United States v. Hopkins (927 F. Supp. 2d 1120, 2013)

United States District Court for the District of New Mexico 2013-02-14

Internal Revenue Code

Citations

Full opinion text

MEMORANDUM OPINION AND ORDER

JAMES 0. BROWNING, District Judge.

THIS MATTER comes before the Court on: (i) the United States’ Motion for Summary Judgment, filed July 16, 2012 (Doc. 66); (ii) the Defendants’ Motion for Leave of Court to Reply to Plaintiffs’ Reply to Hopkins’ Response to Motion for Summary Judgment, filed September 4, 2012 (Doc. 106) (“Motion for Surreply”); and (iii) the Defendants’ Motion for Telephonic Appearance Re: Motion Hearing on January 3, 2013, filed December 21, 2012 (Doc. 141). The Court held a hearing on January 3, 2013. The primary issues are: (i) whether Plaintiff United States of America may reduce to judgment the outstanding tax assessments for tax years 1996, 1997, 1999, 2000, and 2001 against Defendants Mark Hopkins and Sharon Hopkins, who were convicted of tax evasion for these same years in the United States’ case against them, United States v. Mark E. Hopkins and Sharon J. Hopkins, No. CR 09-0863 MCA (D.N.M.); and (ii) whether the United States is entitled to foreclosure on its federal tax liens encumbering the Hopkins’ interest in certain real properties located in Eddy County, New Mexico, in partial satisfaction of their tax liabilities owed to the Internal Revenue Service (“IRS”). For the reasons stated on the record at the hearing, the Court grants the Hopkins’ Motion for Surreply and their Defendants’ Motion for Telephonic Appearance Re: Motion Hearing on January 3, 2013. Because there are no genuine issues of material fact, and because the United States is entitled to judgment as a matter of law, the Court will grant in part and deny in part the United States’ Motion for Summary Judgment. Although the Hopkins have a liberty interest in their right to engage in the common occupation of their choosing, pursuant to Article I, section 8 and the Sixteenth Amendment of the United States Constitution, Congress constitutionally can tax the Hopkins’ income from the exercise of that right. Because Congress can constitutionally tax the Hopkins’ income and has not specifically exempted, excepted, or excluded the Hopkins’ income from taxation under the Internal Revenue Code (“IRC”), the Hopkins’ income from their labor is not exempt from taxation. The United States was the plaintiff in the criminal case against the Hopkins, and necessary to the jury’s verdict that the Hopkins were guilty of Criminal Tax Evasion for tax years 1996-1997, and 1999-2001, was establishing that the Hopkins owed the United States a substantial amount of tax, and that the Hopkins used nominees and/or alter-egos to shelter their income from the United States to evade taxes. The doctrine of res judicata thus prevents the Hopkins from relitigating those issues in this civil case against them. Because the record establishes that there is no genuine dispute whether the IRS assessments underlying the IRS’ federal tax liens on which they seek to foreclose are valid and accurate, and there is no material dispute whether the Hopkins used the Defendants Grace Trust, Shalom Enterprises, Inc., and House of Royale, Inc. as their nominees or alter-egos to shield their assets from the IRS, there is no genuine dispute that the United States is entitled to foreclose on its liens against the subject property and is entitled to summary judgment as a matter of law. Because the United States has agreed with Defendant Bayview Loan Servicing, LLC, that they will equitably divide profits from the sale of Tract # 1, the Court denies the United States’ Summary Judgment to the extent it seeks the Court to declare that its interest in Tract # 1 is prior and superior to any other interest in the property.

FACTUAL BACKGROUND

In support of its motion, the United States relies on specific pleadings, admitted United States exhibits, and trial transcripts from the Hopkins’ criminal case, United States v. Hopkins. Additionally, the United States relies upon a declaration and its IRS exhibits. Finally, the United States relies upon the following undisputed facts:

1. Federal Income Tax Liabilities and Liens Against Hopkins.

M. Hopkins worked as an emergency room physician and earned significant income. Before 1996, the Hopkins filed federal income tax returns and incurred tax debt that they failed to pay fully. See IRS Notices of Tax Liens, Hopkins Crim. Gov. Ex. 39, filed July 16, 2012 (Doc. 69-1). In 1996, the Hopkins took steps to avoid liability and payment. They met and consulted with several individuals and groups that advocate recognized tax protestor arguments and tactics, and made multiple library visits.

In 1997, M. Hopkins filed an “Affidavit of Citizenship and Domicile” with the Chaves County, New Mexico, Clerk, stating that he is a citizen of the “Texas Republic,” is a nonresident alien of the United States, and is not required to pay federal income tax. M. Hopkins’ Affidavit of Citizenship and Domicile, Hopkins Crim Gov. Ex. 35, filed July 16, 2012 (Doc. 69-2). S. Hopkins filed a similar document. See S. Hopkins’ Affidavit of Citizenship and Domicile, Hopkins Crim Gov. Ex. 36, filed July 16, 2012 (Doc. 69-3).

The Hopkins asserted to the IRS that their compensation for labor earned was not income subject to federal income tax. See, e.g., Hopkins’ 1996 Form 1040, Hopkins Crim. Gov. Ex. 152, filed July 16, 2012 (Doc. 69-4). In furtherance of their arguments, the Hopkins filed a joint federal income tax “return” that listed “zero income” for tax year 1996, while attaching W-2’s showing M. Hopkins’ wages as $81,000.00 and S. Hopkins’ wages as $9,000.00. Hopkins’ 1996 Form 1040. The Hopkins’ Form 1040, filed jointly, for tax year 1996 reported “0” income, and attached letters and documents to support their tax positions. See Hopkins’ 1996 Form 1040 at 5. Hopkins altered the jurat, and attached three signed statements containing tax protest language: “Affidavit of Claims for Exemption and Exclusion from Gross Income of Remuneration, Wages and Withholding,” “Affidavit of Citizenship and Domicile,” and “Contract and Declaration of Citizenship.” Hopkins’ 1996 Form 1040 Attachments, Hopkins Crim. Gov. Ex. 152, filed July 16, 2012 (Does. 69-5 and 69-6). Statements attached to the Hopkins 1996 tax return stated: “The income tax is voluntary. We do not wish to volunteer.” Hopkins’ 1996 Form 1040 Attachments at ¶8, at 6. Also, the Hopkins stated: “We are natural born sovereigns, preamble, de jure Citizen of one of the 50 sovereign Republic, freely associated compact American states.” Hopkins’ 1996 Form 1040 Attachments at & 5, at 9. The Hopkins stated that they were sovereign citizens of one of the fifty states, were “not citizen[s] of the United States,” and were “not subject to jurisdiction of the United States,” and filed a “Notice of Election to Terminate U.S. Taxpayer Status” and a “Declaration of Independence.” Hopkins Crim. Gov. Ex. 270, filed July 16, 2012 (Docs. 70, 70-1, 70-2, and 70-3); Hopkins Crim Gov. Ex. 37, filed July 16, 2012 (Doc. 70-4).

As part of their activities designed to avoid the IRS receiving any of their income for their tax liabilities, the Hopkins set up nominees including two trust—Guadalupe Medical Service Trust (“GMST”) and Grace Trust—and corporate shells—Shalom Enterprises, Inc. and House of Royale, Inc. Shalom Enterprises is an Oregon corporation, whose officers were M. Hopkins and S. Hopkins. House of Royale is a Nevada corporation, whose only officer was S. Hopkins. See Default Judgment Against Defendants House of Royale, Inc. and Shalom Enterprises, Inc. at 1-2, filed December 7, 2011 (Doc. 36) (ordering, adjudging and decreeing that House of Royale and Shalom Enterprises are “nominee[s]/alter ego[s] of Mark Hopkins and Sharon Hopkins”).

Hopkins instructed the hospitals or physician staffing groups for which he worked to send his earnings directly to GMST and, later, to Shalom Enterprises. Trans-Mountain Emergency Physicians Group decided to honor an IRS levy for the Hopkins’ unpaid income taxes that seized his May 1997 paycheck. M. Hopkins protested, saying his income was exempt. The Trans-Mountain Group’s Chief Executive Officer rejected that argument, and M. Hopkins quit. See Hopkins Crim. Doc. 340; Crim. Trial Tr. at 555-560 (Sept. 23, 2010) (Dr. Beohm), filed July 16, 2012 (Doc. 71-5). The Hopkins used these nominee entities for their personal living expenses or transferred funds to other nominees, including Grace Trust and House of Royale. See Mark & Sharon Hopkins, Checks & Cash Written Between Nominee Bank Accounts, Hopkins Crim. Gov. Exs. 313, 314, filed July 16, 2012 (Docs. 71 and 71-1).

Based in part on law that zero returns are not legally considered to be tax returns, see United, States v. Rickman, 638 F.2d 182, 184 (10th Cir.1980) (holding that a tax return asserting that a taxpayer had zero income is not a valid return), the IRS disregarded the Hopkins’ return and assessed the couple a frivolous filing penalty of $500.00, see Hopkins Crim. Doc. 340; Crim. Tr. at 625 (Sept. 23, 2010) (Sigler). Hopkins appealed the penalty based on the same arguments that they had made earlier. Despite IRS correspondence and contact, the Hopkins refused to correctly file their 1996 federal income tax return and never filed another income tax return. See Hopkins’ Form 4340s, Hopkins Crim. Gov. Exs. 102-103, 105-107, 117-118, filed July 16, 2012 (Docs. 72, 72-1, 72-2, 72-3, 72-4, 73, and 73-1).

To discover the Hopkins’ income and assets, the IRS commenced its investigation and audit that included third-party summons of bank records, financial and legal documents, third parties’ Form 1099s, and witness interviews. Reviewing the bank deposits, related financial documents and the Form 1099s, the IRS prepared substitutes for return on the Hopkins’ behalf, and sent audit results for tax years 1996, 1997, 1999, 2000, and 2001 to the Hopkins. See Hopkins Crim. Gov. Exs. 190-195, filed July 16, 2012 (Docs. 73-2, 73-4, 77, 74-1, 74-2, 74-3, 75, 75-1, 75-2, 75-3, 75-4, 75-5, 75-6, 76, 76-1, and 76-2). The IRS sent notices of deficiency (“NODs”) to both M. Hopkins and S. Hopkins for each of the years at issue. See Hopkins Crim. Gov. Ex. 193 at 6; Hopkins Crim. Gov. Ex. 194 at 16; Hopkins Crim. Gov. Ex. 195 at 16; Hopkins Crim. Gov. Ex. 207. In response to the NODs for 1996 and 1997, the Hopkins asserted, through their representative, that they had not filed returns or submitted to jurisdiction, and therefore had no income subject to tax. See Letter from John B. Kotmair Jr. Re: Notice of Deficiency to James Walsh, IRS District Director (dated Sep. 5, 2000), Hopkins Crim. Gov. Ex. 208, filed July 16, 2012 (Doc. 76-4).

A delegate of the Secretary of Treasury assessed against, and gave notice and demand to, the Hopkins for unpaid income taxes, penalties, statutory additions, and interest for tax years 1996, 1997, 1999, 2000, and 2001. See Hopkins’ Form 4340s, Hopkins Crim. Gov. Exs. 102, 103, 105-107, 117, 118. To date, the Hopkins have neglected, failed, and refused to pay the full amount of the federal income tax assessments for these years. Hopkins Crim. Ex. 315, filed July 16, 2012 (Doc. 77), shows that IRS computer transcripts stated the tax liabilities in the amount of $732,811.61 that M. Hopkins owes under Count Two of the Indictment as of October 19, 2010—the time of his criminal trial. See Hopkins Crim. Ex. 315. The table below shows the tax period, the assessment date, the amounts assessed, and the total liabilities that M. Hopkins owes for these periods to October 19, 2010.

TAX PERIOD DATE ASSESSED ASSESSED AMOUNT AMOUNT DUE AS 10/19/2010

1996 12/25/2000 $146,925.70 $264,967.60

1997 12/25/2000 $133,650.22 $247,364.21

1999 12/25/2000 $ 48,271.85 $ 73,108.56

2000 12/25/2000 $ 50,205.71 $ 72,626.54

2001 06/05/2004 $ 50,338.72 $ 74,744.70

TOTAL $732,811.61

The balance due has increased since that date, and shall continue to increase by statutory additions and accruals until paid.

During 1996 and 1997 tax years, S. Hopkins had income requiring her to file federal income tax returns. As New Mexico is a community property state, S. Hopkins also received taxable income computed on a community property basis. S. Hopkins did not, however, file federal income tax returns for the 1996 and 1997 tax years. Accordingly, after reviewing the bank deposits, related financial documents, and the Form 1099s, the IRS prepared substitutes for return on behalf of S. Hopkins, and sent audit results and NODs for tax years 1996 and 1997 to the Hopkins. See Notice of Deficiency, Hopkins Crim. Gov. Ex. 207, filed July 16, 2012 (76-3).

A delegate of the Secretary of the Treasury assessed against, and gave notice and demand to, S. Hopkins for unpaid income taxes, penalties, statutory additions, and interest for tax years 1996 and 1997. See IRS Form 4340s, Hopkins Crim. Gov. Exs. 117, 118. To date, S. Hopkins has neglected, failed, and refused to pay the full amount of the federal income tax assessments for these years. The table below shows the tax period, the assessment date, the amounts assessed, and the liabilities that S. Hopkins owes for these periods to October 19, 2010. See Hopkins Crim. Gov. Ex. 315 (stating the tax liabilities at issue in Count Two of the Indictment that S. Hopkins owed at the time of her criminal trial).

TAX PERIOD DATE ASSESSED ASSESSED AMOUNT AMOUNT DUE AS 10/19/2010

1996 12/25/2000 $39,914.38 $ 72,496.21

1997 12/25/2000 $27,794.92 $ 51,174.77

TOTAL $123,670.98

The balance due has increased since that date, and shall continue to increase by statutory additions and accruals until paid. Thus, the IRS required the Hopkins to file federal income tax returns for the tax years at issue: $242,070.00 in tax year 1996; $202,662.00 in 1997; $64,233.00 in 1999; $74,357.00 in 2000; and $93,157.00 in 2001. See Hopkins Crim. Gov. Ex. 192 at 4; Hopkins Crim. Gov. Ex. 192 at 4; Hopkins Crim. Gov. Ex. 193 at 9; Hopkins Crim. Gov. Ex. 194 at 2; Hopkins Crim. Gov. Ex. 194 at 2.

On July 6, 2004, August 3, 2004, July 12, 2005, and December 13, 2005, the IRS filed Notices of Federal Tax Lien for M. Hopkins’ federal income tax liabilities for the tax years at issue with the County Clerk of Eddy County, New Mexico. On September 3, 2009, the IRS filed a Notice of Federal Tax Lien for S. Hopkins’ federal income tax liabilities for tax years 1996 and 1997 with the County Clerk of Eddy County. See Hopkins Form 668s, Notices of Federal Tax Liens, .filed July 16, 2012 (Doc. 77-2).

In May, 2010, the IRS filed Notices of Federal Tax Lien against the Hopkins’ nominees — Shalom Enterprises and House of Royale — as the Hopkins’ nominees and/or alter egos for the Hopkins’ federal income tax liabilities for the years at issue with the County Clerk of Eddy County. See Nominees Form 668s, Notices of Federal Tax Liens, filed July 16, 2012 (Doc. 77-3).

2. The Hopkins’ Real Property on Which the United States Wants to Foreclose.

At a time when they owed income taxes and federal tax liens existed, the Hopkins acquired properties in the names of nominee entities to avoid IRS collection. As part of the tax conspiracy and evasion for which they were convicted in the United States’ criminal case against them, M. Hopkins and S. Hopkins used nominees to acquire their home and adjoining real properties as a way of keeping their assets and ownership interests hidden from the IRS. See Hopkins Crim. Gov. Ex. 331, filed July 16, 2012 (Doc. 77-4) (a plat map with the Hopkins’ real estate at issue). The nominees — Shalom Enterprises and House of Royale — held title in their name to the four real estate tracts at issue in this case. In April 22, 1997, M. Hopkins filed or caused to be filed with the Chaves County, New Mexico, Clerk several documents, each of which is identified as a “common law contract and declaration,” and purports to establish several trusts, including the Grace Trust. See Grace Trust, Hopkins Crim. Gov. Ex. 42, filed July 16, 2012 (Doc. 78).

a. Tract # 1: 601 N. Canyon.

In November 2001, when the Hopkins owed federal income taxes, M. Hopkins wrote a check for $14,589.23 from the Grace Trust account as a down payment to acquire 601 N. Canyon in Carlsbad, New Mexico. Tract # 1, located at 601 N. Canyon, is more fully ■ described as follows: “Lots 11 and 13, Block 66, Lowe Addition to the City of Carlsbad, Eddy County, New Mexico as shown on the official plat thereof on file in the office of the County Clerk of Eddy County, New Mexico,” referring to MAP # 246-66-13, LOC 601 N. Canyon Street. They used Grace Trust to hold title to the property, which served as their principal residence.

In the Fall of 2007, the Hopkins’ attempt to refinance their home was temporarily delayed when the title company refused to issue a clear title, because Grace Trust was a “pure trust,” and not insurable as a borrower or as an owner. According to the title company, the home first needed to be transferred into an entity, a person, or an entity like a corporation. S. Hopkins then directed the nominal trustees of Grace Trust to transfer title to a different nominee — House of Royale— to effect the mortgage acquired from Interbay Funding, LLC, and the title to 601 N. Canyon ultimately vested from Grace Trust to House of Royale. See Hopkins Crim. Doc. 340; Crim. Trial Tr. at 607 (Sept. 23, 2010) (Cliff Currier), filed July 16, 2012 (Doc. 78-1); Hopkins Crim Gov. Ex. 34 (Docs. 78-2, 78-3, 78-4, 78-5, and 78-6). On May 28, 2010, a nominee Notice of Federal Tax lien was filed in the Eddy County property records against House of Royale as the Hopkins’ nominee and/or alter ego for their unpaid federal income tax liabilities for tax years 1996, 1997, 1999, 2000, and 2001. See Entity Form 688s, Notices of Federal Tax Lien.

b. Tract # 2: 605 N. Canyon.

In October, 2002, M. Hopkins purchased 605 N. Canyon Road in Carlsbad in the name of Shalom Enterprises for a $1,000.00 down payment on a $21,500.00 purchase price. See Hopkins Crim. Doc. 340; Hopkins Crim. Gov. Ex. 32; Crim. Trial Tr. at 535-536 (Sept. 23, 2010), filed July 16, 2012 (Doc.,79). Tract # 2 is more fully described as follows: Lowe Addition, Block 65, LOT 9, MAP# 246-66-9, 605 N. CANYON.

c. Tract # 3: 607 N. Canyon.

In April, 2002, M. Hopkins purchased 607 N. Canyon Road in Carlsbad in the name of Shalom Enterprises. See Crim. Trial Tr. at 533-534 (Sept. 23, 2010) (Hopkins Crim. Doc. 340), filed July 16, 2012 (Doc. 79-2); Hopkins Crim. Doc. Ex. 31, filed July 16, 2012 (Doc. 79-3). Tract # 3, located at 607 N. Canyon Road in Carlsbad, is more fully described as follows: Lowe Addition, Block 65, LOT 7, MAP# 246-66-7, 607 N. CANYON. Oh May 28, 2010, a nominee Notice of Federal Tax lien was filed in the Eddy County property records against Shalom Enterprises, as nominee/alter ego of M. Hopkins and/or S. Hopkins for the Hopkins’ unpaid federal income tax liabilities for tax years 1996, 4997, 1999, 2000, and 2001. See Nominees Form 688s, Notices of Federal Tax Lien.

d. Tract # 4: 602 N. Canyon/108 & 110 W. Bonbright.

In November, 2003, M. Hopkins sought to acquire 602 N. Canyon Road, as well as 108 and 110 W. Bonbright, in Carlsbad, in the name of Shalom Enterprises. Tract # 4, located at 602 N. Canyon Street and 108 & 110 W. Bonbright, is more fully described as follows: Lowe Addition, Block 65, LOT 14, Book 532, Page 230, MAP# 246-65-14, 602 N. CANYON. Advanced Electronics, a New Mexico partnership, owned the land on a commercially zoned tract consisting of a two-bedroom home and two two-bedroom homes on one commercial corner lot. Hopkins entered into a New Mexico real estate contract with Advanced Electronics for the property; the original note was- $45,000.00 at 7% interest with a balloon payment due November 15, 2012. On November 15, 2010, WestStar Escrow, on behalf of Advanced Electronics, sent a default notice to Shalom Enterprises for nonpayment; Shalom Enterprises owed $35,789.19' at the time and did not cure the default.

3. Defendants New México Department of Taxation and Revenue and Bayview Loan Servicing, LLC.

On August 15, 2006, Taxation & Revenue filed a Notice of Claim of Lien against M. Hopkins. Bayview Loan intends to establish the validity and default on a promissory note that House of Royale made, signed in November, 2007, by S. Hopkins as director, which, under New Mexico law, was a properly perfected security interest on the real property located at 601 North Canyon. Bayview Loan has a pending state court action against House of Royale, S. Hopkins, and the United States (IRS) in the Fifth Judicial District Court, Eddy County, State of New Mexico. See Fifth Judicial District Court of New Mexico, Case No. D-503-CV-201100096.

4. Criminal Case.

The Hopkins were indicted and convicted of conspiracy and tax evasion. The grand jury indicted the Hopkins on one count of conspiracy and multiple counts of tax evasion. The tax evasion counts related to tax years 1996, 1997, 1999-2007. In particular, Count Two of the Indictment charged the Hopkins with tax evasion for tax years 1996, 1997, 1999,- 2000, and 2001. To gain the conviction on tax evasion, the United States proved beyond a reasonable doubt all elements.

In particular, to prove the first element of tax evasion, the United States proved that the Hopkins had income, subject to tax, in each year charged. Further, with its investigations and audits, the United States provided evidence of the amounts of income that the Hopkins earned and the specific tax that was due on that income. The IRS also introduced its Form 4340s and evidence that it made valid assessments of tax. Hence, the jury necessarily decided that the Hopkins owe substantial income tax.

To prove tax evasion, the United States also proved the third element: that the Hopkins used nominees to evade or to defeat the tax owed. Again, the United States was successful in presenting the evidence of the Hopkins’ use of “pure” trusts and corporate shells while retaining dominion and control of these entities to funnel monies and to conceal their assets, including their home and real estate. The jury’s verdict in finding the Hopkins guilty of Count Two’s tax evasion necessarily determined that the entities were nominees that the Hopkins used.

At the Hopkins’ criminal trial, the United States proved that the Hopkins earned significant income, but failed to report it and used nominees in their illegal attempt to avoid paying any income tax. The Hopkins testified at their trial. In the Hopkins’ criminal trial, the jury instructions, essential to the verdict, were provided to the jury as follows:

INSTRUCTION NO. 3

2. From at least 1996 to the present, MARK E. HOPKINS worked as an emergency room doctor for various medical staffing companies in New Mexico. Since January 1, 1996, MARK E. HOPKINS has earned at least $3,616,134 in business income from these medical staffing companies, including the Schumacher Group, which paid him for services that he performed as an emergency room physician at hospitals in the region that includes Carlsbad Medical Center.

4. MARK E. HOPKINS and SHARON J. HOPKINS have failed to file personal federal tax returns since tax year 1997.

5. To assist in their tax evasion scheme, MARK E. HOPKINS and SHARON J. HOPKINS created a number of entities that the couple used to conceal their assets, including:

i) Shalom Enterprises, Inc. (“Shalom Enterprises”), an Oregon corporation, whose officers were MARK E. HOPKINS and SHARON J. HOPKINS.

ii) House of Royale, Inc. (“House of Royale”), a Nevada Corporation, whose only officer was SHARON J. HOPKINS.

v) The Grace Trust, a purported trust whose purported trustees were VA. and S.S.

Manner and Means

10. It was a part of the conspiracy for MARK E. HOPKINS to direct his business income to a nominee to conceal his income.

11. It was a further part of the conspiracy that MARK E. HOPKINS and SHARON J. HOPKINS would transfer funds between bank accounts held in nominee names.

12. It was a further part of the conspiracy for MARK E. HOPKINS and SHARON J. HOPKINS to title real property in the names of nominees to conceal their ownership of the property.

13. It was a further part of the conspiracy that MARK E. HOPKINS and SHARON J. HOPKINS would send threatening correspondence to IRS employees to impede the ascertainment and collection of the federal income taxes that they owed.

Overt acts

In furtherance of the conspiracy, and to effect the objects thereof, the following overt acts, among others, were committed in the District of New Mexico, and elsewhere:

16. On or about April 15, 1997, MARK E. HOPKINS and SHARON J. HOPKINS filed an IRS Form 1040, U.S. Individual Income Tax Return, falsely stating that they had an adjusted gross income of zero and requesting a refund of all federal income tax withheld.

17. On or about April 22, 1997, MARK E. HOPKINS filed or caused to be filed with the Chaves County Clerk seven documents, each of which was identified as a “common law contract and declaration”, which documents purported to establish the Grace Trust, the Shalom Trust, the Solomon Educational Trust, the Maranatha Trust, the Esteem International Trust, the Bethlehem Trust, and the Guadalupe Medical Services Trust.

24. In December 1998, MARK E. HOPKINS directed his new employer, the Schumacher Group, to pay his business income to Shalom Enterprises.

29. On or about November 15, 2001, MARK E. HOPKINS wrote a check for $14,589.23 from the Grace Trust account #xxxxxx8409 as a down payment for 601 N. Canyon in Carlsbad, New Mexico. Said property was used as the personal residence of MARK E. HOPKINS and SHARON J. HOPKINS through the date of this indictment.

30. On or about April 15, 2002, MARK E. HOPKINS purchased 607 N. Canyon Road in the name of Shalom Enterprises.

31. On or about October 16, 2002, MARK E. HOPKINS purchased 605 N. Canyon Road in the name of Shalom Enterprises.

32. On or about July 28, 2003, SHARON J. HOPKINS filed an Amendment to the Annual Report of Shalom Enterprises, Inc. with the Secretary of State for Oregon, listing MARK E. HOPKINS as president and SHARON J. HOPKINS as secretary.

33. On or about November 14, 2003, MARK E. HOPKINS purchased 602 N. Canyon Road as well as 108 and 110 W. Bonbright in the name of Shalom Enterprises.

34. On or about November 14, 2003, MARK E. HOPKINS and SHARON J. HOPKINS applied for an American Express credit card in the name of House of Royale, Inc.

35. On or about January 30, 2004, MARK E. HOPKINS and SHARON J. HOPKINS opened a bank account at Wells Fargo Bank, NA in the name of House of Royale, Inc., account # xxxxxx0076.

36. On or about December 29, 2006, SHARON J. HOPKINS filed articles of incorporation for the House of Royale, Inc. with the Secretary of State for Nevada.

Count 2

37. Paragraphs 1 through 6, and 14 through 36, above, are hereby are incorporated by reference as if realleged and recited in full.

38. From in or about 1996 up to and including the date of this indictment, in the District of New Mexico, the defendants, MARK E. HOPKINS and SHARON J. HOPKINS, did willfully attempt to evade and defeat the payment of a large part of the income tax due and owing by them to the United States of America for the tax years set forth below and in the amounts set forth below, by, among other things, using nominees to conceal their income, bank accounts, and ownership of assets.

In violation of 26 U.S.C. § 7201.

Counts 3-8

39. Paragraphs 1 through 6, and 14 through 36, above, are hereby incorporated by reference as if realleged and recited in full,

40. For each year set forth below, MARK E. HOPKINS and SHARON J. HOPKINS, had received taxable income in the amounts set forth below, computed on a community property basis for calendar years 2002 through 2007. Based upon said taxable income, the defendants had a substantial tax due and owing to the United States. Knowing and cognizant of the foregoing facts and the legal duty deriving therefrom, MARK E. HOPKINS and SHARON J. HOPKINS, in the District of New Mexico, did willfully attempt to evade and defeat the assessment and payment of income taxes due and owing by them to the United States of America for each of the following calendar years by committing the following affirmative acts of tax evasion, among others: by failing to file any income tax returns on or before the due date of the tax returns, as required by law; by failing to pay those income taxes, and by, among other things, using

nominees to conceal their income, bank accounts, and ownership of assets.

In violation of 26 U.S.C. § 7201.

INSTRUCTION NO. 7

The defendants are charged in Counts 2 through 8 with violating Title 26, Section 7201 of the United States Code. This law makes it. a crime for anyone willfully to attempt to evade or defeat the payment of federal income tax. To find a defendant guilty of this crime you must be convinced that the government has proved each of the following beyond a reasonable doubt:

First: the defendant or another person owed substantial income tax; Second: the defendant intended to evade and defeat payment of that tax; Third: the defendant committed an affirmative act in furtherance of this intent, that is the defendant used nominees to conceal their income, bank accounts, and ownership of assets; and

Fourth: the defendant acted willfully, that is, with the voluntary intent to violate a known legal duty.

To “evade and defeat” the payment of tax means to escape paying a tax due other than by lawful avoidance. The Indictment alleges a specific amount of tax due. The proof, however, need not show the exact amount of the additional tax due. The government is required only to prove, beyond a reasonable doubt, that the additional tax due was substantial. Whether the amount is “substantial” turns on whether under the surrounding circumstances the amount of the deficiency would be significant to an ordinary person.

INSTRUCTION NO. 9

The government has contended that the defendants owed taxes to the United States. For Count 2, the government contends that the defendants evaded the payment of their federal income tax liability for tax years 1996, 1997, 1999, 2000, and 2001. The government has put forth evidence of assessments for each of these years.

An assessment is simply a bookkeeping entry by the IRS that shows that the defendant owed money to the United States. In this case, an IRS agent prepared a substitute for return for the defendants for years 1996, 1997, 1999, 2000, and 2001. After the substitute for return was prepared, the IRS was able to prepare an assessment, which included unpaid federal income taxes and certain penalties.

Once some evidence is introduced demonstrating that the defendants received unreported income, the jury may consider this as evidence of a tax due and owing. The defendants may then put forth evidence that shows that this tax liability does not exist.

For Counts 3 through 8, the government contends that the defendants evaded the payment of their federal income tax liability for tax years 2002, 2003, 2004, 2005, 2006, and 2007. You may find the defendants had a tax due and owing based on the testimony at trial....

United States v. Mark E. Hopkins and Sharon J. Hopkins, No. 09-0863 MCA, Court’s Jury Instructions at 4-12, and 19-20, filed Sept. 28, 2010 (Doc. 260) (“Court’s Jury Instruction in No. 09-0863 MCA”). On September 29, 2010, after a seven-day trial, the jury found both M. Hopkins and S. Hopkins guilty of tax evasion—Counts 2-8 of the Indictment, Hopkins Crim. Gov. Ex. 315, filed in No. 09-0863 Apr. 9, 2009 (Doc. 2), filed in this civil case July 16, 2012 (Doc. 67-4). See United States v. Mark E. Hopkins and Sharon J. Hopkins, No. 09-0863 MCA, Redacted Verdict as to M. Hopkins at 1-2, filed in No 09-0863 Sept. 29, 2010 (Doc. 270), filed in this civil case July 16, 2012 (Doc. 67-2); United States v. Mark E. Hopkins and Sharon J. Hopkins, No. 09-0863 MCA, Redacted Verdict as to S. Hopkins at 1-2, filed in No. 09-0863 Sept. 29, 2010 (Doc. 272), filed in this civil case July 16, 2012 (Doc. 67-3).

The jury actually and necessarily decided that the Hopkins owed federal income taxes for years 1996, 1997, 1999, 2000, and 2001 that the IRS had assessed. In proving that the Hopkins willfully attempted to evade and defeat payment of income taxes, the United States established another element of tax evasion: that the Hopkins used nominees to conceal their income, bank accounts, and ownership of assets.

M. Hopkins and S. Hopkins each testified, and presented witnesses and evidence. The Hopkins had a “full and fair opportunity to litigate.” The Honorable M. Christina Armijo, United States District Court Chief Judge for the District of New Mexico, entered judgment and sentenced the Hopkins. See Judgment, Hopkins Crim. Doc. 308, filed July 16, 2012 (Doc. 79-4). Judge Armijo ordered restitution to be paid to the IRS in the amount of $1,744,222.26. See Judgment at 1.

Importantly, the Hopkins appealed only their sentences, and not their convictions, to the United States Court of Appeals for the Tenth Circuit. See M. Hopkins’ Opening Brief at 2, Case 11-2114 (10th Cir.) (Doc. 01018784918) (stating that the sole issue presented for review is “[wjhether the district court erred in imposing a two level enhancement under U.S. Sentencing Guidelines § 3C1.1 for obstruction of justice”); S. Hopkins’ Opening Brief at 1-2, Case 11-2115 (10th Cir.) (Doc. 1018800195) (positing three issues: two for enhancement and one for right to counsel). In light of the fact that the Hopkins did not appeal their tax evasion or conspiracy conviction to the Tenth Circuit, but appealed only the enlargement of their sentences, their tax conviction is final.

PROCEDURAL BACKGROUND

The United States commenced this lawsuit against the Hopkins and the other co-Defendants pursuant to 26 U.S.C. §§ 7401, 7402, and 7403, to reduce to judgment the outstanding tax assessments against the Hopkins, “and to recover the unpaid federal taxes, penalties and interest assessed against them by foreclosure of federal tax liens encumbering their interest in certain real property located in Eddy County, New Mexico.” United States’ Complaint ¶ 1, at 1, filed May 13, 2011 (Doc. 1) (“Complaint”). The Court granted the United States default judgment in this case against both entities as nominees. Specifically, on December 7, 2011, the Court granted the United States’ Motion for Default Judgment against House of Royale and Shalom Enterprises. See Default Judgment Against Defendants House of Royale, Inc. and Shalom Enterprises, Inc. (Doc. 36) (“Default Judgment”). According to the Default Judgment, House of Royale is the Hopkins’ nominee/alter-ego that is holding title only to Tract # 1, the residential property for the real owners, the Hopkins. Also according to the Default Judgment, Shalom Enterprises is the Hopkins’ nominee/alter ego that is holding title only to the properties Tract #2, Tract # 3, and Tract # 4 — without prejudice to Advanced Electronics — for the real owners, the Hopkins. See Default Judgment at 2.

The United States, on behalf of the IRS, filed its Motion for Summary Judgment pursuant to rule 56 of the Federal Rules of Civil Procedure and moves the Court to grant summary judgment as follows: (i) that the United States grant the United States judgment such that M. Hopkins is indebted to the United States for $732,811.61 as of October 19, 2010, for the federal income taxes assessed against him for the years 1996, 1997, 1999, 2000, and 2001, plus interest and all statutory additions provided by law until paid; (ii) that the Court grant the United States judgment such that S. Hopkins is indebted to the United States for $123,670.98 as of October 19, 2010, for the federal income taxes assessed against her for the tax years 1996 and 1997, plus interest and all statutory additions provided by law until paid; (iii) that the Court order, adjudge, and decree that the House of Royale, Shalom Enterprises, and the Grace Trust, are the Hopkins’ nominees, alter egos, transferees, agents, and/or holders of their beneficial interest in Tracts 1, 2, and 3; (iv) that the Court order, adjudge, and decree that the United States has valid liens in Tracts 1, 2, and 3; (v) that the Court order the foreclosure of such IRS tax hens, that Tracts 1, 2, and 3 be sold in accordance with the law and the Court’s practices, and that the proceeds of the sale be distributed in accordance with the Court’s findings and the United States’ rights; and (vi) that Advanced Electronics and not Shalom Enterprises or the Hopkins, who failed to pay the amounts required under the contract, owns Tract 4, located at 602 N. Canyon, Carlsbad, and 108 & 110 W. Bonbright, Carlsbad, and that Shalom Enterprises and the Hopkins have no rights or interests in the property. See Motion for Summary Judgment at 1-2.

The United States contends that it is entitled to summary judgment as a matter of law, because there is no genuine issue of material fact. See Motion for Summary Judgment at 1. In support of their Motion for Summary Judgment, the United States argues that res judicata applies to any assertion by the Hopkins that they do not owe substantial income tax, pointing out that to have proved that the Hopkins were guilty of tax “evasion,” one of the elements that the United States was required to prove was that the Hopkins owe substantial income tax. MSJ Brief ¶ 1, at 1-2. The United States asserts that it proved that the Hopkins used the nominees to conceal their income, bank accounts, and ownership of assets — another element of tax evasion — in the Hopkins’ criminal case by proving that the Hopkins “willfully attempted to evade and defeat payment of income taxes.” MSJ Brief ¶ 2, at 2. The United States contends that res judicata thus applies to any assertion by the Hopkins that the United States cannot foreclose on the tracts of land held by the nominees — Shalom Enterprises and House of Royale. See MSJ Brief ¶ 2, at 2-3. The United States asserts: “With the Hopkins’ convictions and the fact that this Court has granted the United States default judgment in this case against both entities as nominees, the United States is entitled to summary judgment on the two issues presented.” MSJ Brief ¶2, at 3.

The United States argues that it is entitled to judgment under the res judicata doctrine, as the jury found in convicting the Hopkins of tax evasion that the United States proved beyond a reasonable doubt that the Hopkins committed tax evasion and also that the United States proved the validity of the IRS’ tax assessments on which the IRS now seeks to foreclose. See MSJ Brief at 13-15. The United States asserts:

The Tenth Circuit has adopted the “transactional” approach to determine what constitutes a “cause of action” for res judicata. Wilkes [v. Dep’t of Emp’t Div. of Labor Standards, 314 F.3d 501] 504 [ (10th Cir.2002) ]. Under this approach, a cause of action encompasses “all rights of the plaintiff to remedies against the defendant with respect to all or any part of the transaction, or series of connected transactions, out of. which the action arose.” Id.

MSJ Brief at 14 n. 46. The United States thus contends that the only issue left for the Court is whether the IRS’ liens are valid and that the IRS can foreclose on the liens, as to which, it asserts, there is no material dispute.

The United States points out that, under the Internal Revenue Code, Title 26 of the United States Code (“IRC”), the IRS Forms 4340s for the Hopkins for tax years 1996, 1997, 1999, 2000, and 2001 are prima facie evidence of tax liability. See MSJ Brief at 16 (citing United States v. Silkman, 220 F.3d 935, 937 (8th Cir.2000); United States v. Voorhies, 658 F.2d 710, 715- (9th Cir.1981)). The United States cites to 26 U.S.C. § 6321 for the proposition that Hopkins’ federal tax liens arose automatically against them on the day the IRS made the assessment, and that the liens are effective against all of the Hopkins’ property rights whether existing or acquired after the liens arose, and that they remain valid and enforceable until the underlying debt is satisfied. See MSJ Brief at 16 (citing Texas Commerce Bank-Fort Worth, N.A. v. United States, 896 F.2d 152, 161 (5th Cir.1990)). The United States contends that it is thus entitled to summary judgment in its favor for the amounts reflected in the 4340s for the Hopkins. See MSJ Brief at 17-18. The United States asserts that, because the § 6321 statutory lien attaches to all interests in property whether owned in December 2000, the time at which the IRS lien for the amount owing from 1996 and 1997 attached, or acquired afterward, it is entitled to foreclose on the following tracts of land to satisfy the hens: (i) 601 N. Canyon, acquired in November 2001; (ii) 605 and 607 N. Canyon, acquired in October and April of 2002 respectively, and (iii) 602 N. Canyon St., 108 W. Bonbright, and 110 W. Bonbright, acquired in November 2003. See MSJ Brief at 17-19. In regards to the rights of the Hopkins’ other creditors— Taxation & Revenue and Bayview Loan— the United States notes:

[T]he IRS liens predate those of the State of New Mexico; the state’s claims, therefore, are junior to the IRS claims and would take after the IRS hens have been satisfied — an unlikely event. As to Bayview’s claims that arise from its refinancing efforts in 2007 with respect to Tract # 1 at 601 N. Canyon, the United States and Bayview have agreed that the IRS hens are entitled to and shall be foreclosed against the property, but that distribution of sale proceeds after costs, await further stipulation of these parties for a future order of the Court.

MSJ Brief at 19.

In regards to the Hopkins’ arguments, the United States asserts that M. Hopkins takes the position that, “since the IRS has not pointed to a single statute that he recognizes, [M.] Hopkins has refused to file federal income tax returns.” MSJ Brief at 20. The United States argues that the Court should find that the Hopkins’ tax arguments lack a sound basis in the law, because “[t]he Tenth Circuit in particular has dispatched with tax protestors repeatedly for clinging to arguments like those made by the Hopkins.” MSJ Brief at 20 (citing Wheeler v. C.I.R., 521 F.3d 1289 (10th Cir.2008); Lonsdale v. United States, 919 F.2d 1440 (10th Cir.1990)). The United States contends that the Hopkins’ tax arguments “fall into most of the[ ] categories” of arguments against taxing income that the Tenth Circuit has analyzed and rejected, and thus so should the Court. MSJ Brief at 21. The United States argues that “[e]very taxpayer has a legal duty to maintain accounting records which enable him to file a tax return .... [, and] [a] taxpayer who has abandoned the advantage of mathematical precision by failing to keep adequate records cannot complain [about] the Commissioner’s assessments].” MSJ Brief at 21-22 (quoting Jones v. Commissioner, 903 F.2d 1301, 1303 (10th Cir.1990)). The United States thus asks the Court to reject any such arguments the Hopkins may assert.

On August 6, 2012, Bayview Loan filed its Defendant Bayview Loan Servicing’s Response to Plaintiffs Motion for Summary Judgment. See Doc. 95 (“Bayview’s MSJ Response”). Bayview Loan does not oppose the Plaintiffs relief sought in paragraphs one and two of their Motion for Summary judgment — that judgment should be entered against the Hopkins to reflect their indebtedness to the United States. Bayview’s MSJ Response ¶ 1, at 1. It argues, however, that it opposes the United States’ relief sought in paragraph three of its Motion for Summary Judgment. See Bayview’s MSJ Response ¶2, at 1. Bayview Loan notes that the United States relies upon the Default Judgment, which the Court entered to support its contention that House of Royale and Shalom Enterprises M. Hopkins’ nominees and/or alter-egos, but points out that the Court did not enter the Default Judgment against it. See Bayview’s MSJ Response ¶ 2, at 1. Bayview Loan asserts that there is thus no evidence in the record that the United States sought or obtained judgment against Bayview Loan establishing that M. Hopkins’ pre-existing IRS tax liens should be prior and superior as against Bayview Loan concerning the property at 601 N. Canyon. See Bayview’s MSJ Response ¶ 1, at 1-2. It contends that the original lender, InterBay Funding, could not have known that the borrower, House of Royale, was M. Hopkins’ alter ego or nominee, because, “[a]s evidenced by the copy of Bayview’s Note and Mortgage ..., the borrower on the subject loan was House of Royale, Inc., through Sharon Hopkins as its director .... [and] the loan was guaranteed by Sharon J. Hopkins, individually.” Bayview’s MSJ Response ¶ 2, at 2. Bayview Loan asserts that, because there is no indication in the loan documents that M. Hopkins was associated with the House of Royale or the loans, there is a genuine issue of material fact whether the IRS’ lien is superior to that of Bayview Loan’s. See Bayview’s MSJ Response ¶ 2, at 2. Bayview Loan states that, in an effort to resolve their differences without adding to the expense of this litigation, it has agreed with the United States “that Plaintiff and Bayview are both entitled to foreclose on their liens against [ ] 601 N. Canyon, and have agreed upon an equitable division of the proceeds of the sale of the property.” Bayview’s MSJ Response ¶ 3, at 2. Should the Court not approve the terms of this settlement agreement, Bayview Loan ask the Court for an additional opportunity to present evidence whether the IRS’ liens are superior to those of Bayview Loan’s. See Bay-view’s MSJ Response ¶ 4, at 2-3. Bayview Loan states that it does not further object to any relief that the United States is seeking in its Motion for Summary Judgment. See Bayview’s MSJ Response ¶4, at 3.

On August 13, 2012, the Hopkins filed their Defendant’s Rebuttal to Plaintiffs Motion for Summary Judgment. See Docs. 96 and 97 (“Hopkins’ MSJ Response”). The Hopkins assert that their Hopkins’ MSJ Response shows that: (i) there are genuine factual disputes; (ii) there are issues in the case which were not litigated at the Hopkins’ criminal trial and are not precluded under the doctrine of res judicata; (in) there are inconsistencies in the United States’ arguments; (iv) the United States misapplies tax laws to the phrase “exempt income;” (v) the jury did not find the amount of tax owed as S. Union Co. v. United States, — U.S. -, 132 S.Ct. 2344, 183 L.Ed.2d 318 (2012), requires; (vi) the discovery necessary for the case has not been completed; (vii) the Hopkins’ criminal trial excluded witnesses that would be allowed in the trial here; (viii) the Hopkins’ criminal trial disallowed evidence that would be admissible and relevant here; and (ix) the United States mischaracterizes rights as “Tax Protestor argument.” Hopkins’ MSJ Response at 1. The Hopkins note that the Tenth Circuit has stated that in “a Motion for Summary Judgment, evidence, including testimony, must be based on more than mere speculation, conjecture, and surmise.” Hopkins’ MSJ Response at 2 (quoting Bones v. Honeywell Int’l, Inc., 366 F.3d 869, 875 (10th Cir.2004)). They also point out that the Court, as a district court deciding a summary judgment motion, “must construe the facts ‘in the light most favorable to the non-moving party.’ ” Hopkins’ MSJ Response at 2 (quoting Duvall v. Gar-Pac. Consumer Prods. L.P., 607 F.3d 1255, 1259 (10th Cir.2010)).

The Hopkins argue that the United States’ assertion that the indebtedness the Hopkins allegedly owe arose from income is without a sound basis in the law, because they contend that the income that they received from 1996 on was taxable income, but was exempt from taxation under the United States Constitution. See Hopkins’ MSJ Response fA, at 2-3. They argue that the United States’ failure to recognize the income as exempt contradicts the United States’ position: “Every Substitute for Return [], Notice of Deficiency [], Notice of Assessment and Demand for Payment [], liens, levies, indictment, conviction, and attempt at foreclosure has been tainted by a flagrant disregard of a claimed exemption on income earned when exercising a constitutionally guaranteed fundamental right.” Hopkins’ MSJ Response ¶A, at 3 (citing 26 C.F.R. § 1.861-8T(e)(ii) and (in)). The Hopkins contend that, where the United States asserts the Hopkins effectively did not file tax returns as the filed tax returns were legally invalid, they “have never ‘avoided liability’ for any taxable income. Defendants proved that the income in question was ‘exempt.’ ” Hopkins’ MSJ Response ¶ D, at 3. The Hopkins dispute that they owe the United States the amounts listed in the tables in its MSJ Brief, asserting that “this amount ... is ‘exempt’ income as per 26 U.S.C. § 61, as lodged in ‘except as otherwise provided in this subtitle.’ ” Hopkins’ MSJ Response ¶ F, at 4. The Hopkins contend that, because M. Hopkins was taxed for 1996 and 1997 on 100% of his taxable income, and S. Hopkins was taxed on her 50% as community property, they “have been taxed at 150% of the allowable statutory amount on the alleged ‘taxable income’ which forms the basis of the tables in the years 1996 and 1997.” Hopkins’ MSJ Response ¶ I, at 4.

The Hopkins argue that res judicata does not apply, because the criminal forum was not a proper forum in which the Hopkins could litigate the issue “as to what income is considered ‘Exempt’ ... nor was evidence put forth to support Defendants’ arguments.... ” Hopkins’ MSJ Response ¶ 2, at 4. They assert that they were not allowed at their criminal trial to put forth evidence regarding the amount of their income that is exempt, as 26 C.F.R. § 19.22(b)-1 uses that term. See Hopkins’ MSJ Response ¶ 2, at 5.

The Hopkins point to various statements in the United States’ Motion for Summary Judgment and the corresponding MSJ Brief that they contend are inconsistent. See Hopkins’ Response ¶ 3, at 5. The Hopkins contend that the United States’ factual assertion that “Hopkins filed a joint federal income tax return that listed zero income,” and that “Hopkins refused to correctly file their 1996 federal income tax return and never filed another federal income tax return,” is inconsistent with its statement that “Sharon Hopkins failed to file federal income tax returns for the 1996 and 1997 tax years.” Hopkins’ MSJ Response ¶ 3, at 5. The Hopkins also contend that the United States’ assertion that it is “settled law that zero returns are not legally considered to be tax returns,” MSJ Brief ¶ 6, at 6 (citing United States v. Rickman, 638 F.2d 182 (10th Cir.1980)), is incorrect, in that the law is not settled that a zero return is not legally a tax return, see Hopkins’ MSJ Response ¶ 3, at 5 (citing United States v. Long, 618 F.2d 74 (9th Cir.1980); United States v. Moore, 627 F.2d 830 (7th Cir.1980)).

The Hopkins note that, in response to the United States’ contention “that every dollar earned by [the Hopkins] was ‘taxable income,’ ” the Hopkins note that they “will argue in their Case-in-Chief that all or a portion of such may be ‘exempt income’ as per ... Follett v. McCormick, 321 U.S. 573, 64 S.Ct. 717, 88 L.Ed. 938 (1944) and Murdock v. Pennsylvania, 319 U.S. 105, 63 S.Ct. 870, 87 L.Ed. 1292 (1943).” Hopkins’ MSJ Response ¶4, at 6. They assert that their income is exempt from gross income under the Sixteenth Amendment, 26 U.S.C. § 61, 26 U.S.C. § 861, and 26 C.F.R. § 1.861-8T(d)(2)(ii). See Hopkins’ MSJ Response ¶ 4 at 6-7. The Hopkins also argue that, pursuant to the Supreme Court of the United States’ 2012 opinion in S. Union Co. v. United States, 132 S.Ct. at 2344, requiring a jury trial on any imposition of criminal fines, the jury did not find the amount of tax owed and the issue has therefore not been adjudicated. See Hopkins’ MSJ Response ¶ 5, at 7. They assert further that, because they have only recently received “a very limited discovery” five months after it was requested, the United States, in bad faith, has placed the Hopkins at a disadvantage. Hopkins’ MSJ Response ¶ 6, at 7-8. The Hopkins contend that, as the United States’ filing of its Motion for Summary Judgment only eight days after serving the discovery evince, the delay in discovery was in bad faith. See Hopkins’ MSJ Response ¶ 6 at 8.

The Hopkins additionally argue that the Court should deny the Motion for Summary Judgment, because Joe Banister, a witness that they tried to call at their criminal trial, but who was excluded after a hearing under Daubert v. Merrell Parms., Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993), will be allowed to testify in this civil case under rule 28 of the Federal Rules of Civil Procedure. See Hopkins’ MSJ Response ¶ 7, at 8. They assert that they will also be allowed evidence in this civil trial, “including affidavits and historical (law) evidence, which was disallowed by the Court” in their criminal trial. Hopkins’ MSJ Response ¶ 8, at 9. Last, they argue that the United States, “in its attempt to dispose of Defendant’s tax protestor arguments,” mischaracterizes their rights and imputes alleged arguments which they assert are mischaracterizations of their arguments. See Hopkins’ MSJ Response ¶ 9, at 9-10. The Hopkins point out that, where the United States asserts that the Hopkins espouse that the United States does not have the power to tax wages or individuals, they argue, rather, that the United States “can tax all taxable income. BUT it CANNOT tax ‘exempt income.’” Hopkins’ MSJ Response ¶ 9, at 10. Similarly, the Hopkins assert that, where the United States argues that they contend that wages are not income, the Hopkins concede that “[wjages are income,” but they contend that “not all income is taxable income.” Hopkins’ MSJ Response ¶ 10, at 11. In response to the assertion that the Hopkins espouse that tax is voluntary, the Hopkins’ reply: “Income tax is not voluntary. Income tax is mandatory on all taxable income.” Hopkins’ MSJ Response ¶ 10, at 11. The Hopkins assert:

Plaintiff claims that Defendant’s arguments fail in most of ‘these categories’ (Lonsdale arguments) and thus should be rejected. Defendant agrees that IF Defendant was making those arguments, they should be rejected. However, Defendants HAVE NOT ACCEPTED SUCH ARGUMENTS. Plaintiff has assumed incorrectly, and has predicated [its] entire argument on a misconception and error.

Plaintiff has been misinformed because Defendants have NEVER had the opportunity to bring THEIR true arguments before the Court or a jury. Plaintiffs ignorance of Defendants’ real arguments on this matter is evident.

Hopkins’ MSJ Response ¶ 10, at 11. The Hopkins ask that the Court not grant the Motion for Summary Judgment, because, as discovery has not been completed, it is not ripe, and because “a trier of fact [could] resolve this case either way....” Hopkins’ MSJ Response at 12.

On August 22, 2012, the United States filed its MSJ Reply. The United States argues that the Hopkins’ compensation earned as a physician is income subject to tax and not exempt. See MSJ Reply at 1. The United States asserts that the Hopkins hold the “erroneous belief,” held by many tax protestors, that there is allegedly no taxable profit or gain when a person exchanges labor for money, because earnings from labor do not come within the statutory definition of gross income. MSJ Reply at 1. The United States contends that, like many tax protestors, the Hopkins support their argument with “inapplicable statutes or Treasury regulations, some dealing with corporate tax or the 1989 tax code long since replaced, as well as a smattering of lines from dicta in ancient court decisions.” MSJ Reply at 1 (citing, as an example, the Hopkins’ MSJ Reply ¶4). The United States argues that the idea that earnings from labor is not taxable income, or is exempt income, has been “universally rejected by courts everywhere and the Tenth Circuit in particular.” MSJ Reply at 1-2 (citing Lonsdale v. United States, 919 F.2d at 1440).

The United States asserts that, for federal income tax purposes, gross income means income from whatever source derived and expressly includes compensation for services, no matter what form payment for services may take. See MSJ Reply at 2 (citing 26 U.S.C. § 61(a)(1)). The United States refers the Court to M. Hopkins’ testimony at his criminal trial as an example of M. Hopkins’ tax protestor argument:

Well, due to the fact that I was exercising a fundamental right to work, and that work was an even exchange, there was no increase or gain. And, according to what I understood, that was exempt income. That was money coming in that was exempt and was to be excluded before you ever got to gross receipts. When you exercise your fundamental right, those are nontaxable. Government can’t tax your right to work or the exchange that you get for labor.

We know that compensation for labor in the private sector by a citizen of one of the 50 sovereign states is not income as lawfully defined. Income as defined in law is limited to gains and profits severed from capital and reinvested.

Hopkins Crim. Doc. 336, Trial Transcript at 50:3-7, 51:11-19 (taken Sept. 27, 2010) (M. Hopkins), filed August 22, 2012 (Doc. 102-1). The United States contends that these tax protestor arguments were fully contested before the jury in the course of the Hopkins’ criminal trial, and the jury found that the United States had proven, beyond a reasonable doubt, “each element ... including the first element of tax evasion — that the Hopkins had income subject to tax, and owed substantial income tax.” MSJ Reply at 3. The United States asserts that the jury also found that the Hopkins “had $242,070 in gross income in tax year 1996; $202,662 in 1997; $64,233 in 1999; $74,357 in 2000; and $93,157 in 2001.” MSJ Reply at 3-4. These arguments, having been raised and decided by the jury in their criminal trial, the United States contends, should be res judicata and collaterally estop the Hopkins’ efforts to assert to the contrary in this civil case. See MSJ Reply at 4.

In response to the Hopkins’ assertion that the United States is incorrect that they failed to file a 1996 income tax return, the United States “admits that such a form was submitted to the IRS and produced a copy of it.... It was not a valid income tax return.... ” MSJ Reply at 5. The United States points to Bachman v. Commissioner, 283 Fed.Appx. 636 (10th Cir.2008), contending that the Tenth Circuit held that federal income tax returns indicating that the taxpayer had no income were not valid returns “because a return that asserts no income is not a valid return.” MSJ Reply at 5. The United States asserts that, pursuant to Bachman v. Commissioner and United States v. Rickman, 638 F.2d 182 (10th Cir.1980), “the Court may hold that Hopkins’ Form 1040 for 1996 was not a valid return.... ” MSJ Reply at 6. The United States argues that, because the IRS at all times considered the 1996 Form 1040 invalid, whether the Court finds the 1996 return valid is not a material issue in the resolution of the case. See MSJ Reply at 6.

The United States argues that the “Hopkins’ Form 1040 for 1997 Is A Myth.” MSJ Reply at 6. It points out that the Hopkins fail to refer to evidence in the record to support that they filed a tax return in 1997, whereas, the United States relies upon the declaration of an IRS agent that the IRS never received such a tax form from the Hopkins or their attorneys. See MSJ Reply at 6. The United States asserts that, because any tax return filed by the Hopkins would have represented a zero return and the IRS would have thus treated it as another invalid return, whether the Hopkins filed a 1997 tax return is not material to the Court’s determination of summary judgment. See MSJ Reply at 6.

In reply to the Hopkins’ contention that they never avoided liability for any taxable income, the United States asserts that Judge Armijo noted at their sentencing hearing that “the trusts were created ... to avoid payment and as part of a scheme to avoid payme