice in an order dated October 7, 1999, and there has been no further resolution of the relevant issues between Mazzeo and the United States. Mazzeo received his discharge in bankruptcy on February 28,1998. On April 21, 1998, the United States instituted this fraudulent conveyance action. Mazzeo died on July 9, 1999. On September 30, 1999, Judge Seybert denied the parties’ cross-motions for summary judgement. United States v. Mazzeo, 245 B.R. at 444. The United States amended its complaint on January 18, 2001. [Doc. No. 90]. II. FINDINGS OF FACT AND CONCLUSIONS OF LAW MADE AT TRIAL In May and June, 2002, this jury-waived case was tried before this Court, with the parties and their witnesses in the courthouse in Central Islip, New York, and the Court seated in Massachusetts. This was accomplished through video-conferencing, which would not have been possible without the able and invaluable assistance of Maria Perrone, at that time a courtroom deputy clerk in the Eastern District of New York. After a lengthy and exhaustive trial — it became necessary to call each and every subcontractor who worked on Mazzeo’s home to testify that he had actually worked at the property on 41 Post Road and had been paid by check, because Mrs. Mazzeo refused to stipulate as to the different checks, their amounts, to whom they were paid, and from whom they originated — the Court made the following findings of fact on June 7, 2002, which are paraphrased and numbered below: ONE: The property sought in this case by the United States is not part of the bankruptcy estate presently being administered by the Bankruptcy Court, but the property transfers or transactions the United States successfully voids, if any, will be put back into the bankruptcy estate to be administered by the trustee in bankruptcy, Richard L. Stern, and to be dispensed pursuant to the order of the United States Bankruptcy Court, which order is still extant in this case. Even if this case has somehow been closed, the result here will be to put assets back into the estate and to let it be administered in accordance with the laws of bankruptcy, rather than simply to order matters conveyed or paid over to the United States. TWO: It was not proven by a fair preponderance of the evidence that Mrs. Mazzeo is or at any material time was complicit in any fraud, if fraud there was, on the part of Mazzeo. The United States also failed to prove that any transfer of assets once in her possession was fraudulent against the United States or any other creditors of Mazzeo. THREE: Mrs. Mazzeo’s defense of this case under New York Debtor and Creditor Law was not so bereft of merit to require that she be subjected to attorney’s fees as sought by the United States. FOUR: The United States proved the indebtedness of Mazzeo to it in 1985 and for the 1994 tax liability, as stated [in the text] above. FIVE: Mrs. Mazzeo, through her counsel, has the right to reduce the amount of Mazzeo’s 1994 Responsible Person Liability, if she is able, in this forum. The Court erred when it excluded the testimony of her witness, Accountant Harvey Mendelsohn. Mr. Mendelsohn may submit an affidavit detailing to what he would have testified regarding this matter. SIX: The United States is limited in any recoveries' that it obtains to the transfers pleaded with particularity in its First Amended Complaint, (i.e., one transfer in Count I,- and the distinct transfers listed in Counts II and III). In addition, the United States is limited in its recovery to those transfers which have been demonstrated by actual checks that were received in evidence. Therefore, if particular transfers detailed in Counts II and III are not backed up by checks admitted in evidence, the United States has failed in its proof. SEVEN: Regarding all of the transfers detailed in Counts II and III, the United States has proven by a fair preponderance of the evidence that each of these transfers was made without fair consideration from Mrs. Mazzeo. The duty to support a spouse does not set up any antecedent debt to trump the fraudulent conveyance law of the State of New York and the need for consideration. EIGHT: Regarding all of the transfers in Counts II and III, the United States has met its burden in proving by a fair preponderance that each and every one of them was actually fraudulent and made with a direct intent to defraud such creditors that Mazzeo then had and to obstruct and hinder their ability and right to obtain payment. Therefore, the transfers in Counts II and III were actually fraudulent under Section 276. NINE: The recovery, (which will go to the trustee and not directly to the United States, as detailed above,) on each of the transfers in Count III — life insurance premiums paid, mortgage interest, cash transfers converted to personalty, etc. — is limited to the actual cash amount of the transfer with statutory interest for fraudulent transfers under the laws of the State of New York. To the extent that Mrs. Mazzeo has the personalty, i.e. the jewelry, that was a result of any of these transfers, her duty cannot exceed returning the jewelry to the trustee and the trustee may seek to repossess this jewelry after the Court enters its written order. Mrs. Mazzeo is prohibited from transferring, subordinating or obligating any of this jewelry. It must be held for the bankruptcy trustee. TEN: Mrs. Mazzeo in good faith took the proceeds from her husband’s life insurance policies and transferred them into an annuity. The trustee cannot recover the insurance policies/annuity. ELEVEN: As for Count II, given that the improvements are the result of fraudulent transfers of Mazzeo, these fraudulent transfers result necessarily in a lien against the house in favor of the trustee, in the aggregate amount of the transfers plus interest at the New York State statutory rate for fraudulent transfers. TWELVE: Regarding Count I, the Court placed no weight on the testimony of Mrs. Mazzeo that, during the period of their engagement, it was agreed between herself and Mazzeo that the house would always be in her name. THIRTEEN: Regarding Count I, given that Mazzeo’s business had collapsed in August 1985, the Court draws the reasonable inference that Mazzeo knew that numerous creditors were looming and waiting to collect their debts in December 1985, when he transferred the home to Mrs. Mazzeo. FOURTEEN: Regarding Count I, Mrs. Mazzeo proved by a fair preponderance of the evidence that Mazzeo was solvent at least with respect to the extent of the accrued liability he owed to the United States when the home was transferred. He could have laid his hands on enough disposable assets that would have satisfied that debt. It is a reasonable inference that there were other debts extant at this time, but none of them were proven on the record, so Mazzeo was solvent for the purposes of Section 273. FIFTEEN: Notwithstanding the fact that Mazzeo was not guilty of constructive fraud, because he was solvent when the home was transferred, Mazzeo was guilty of actual fraud under Section 276 when he transferred the home to his wife. SIXTEEN: The state of Mrs. Mazzeo’s title in the house was voidable, not void or void ab initio. It was effective against all the world except for those creditors who could demonstrate that the transfer of the title was fraudulent. The United States has done so here. The debt owed to the United States at the time of the transfer, however, was fully satisfied. The title of Mrs. Mazzeo in the property ripened into title absolute even as against the United States once the debt that could have made it fraudulent and voidable was paid off. The Court finds that it was paid off. Even so, all improvements poured into the house are fraudulent and they result in a lien in favor of the trustee. SEVENTEEN: The equitable defense that Mrs. Mazzeo ought be allowed to remain in the home and that the home ought be the security for the United States’s lien was rejected. If the home can be sold for sufficient money as the Court has established and those funds, once back in the hands of the trustee, are used to pay off the United States and, first in priority, the bank holding the mortgage, which is a matter for the bankruptcy judge and not for this Court, then Mrs. Mazzeo can redeem the house. EIGHTEEN: To the extent that a number of the checks in Count II represent personalty and not fixtures, (this personalty consisting of jewelry, elephant tusks, a rare corkscrew, and other items, as shown at trial), Mrs. Mazzeo’s liability is only for the cash amount of the transfer, which is what is fraudulent, plus interest at the New York State statutory rate for fraudulent transfers. She may satisfy that liability by turning over the personalty. NINETEEN: The fixtures in the home, the improvements, are subject to a lien against the house. The bankruptcy trustee, Mr. Stern, may seek to execute on that lien and sell the house, and then the funds will be held subject to the order of the bankruptcy judge. TWENTY: The Court, responding to a question from defense counsel, declined to hold from the bench exactly what the conveyances in Counts II and III were properly to be termed: whether embezzlement, ultra vires, income, or a loan, they were in his possession, were fraudulent as to creditors, and were a lawless reduction to possession. See 6/07/02 Trial Tr., at 3-19, 53-54. The Court now elaborates upon and further clarifies these findings, and addresses questions brought up by the parties at trial and in subsequent post-trial motions. Moreover, the Court, upon further reflection, finds it necessary to revise a number of these findings so, to the extent this opinion is inconsistent with prior findings, it supercedes them. III. DISCUSSION The Court notes at the outset that the validity of the conveyances properly is governed by New York state law, in this case sections of the New York Debtor and Creditor Law. United States v. McCombs, 30 F.3d 310, 323 (2d Cir.1994) (citing Aquilino v. United States, 363 U.S. 509, 512-13, 80 S.Ct. 1277, 4 L.Ed.2d 1365 (I960)). A. Constructive Fraud Under Section 273 Under Section 273 of New York Debtor and Creditor Law, a conveyance made by a person that is or will be rendered insolvent is fraudulent as to creditors, without regard to actual intent, if it is made without fair consideration. See note 2, supra. Generally, therefore, the party challenging the conveyance must prove at trial that: 1) the conveyance was made; 2) the transferor was or would become insolvent at the time of the conveyance; and 3) the conveyance was made without fair consideration. The party challenging the conveyance usually bears the initial burden of proof as to solvency and lack of consideration, American Inv. Bank, N.A. v. Marine Midland Bank, N.A., 191 A.D.2d 690, 595 N.Y.S.2d 537, 538 (2d Dep’t 1993); however, under New York law, once it is established that a debtor transferred property without fair consideration, the law presumes that the transfer rendered debt- or insolvent and the burden of production then shifts to the party seeking to uphold the conveyance to overcome that presumption by producing evidence of the debtor’s continued solvency after the transfer. Cadle Co. v. Newhouse, 2002 WL 1888716, at * 5 (S.D.N.Y. Aug.16, 2002); United States v. Red Stripe, 792 F.Supp. 1338, 1342 (E.D.N.Y.1992); Shelly v. Doe, 249 A.D.2d 756, 671 N.Y.S.2d 803, 805 (3d Dep’t 1998). The Court ruled from' the bench that none of the conveyances in any of the Counts was supported by fair consideration. The Court further held that Mrs. Mazzeo was able to prove that Mazzeo was not rendered insolvent when he conveyed the home as detailed in Count I. The Court did not discuss solvency relating to Counts II and III on June 7, 2002, when it made its preliminary findings, but will address this issue below. 1. Solvency Solvency under Section 271 is a “balance sheet test,” which requires a showing that the debtor’s assets, if sold for fair value (not book value), would be equal to or greater than the liabilities. E.g., Morgan Guar. Trust Co. v. Hellenic Lines Ltd., 621 F.Supp. 198, 220 (S.D.N.Y.1985). A witness’s testimony concerning the value of assets must be deemed reliable by the court before it can be used to establish fair salable value. See In re Manshul Constr. Corp., 2000 WL 1228866, at *40 (S.D.N.Y. Aug.30, 2000). Based on Mazzeo’s deposition testimony in his bankruptcy proceedings, see Pl.’s Ex. 39, referred to by Mrs. Mazzeo in submissions by her counsel to this Court, and other evidence presented at trial, the Court is satisfied that Mrs. Mazzeo met her burden in proving solvency regarding Count I. Mazzeo testified to the ownership of partnership interests in several companies, his possession of (an admittedly small) equity in a furnished condominium in Florida (his $40,000 estimate came from the fact that he sold the condo for $130,000 in 1987, after failing to meet payments on his obligation for a five-year, $90,000 note on the property), a car, and other assets. While Mazzeo may have overestimated his asset value in his deposition, his testimony establishes a fair amount of assets sufficient to meet a debt of approximately $60,000 (the tax liability plus interest and penalties) on December 11, 1985. The Court therefore held that he had sufficient assets to satisfy his debts to the IRS when he conveyed the home in December 1985, even including any possible accrued interest and late penalties on his tax liability and his monthly mortgage payments, and that Mrs. Mazzeo had therefore proven that Mazzeo was solvent for the purposes of this transfer. When it made its factual findings from the bench, the Court neglected to address whether Mrs. Mazzeo was able to meet her burden of producing evidence that Mazzeo was solvent when he made the transactions in Counts II and III. The Court now holds that she did not. The conveyances made from 1994 to 1997 rendered Mazzeo insolvent as to his existing debt to the United States, not to mention the numerous other debts that he had incurred by this time. The Court bases this ruling on the evidence the United States gave of Mazzeo’s substantial, indeed astronomical, 1994 tax liability, and on the fact that Mazzeo had been involved in different bankruptcy proceedings under three distinct chapters from 1995 to 1997, with his first proceeding being dismissed due to his exceeding the statutory limitation regarding unsecured debts. Mrs. Mazzeo presented little or no evidence of Mazzeo’s financial situation and the salable value of the assets in his possession at this time to possibly allow any competent court to conclude that Mazzeo was solvent when the conveyances in Counts II and III were made. He was completely mired in debt, far over his ability to pay. Mrs. Mazzeo attempts to argue that the Court must determine that Mazzeo was insolvent at each and every time he wrote a check when evaluating the numerous transactions over a period of roughly three years in Counts II and III; an ingenious and creative argument that ignores (admittedly sparse) case precedent and, in any event, misses the larger point entirely. Mazzeo, this Court has found, undertook an intentional and concerted effort over a period of years to effectuate a scheme for hiding his assets from creditors that he knew would place him beyond the ability to pay his debts. He thereby rendered himself insolvent. Given the size of his tax liability and other debts in 1994, he was completely insolvent well before he first declared bankruptcy, and the largest asset he possessed, his home, was no longer in his name. The Court need not, however, comb through Mazzeo’s financial statements and engage in a convoluted accounting process, as Mrs. Mazzeo’s counsel would have it. Even if the conveyances were not part of an actually fraudulent scheme, Mazzeo’s estate is accountable if it can be proven that Mazzeo engaged in a prolonged asset avoidance scheme involving constructively fraudulent conveyances. If Mazzeo is found to have deliberately rendered himself insolvent through a continuing scheme, even if he lacked any intent to hinder, delay, or defraud creditors, each and every conveyance made in furtherance of the scheme is void. Given the net result here, Mazzeo properly is considered insolvent retroactively as to each such conveyance as matter of law. As one court ruled when presented with the identical argument for separate findings of insolvency as to each transaction in a series of conveyances: Each transfer does not constitute a separate cause of action, as urged by defendants; it is the whole series of transfers which is actionable where it results in the transferor’s insolvency or where it is made with actual intent to defraud, since it may be only the aggregate of all which renders the transferor insolvent or establishes actual intent to defraud, while one or more, taken alone, may not have this result. Gruenebaum v. Lissauer, 185 Misc. 718, 57 N.Y.S.2d 137, 145 (N.Y.Sup.Ct.1946), aff'd 270 A.D. 836, 61 N.Y.S.2d 372 (1st Dep’t 1946). This Court ruled from the bench that all the conveyances in Counts II and III were constructively and actually fraudulent. The Court was not at that time thinking of the issues raised by the possibility that the transfers could be fraudulent as to one, but not the other, of Mazzeo’s federal tax debts, nor was it considering the possibility that the appropriate treatment of a series of related transfers might be different, depending on whether the claim was for actual fraud or for constructive fraud. As the Court has made clear, all of the transfers in Counts II and III were part of a continuing course of conduct designed to maintain Mazzeo insolvent. It seems reasonable to make any transfer falling within that scheme actionable by any creditor injured thereby, even if Mazzeo did not know that that person would be a creditor at the time the scheme began. Had Maz-zeo acted lawfully, all of the money conveyed pursuant to the scheme should have been available for creditors as their debts came into existence, so “relating back” is appropriate, regardless of when during his course of conduct Mazzeo became aware that a particular person might become his creditor (and thus be injured by his actions). Thus any creditor injured during the pendency of Mazzeo’s scheme should be considered a “present creditor” as of the scheme’s commencement. The Court will explain below why actual fraud should perhaps receive different treatment. 2. Fair Consideration The more important issue of fair consideration has been argued at length. Mrs. Mazzeo maintained at trial that fair consideration was present in all of the conveyances listed in Counts I — III because of an antecedent debt that constituted fair consideration under Section 272 — i.e., the obligation of spousal support Mazzeo had as her husband. Under New York law, this is plainly not the case, but because past precedent is confusing on this point, the Court includes the following analysis to clarify the issue. The Court held, correctly, that the duty to support a spouse does not set up any antecedent debt to trump the fraudulent conveyance law of the State of New York and the need for fair consideration, and it further held that the house did not constitute consideration for Mrs. Mazzeo’s promise to marry Mazzeo. The Court specifically noted that it did not credit the testimony of Mrs. Mazzeo that Mazzeo had promised to put his home in her name before they were married, to give her a sense of security after a previous failed marriage. The Court based its finding on the fact that the deed to the home given to Mrs. Mazzeo stated it had been conveyed “for love and affection.” Thus, the transfer failed to create any antecedent debt that might constitute fair consideration. The Court did not explain from the bench the reasons for finding lack of consideration for the transfers in Counts II and III. To succeed in her argument, Mrs. Mazzeo must present evidence both that the transfers constituted spousal support, and that the duty of spousal support creates an antecedent debt, the discharge of which would constitute consideration for the transfers. This Court is skeptical that all of these transfers can be considered spousal support. Certainly, the payment of mortgage interest and life insurance premiums might well qualify as spousal support. Many of the conveyances in Counts II and III, however, were simply an attempt to add luxuries to an already adequate home. Rather than resolve questions as to which transfers qualified as spousal support, an inquiry that would require a close examination of New York’s necessaries law and related doctrines, the Court assumes, arguendo, that all the transfers constituted support, because even if they did, they still would not create an antecedent debt that would constitute consideration under the New York Debtor and Creditor Law. To shed light on the legal bases for its ruling from the bench, the Court now analyzes existing New York law regarding the use of the existence of antecedent debt derived from the obligation of spousal support to shield third party creditors from fraudulent conveyances. As a general proposition, under New York law “[l]ove and affection are inadequate consideration under the [Debtor and Creditor Law].” Hickland v. Hickland, 100 A.D.2d 643, 472 N.Y.S.2d 951, 954 (3d Dep’t 1984), appeal dismissed 63 N.Y.2d 951, 483 N.Y.S.2d 1027, 473 N.E.2d 44 (1984); see also Apple Bank for Sav. v. Contaratos, 204 A.D.2d 375, 612 N.Y.S.2d 51, 52 (2d Dep’t 1994). There is also no basis under New York law to conclude that a husband owes an antecedent debt for the purposes of Section 272’s definition of fair consideration solely based on the existence of a marital relationship. See Manshul Construction Corp., 2000 WL 1228866, at *49, and cases cited. The cases Mrs. Mazzeo cites as “establishing” that the obligation of spousal support somehow automatically creates an antecedent debt between two spouses for the purposes of Section 272 actually do nothing of the kind. First, one of the principal cases she cites for this position, Vinlis Construction Co. v. Roreck, 67 Misc.2d 942, 325 N.Y.S.2d 457, 462 (N.Y.Sup.Ct.1971), misapplies the main precedent it cursorily cites to state that antecedent debt may arise out of the spousal duty to support. That main precedent, Safie v. Safie, 24 A.D.2d 502, 261 N.Y.S.2d 993 (2d Dep’t.1965) affirmed, essentially without opinion, a judgment holding that a debtor husband’s transfer of certain real property to his wife, from whom he was living separately. In dissent, two justices urged that the judgment should not be affirmed, because the relationship of a husband and wife cannot by itself give rise to debtor-creditor status. Id. at 994 (Christ, J. & Rabin, J., dissenting). The New York Court of Appeals decision in this matter, Safie v. Safie, 17 N.Y.2d 601, 268 N.Y.S.2d 561, 562, 215 N.E.2d 682 (1966), makes clear that the holding of antecedent debt was based on the fact that the debt was created by a prospective separation agreement between the parties, who had been living apart for four years. This was also true in FDIC v. Malin, 802 F.2d 12, 18-19 (2d Cir.1986), which cited Vinlis and Safie as support for the proposition that, in a case involving a separation agreement where a husband agreed to convey a home to his ex-wife, the antecedent debt of support as embodied in this agreement constitutes fair consideration. The key here is that the precedents that Mrs. Mazzeo cites all concern the debt owed a spouse as the result of a separation or divorce agreement, that is, during the dissolution or anticipated dissolution of a marriage, and do not concern the ongoing duty of support in an intact marriage, as here. Therefore, the “extreme proposition” that Mrs. Mazzeo advocates simply is not supported by New York law to any meaningful degree, which is “particularly telling ... [given] the frequency with which interspousal conveyances must undoubtedly occur.” Cadle Co. v. Newhouse, 2000 WL 1721131, at *5 (S.D.N.Y. Nov.16, 2000). It is certainly sensible to treat intact marriages and dissolving marriages differently from this standpoint, and it is hardly surprising that New York law does so. Mazzeo canceled no pre-existing debt when he made any of the conveyances at issue in this case. The Court finds there was none. Nor did he receive anything of value from Mrs. Mazzeo. In analyzing this issue directly, the Southern District of New York made the following policy argument against allowing spousal support to be taken automatically as an antecedent debt and thus constituting fair consideration: [Under a rule that allowed as much,] any spouse could transfer substantial assets to the other spouse and simply call it a transfer in return for consideration and shelter the assets from creditors. There is no such loophole. As the Court of Appeals for the Second Circuit explained in a related context, [under such a rule], a potential spouse “could empty his estate with impunity when sued by victims, transfer his property to his fiancee and receive nothing but inchoate interests in return — nothing from which [a creditor] could recover its judgment— and yet enjoy the benefits of the property now nominally owned by his wife. That is the sort of injustice fraudulent conveyance law is designed to prevent.” Manshul Construction Corp., 2000 WL 1228866, at *49 (quoting HBE Leasing Corp. v. Frank, 61 F.3d 1054, 1059 (2d Cir.1995)). The Court agrees that it strains concepts of basic fairness to ask it to conclude, as matter of law, that any transfer by a husband to his wife is automatically made for fair consideration simply because the husband has an obligation to support his spouse. Mrs. Mazzeo’s arguments in this regard are emphatically rejected and this Court finds that no fair consideration existed for any of the transfers listed in Counts II and III. B. Actual Fraud Under Section 276 The Court held that all of the conveyances in Counts I — III were actually fraudulent as defined under New York Debtor and Creditor Law Section 276. To claim actual fraud successfully, the creditor (here the United States) must meet its burden of proof to establish that a conveyance was made with actual intent to delay, hinder, or defraud creditors under Section 276, and under New York law the standard for such proof of actual intent is clear and convincing evidence. United States v. McCombs, 30 F.3d 310, 328 (2d Cir.1994); Marine Midland Bank v. Murkoff, 120 A.D.2d 122, 508 N.Y.S.2d 17, 20 (2d Dep’t 1986). Mrs. Mazzeo’s counsel, at the conclusion of the June 7, 2002 findings of fact and conclusions of law, correctly pointed out that the Court had used the incorrect standard of proof, a fair preponderance rather than clear and convincing evidence, when evaluating whether the United States had met its burden in proving an actual intent to delay; hinder, or defraud creditors, as Section 276 requires. Upon reflection, the Court now holds that it was in error when it used the fair preponderance standard, but that the error was immaterial, because even under the heightened standard of clear and convincing evidence the United States resoundingly proved that Mazzeo had an actual intent to hinder, delay, and defraud his creditors when he made the renovations to the home and the other payments described in Counts II and III. “[L]aek of fair consideration gives rise to a rebuttable presumption of fraudulent intent.” United States v. Carlin, 948 F.Supp. 271, 277-78 (S.D.N.Y.1996) (citing Atlanta Shipping Corp., Inc. v. Chemical Bank, 631 F.Supp. 335, 346-47 (S.D.N.Y.1986), aff'd 818 F.2d 240 (2nd Cir.1987)). Moreover, “[cjourts view intrafamily transfers without any signs of tangible consideration as presumptively fraudulent.” United States v. Alfano, 34 F.Supp.2d 827, 845 (E.D.N.Y.1999) (emphasis added). Mrs. Mazzeo did not overcome the force of these dual presumptions regarding actual fraud at trial. Mrs. Mazzeo argues that Mazzeo was not aware of his exact federal income tax liability in 1985 when he transferred his home to his wife, as the IRS did not demand payment until 1987, and that this should be factored in to any finding of actual fraud as to Count I. She argues that Mazzeo was likewise not aware of his specific debt in 1994, payment for which was demanded in 1996. This avails her nothing. First, while knowledge of the existence or extent of debt is surely a factor in determining intent in any fraud case, it is just that — a factor and not a requirement. See Carlin, 948 F.Supp. at 277; Atlanta Shipping Corp., Inc., 631 F.Supp. at 346-47. All that must be proven is a contemporaneous intent to hinder, delay, or defraud creditors, either specifically or generally. Venerable precedent in the State of New York holds that when attempting to prove actual and constructive fraud, “[i]t is no longer necessary to establish the existence of the indebtedness as of the date of the conveyance.” In re Haber’s Estate, 151 Misc. 82, 270 N.Y.S. 603, 606 (N.Y.Sur.1934). In any event, Mazzeo was in debt to the IRS both when he conveyed the home in 1985 and when he started his string of fraudulent transactions in 1994, although the Court does not determine when precisely Mazzeo became indebted on the 1994 tax liability. The fact that payment has not yet have been demanded does not mean that debts do not exist or have not accrued. Moreover, it cannot rationally be claimed that Mazzeo lacked knowledge of his debts. While he had not yet been presented - with a demand for payment from the IRS when he transferred his home to Mrs. Mazzeo in 1985, Mazzeo certainly knew he had not paid any income tax for the tax year- 1984. More importantly, the Court has already held that, regarding the transfer of his home, in light of the failure of his business, the fact that he was liable at the margin call for certain securities, and the fact that creditors were looming, he transferred his home to his wife without consideration in order to avoid having this asset used to satisfy his debts. The same can be said of the transactions in Counts II and III. Mazzeo again knew that he faced imminent tax problems and, regardless of his debts to the IRS, the considerable level of Mazzeo’s other debts during the relevant time period forced him to declare bankruptcy. When doing so, he exceeded the statutorily mandated unsecured debt. In June 1994, Mazzeo knew that creditors were again appearing on the horizon (indeed, his knowledge at this point was far more specific than in 1985), and he sought to shield his assets from creditors through a scheme of pouring money into a house not in his name, wrongly thinking this would shield those monies. In addition, a finding of actual fraudulent intent on the part of Mazzeo as to all counts is warranted because, recognizing that direct proof of fraudulent intent as required under Section 276 is usually difficult to obtain, courts applying New York law have held that intent need not be shown by direct evidence, and is normally inferred from the circumstances surrounding the transfer. E.g., McCombs, 30 F.3d at 328, and cases cited. In determining the proper method of using circumstantial evidence in this way, New York state and federal courts have concluded that such intent may be inferred from circumstantial evidence, or from the traditional “badges of fraud.” Securities Investor Prot. Corp. v. Stratton Oakmont, Inc., 234 B.R. 293, 315 (Bankr.S.D.N.Y.1999). Badges of fraud include: 1) the lack or inadequacy of consideration; 2) the family, friendship or close associate relationship between the parties; 3) retention of possession, benefit or use of the property in question [by the debtor]; 4) the financial condition of the party sought to be charged both before and after the transaction in question; 5) the existence or cumulative effect of a pattern or series of transactions or course of conduct after the incurring of debt, onset of financial difficulties, or pendency or threat of suits by creditors; and 6) the general chronology of the events and transactions under inquiry. (In re Kaiser) Salmon v. Kaiser, 722 F.2d 1574, 1582-83 (2d Cir.1983); see also McCombs, 30 F.3d at 328; Cadle Co., 2002 WL 1888716, at * 5; Bulkmatic Transp. Co. v. Pappas, 2001 WL 882039, at *11 (S.D.N.Y. May 11, 2001); RTC Mortgage Trust v. Sopher, 171 F.Supp.2d 192, 201 (S.D.N.Y.2001); Murkoff, 508 N.Y.S.2d at 22; Twyne’s Case, 3 Coke 806, 76 Eng. Rep. 809 (Star Chamber, 1601). The Court inferred Mazzeo’s actual fraudulent intent based on the evidence presented. Many of the badges of fraud set out above were present in this case: the transferor and transferee were married; the consideration was inadequate (indeed, nonexistent); there was a “pattern” of activity as evidenced by the transactions in Counts II and III after a large debt had been incurred; and Mazzeo retained the “benefit” and “use” of the home, if not “control” of it, by continuing to live there. An important analytical issue remains. There can be little doubt that all of the transfers in Counts II and III were actually fraudulent as against the United States, as creditor on the 1985 tax liability. It may be, however, that New York law would not be willing to charge Mazzeo with actual fraud as against the United States, as creditor on the 1994 tax liability, until the time when he actually knew that the United States would be a victim of his fraudulent scheme. To be more precise, New York law might not be willing to treat the United States, as creditor on the 1994 liability, as a “present creditor” until Maz-zeo actually knew that the United States would be his creditor in that capacity. The heightened proof and pleading requirements for actual fraud suggest that courts should be much more careful in ascribing actual, rather than constructive, fraud to a debtor. If this is in fact the law, and the Court seeks to charge Mazzeo with actual fraud, then the Court must determine as of what date Mazzeo can be charged with knowing that he would have the United States as a creditor for the 1994 liability. This date must be at least as early as December 21, 1995, the date that Mazzeo filed for Chapter 13 in anticipation of the New York assessment. It might even be as early as December 31,1994, the end of the tax year for which Mazzeo would be charged with his Responsible Person Assessment, or earlier. Westfield went out of business at the end of 1994, Pl.’s Ex. 39, at 32, so it would be surprising if Mazzeo, who as an officer knew of Westfield’s high federal tax debts, did not know that the United States was about to become his creditor again. Fortunately, the Court need not reach the questions whether the United States’ later tax debt can be “related back” to the earliest of the transfers under an actual fraud theory, and as of which date Mazzeo can be charged with “actual knowledge” of the United States as a creditor, if that is required, because the United States can reach all of the transfers in Counts II and III under constructive fraud, as discussed above. C. Liability to Future Creditors Under Sections 276 and 278 Section 276 states flatly that any conveyance found to be actually fraudulent “is fraudulent as to both present and future creditors.” Id.; see note 2, supra. This is a broad statutory grant and has been interpreted as such: “[T]he plain language of the statute reaches ... conveyances which occurred prior to the time the obligation to the plaintiff arose.” JR & J Holding Co. v. Rabinowitz, 201 A.D.2d 535, 607 N.Y.S.2d 724, 725 (2d Dep’t 1994); see also United States v. Cohn, 682 F.Supp. 209, 217 (S.D.N.Y.1988); In re Rosenfield’s Will, 213 N.Y.S.2d 1009, 1015 (N.Y.Sur.1961). The United States relies on this section when it argues that the transfer of the home to Mrs. Mazzeo should be voided, as Mazzeo conveyed it to her with an actual intent to defraud the United States as to his 1984 debt. The United States seeks, therefore, to execute its lien on the entire house and to take all of its value, not simply to collect on the fraudulently conveyed assets that can be traced into it. Section 278, however, provides an exception to the general rule found in Section 276: 1. Where a conveyance or obligation is fraudulent as to a creditor, such creditor, when his claim has matured, may, as against any person except a purchaser for fair consideration ivithout knowledge of the fraud at the time of the purchase, or one who has derived title immediately or mediately from such a purchaser, a. Have the conveyance set aside or obligation annulled to the extent necessary to satisfy his claim, or b. Disregard the conveyance and attach or levy execution upon the property conveyed. 2. A purchaser who without actual fraudulent intent has given less than a fair consideration for the conveyance or obligation, may retain the property or obligation as security for repayment. N.Y. Debt. & Cred. Law § 278 (emphasis added). Section 278(1) sets up a “bona-fide purchaser” exception to the general rule of Section 276 that a conveyance found to be actually fraudulent is void against present and future creditors. See Malin, 802 F.2d at 16-18. Sections 276 and 278 are not in conflict; the latter merely modifies and restricts the other. Mrs. Mazzeo is unable to utilize the bona-fide purchaser defense because she did not provide fair consideration as a transferee. Part (2) of Section 278 makes clear that a transferee who received a conveyance without providing fair consideration may retain the property as security for repayment of the consideration furnished, however inadequate. This is a further limitation on Section 276’s broad grant and is best termed an equitable defense to seizure. Mrs. Mazzeo argued at trial that she should be allowed to keep the home as security for her husband’s debts, citing the hardship involved in moving, and the Court rejected this defense. Mrs. Mazzeo furnished no consideration for the home, and a defense based on Section'278(2) avails her nothing. New York decisional law, however, goes further than this statutory limitation and hólds that a conveyance will not be held to be fraudulent against subsequent creditors unless the grantee herself received it with an intent to defraud, or participated in such fraud. Durland v. Crawford, 183 A.D. 763, 171 N.Y.S. 135, 137 (3d Dep’t 1918); see Bein v. Baer, 7 Misc.2d 543, 162 N.Y.S.2d 676, 677-78 (N.Y.Sup.Ct.1957); In re Campbell’s Estate, 164 Misc. 632, 299 N.Y.S. 442, 450 (1937). Despite their age, these cases remain good law for this proposition. See 30 N.Y.Jur.2d Creditors’ Rights and Reme dies § 397 n. 79 (confirming Bein’s continuing validity). The Bein case is particularly on point. Bein concerned a husband and wife’s motion to dismiss a complaint that the husband had fraudulently conveyed, without consideration, mortgage payments, improvements, and expenses upon realty owned by his wife, to hide funds from creditors. 162 N.Y.S.2d at 677. The motion was denied and the court highlighted the intent of the grantee as a matter to be determined at trial, interpreting Section 276 to mean that “[a] conveyance made with an actual and contemporary intent to defraud subsequent creditors may be challenged for fraud and set aside by them where the grantee participated in such fraud.” Bein 162 N.Y.S.2d at 677-78. This Court held that Mrs. Mazzeo received the home (and, indeed, all the conveyances to her. in this case) without the intent to defraud, and did not actively participate in any fraud. Under New York ease precedent,. however sparse, her home is therefore protected from future creditors. The United States is certainly a future creditor as to the 1994 tax liability, which did not accrue until roughly a decade after the 1985 transfer. It was a then-present creditor, however, with respect to the 1984 tax liability. 1. The 1984 Tax Liability The Court, in its preliminary findings, indicated that Mrs. Mazzeo’s title had been perfected and had ripened into title absolute when the 1984 liability was extinguished; the Court based its finding that the 1984 tax debt was satisfied on the fact that the evidence showed the assessed balance to be zero. Pl.’s Ex. 31. The United States has presented evidence to the Court both during and after the trial that the debt was not satisfied and that the zero balance in Exhibit 31, a Certificate of Record that attaches Certificates of Assessments and Payments for the 1984 Tax Year, only refers to assessed taxes and not to accrued additions such as interest and penalties. The confusing fact that such a form can show a zero balance when the taxpayer still owes money in the form of interest and penalties is explained by the fact that, unlike most creditors (such as banks or graduate student loan providers), and true to the popular image of its irrationality, the IRS does not apply payments first to interest and then to principal. Rather, the IRS applies payments to collection costs, principal, penalty, and interest, in that order. . See Rev. Proc. 84-58, 1984-2 C.B. 501, 1984 .WL 260577; Rev. Proc. 82-51, 1982-2 C.B. 839, 1982 WL 196390; Rev. Rul. 79-284, 1979-2 C.B. 83, 1979 WL 51035; Rev. Rul. 73-305, 1973-2 C.B. 43, 1973 WL 32999. Interest accrues on federal tax liabilities by operation of statute, and the amount owed is matter of law. See I.R.C. §§ 6601(a) & (e)(2); United States v. Schroeder, 900 F.2d 1144, 1150 n. 5 (7th Cir.1990); Greenhouse v. United States, 780 F.Supp. 136, 142 n. 14 (S.D.N.Y.1991). Further, pursuant to I.R.C. §§ 6601(a) & 6622, the IRS only assesses these accrued interest and penalty liabilities once the principal that formed the liability in the first place is paid. See I.R.C. § 6601. In short, additional accruals will be assessed only when a payment is made in an amount sufficient to satisfy prior assessments. Here, the assessed balance (the principal) was satisfied on December 6, 2000, with approximately $34,000 paid in addition. After deducting $4,000 in the capped late penalty, the IRS used the rest to absorb accrued interest. Much more is still owed, but the remainder of the accrued interest will only be assessed (and become known) when, and only ivhen, another payment is made. Pressed by the Court, however, the United States has arrived at a figure of $134,551.57 still owed on the 1984 liability in accrued interest, as of June 30, 2002, none of which has yet been assessed. For purposes of discussion only, the Court accepts this proffer. The Court notes, however, that the United States’ proffer constitutes an admission that, as of June 30, 2002, the amount owed on the 1984 liability was no more than that. There were two tax liabilities in this case, and Mazzeo’s estate was making ongoing payments on both. The United States’ own evidence shows that Mazzeo’s estate made payments pursuant to a settlement and levy of $161,202.40 on August 11, 2000, and $40,000 on November 3, 2000, more than enough to satisfy the mystical and hidden accrued interest penalties detailed above on the 1984 liability; the United States, however, applied much of the money paid to the 1994 liability, not the 1984 liability. Pl.’s Ex. 31; Pl.’s Ex. 32 (Certificate of 1994 Responsible Person Liability). These payments were undesig-nated, and could have gone towards satisfying either liability. The IRS does not necessarily apply involuntary payments to the oldest debt first, as this case makes clear, and while 26 U.S.C. § 6342(a)(3) requires that proceeds from federal tax levies go to the liabilities for which the levies were issued, the IRS had two valid levies in this case and, as the payments were undesignated, it chose to apply them to the 1994 liability. In fact, by its own admission, it did this deliberately, because it was advised by the Department of Justice that it was in the United States’ best interest to preserve the 1984 tax liability in order to maximize the United States’ right to continue challenging the 1985 conveyance (though it went against this recommendation for some reason and allowed certain of the 2000 payments to be applied to the 1984 liability). The United States arguably has authority to do this under Policy Statement P-5-60, which permits the United States to apply as it sees fit any involuntary payments or nondesignated voluntary payments, at least where Responsible Person Assessments a