This is an action to determine the dischargeability of tax obligations arising for the years 1980 through 1989. Additionally, the plaintiffs seek to determine the amount of their tax debt for the years 1990 through 1994. This court has jurisdiction over the controversy pursuant to 28 U.S.C. § 157(b)(2)(I) and (O). I find for the United States on all issues.

Background

The plaintiffs are residents of Juneau, Alaska. Mr. Mungle works overseas as a construction superintendent in San Jose, Costa Rica. Mrs. Mungle conducts an insurance business out of a home in Juneau. The Mungles have had ongoing tax problems with the United States for many years, going back as far as 1979.

Prior to trial the plaintiffs moved to determine the validity of defendant's application of certain payments. This court previously ruled against the plaintiffs' interpretation of 26 U.S.C. § 6342 with regard to such payments through an order dated August 23, 1995. That determination
      4 ABR 177  will not be amended in any manner by this decision.

The parties have stipulated to most of the facts in this dispute. These facts are contained in a stipulation, dated September 12, 1995, filed September 18, 1995. These facts, together with any factual findings in this memorandum, shall constitute the court's findings of fact. The stipulated facts follow.

Stipulation of Facts

I. BACKGROUND

1. The Mungles married in 1957 and have been married continuously until the present. Thomas Mungle obtained a real estate license in 1979 and worked selling real estate from 1979 through 1984. Marlene Mungle worked selling real estate from 1980 through 1984.

2. The Mungles filed a federal income tax return for the year 1978, on November 17, 1980, but did not pay the balance due until October 1982. The Mungles filed a return for the year 1979 in December 1983, but did not pay the balance due. The Mungles filed timely requests for extensions of time to file returns for the years 1978, 1981, 1982, 1984, 1986, 1987 and 1988.

3. Since the Mungles filed a 1979 return showing a balance due, and did not pay the liability, the IRS recorded a Notice of Federal Tax Lien in the Juneau Recording District. The Notice of Federal Tax Lien identified as the unpaid balance due of assessments for the 1979 year $7,163.15, and was recorded on April 13, 1984. In a letter dated June 15, 1984, the Mungles authorized Title Insurance Agency to disburse sufficient funds to the IRS to obtain release of the lien. The funds were to be disbursed from the proceeds otherwise due to the Mungles from one of the escrow collection accounts described below. The 1979 liability was satisfied on June 19, 1984, and the Notice of Federal Tax Lien has been released.

II. RETURN FILING

4. The Mungles did not timely file their federal income tax returns for the years 1980 through 1990. IRS records of the Mungles' accounts for the tax years 1980-1991 indicate that the returns for these years were filed on the following dates:

1980	May 28, 1991
1981	May 28, 1991
1982	May 28, 1991
1983	April 27, 1987
1984	no return filed
1985	March 25, 1991
1986	March 25, 1991
1987	November 4, 1991
1987	November 4, 1991
1988	November 4, 1991
1989	November 4, 1991
1990	November 4, 1991
1991	January 25, 1993

5. The only credits that were applied to the 1980 through 1990 accounts, prior to April 1991, when the IRS commenced enforced collection, were as follows: (1) on or about April 15, 1983, the Mungles paid $2,000 towards their 1982 liability with a request for an extension of the time in which to file their return; (2) one of Thomas Mungle's employers withheld approximately $7,674.10 from his wages during the 1983 year; (3) on or about April 15, 1985, the Mungles paid $100 towards their 1984 liability with their request for an extension of time in which to file a return; (4) a credit of $2,950 was applied to the 1984 liability in January 1987.

6. On or about April 10, 1987, IRS auditor Ray Gamez mailed Thomas Mungle a letter and an audit report. The thrust of the letter was that the IRS did not have a record of the Mungles filing a 1983 return and that the IRS had concluded that Mr. Mungle had an unpaid balance due of 1983 tax of $35,282.90. With interest and penalties, the report concluded that Mr. Mungle owed $85,382.

7. On or about April 23, 1987, the Mungles and an accountant wrote back to Ray Gamez. By this letter the Mungles disputed the audit results, and submitted to the IRS a 1983 tax return. The return which the Mungles submitted included computations showing a tax liability of $23,770.53. The Mungles noted in their letter that the accompanying return omitted two items: (1) one item of income in the amount of $37,500, and (2) associated withholding in the amount of $7,674.10.

8. After April 23, 1987, the Mungles and IRS negotiated over the Mungles' correct tax liability. The Mungles and IRS ultimately settled the matter in a Tax Court proceeding in April 1991, with the Mungles conceding a deficiency of $12,834 and the IRS conceding a prepayment credit of $7,500. In other words, the Mungles conceded that the tax reported on their return, $23,770.53, understated their liability by $12,834, and that their liability for 1983 tax should have been $36,604.53, of which $7,500 had been paid. In addition, the Mungles conceded to penalties in the amount of $13,496 for failure to file a return, substantial understatement of tax, and understatement due to negligence. The Mungles were also liable for interest on the unpaid balance due.

III. PROPERTY PURCHASES AND SALE.

9. The Mungles purchased three lots with three 4-plexes in March 1977 for $225,000. The Mungles paid $25,000 and the sellers (the "Days") provided financing for the balance at 8% for 20 years. The Mungles sold the property to the VanDelinders for $430,000 in February 1981, and provided financing to the purchaser. The VanDelinders and the Mungles entered into a contract collection agreement with Title Insurance Agency ("TIA") which provided that the purchaser would make payment to TIA, which would disburse the funds received monthly first on the Mungles' indebtedness on the property (to the Days), with the balance to the Mungles. Consequently, the Mungles received checks each month from TIA in the amount of $1,916 from early 1981 through early 1984. In early 1984 the payments went up to $2,416, and in early 1985 the payments went up again to $2,820.75. The payments to the Mungles remained $2,820.75 through December 1989, at which time TIA began sending the checks to "Main Sheet, Inc." for reasons described more fully below and which will be the subject of further testimony at trial.

10. The Mungles purchased a parcel of real property in Juneau in 1977 for $78,000 which they sold in December 1980 for $128,500 to Kenneth, Jennette, Richard and Stella Powers. The Powers made a down payment of $15,000 and the Mungles provided financing in the amount of $113,500, which the Powers were to pay over 20 years with interest at 13%. The Powers and Mungles entered into another collection agreement       4 ABR 180  with TIA similar to the one described in the previous paragraph, whereby the Powers paid TIA each month and TIA paid the amounts it received first towards the Mungles' indebtedness on the property, and second to the Mungles. Consequently, the Mungles received monthly checks in the amount of $700.76 from February 1981 through September 1986. In October 1986 the note was paid off, and TIA disbursed $54,070 to or on behalf of the Mungles. More specifically, $14,241 was paid to Peter Page, a creditor of the Mungles, as a result of an assignment, and $39,829 was paid directly to the Mungles.

11. The Mungles purchased a parcel of property in Juneau at an unknown date and for an unknown amount, which they sold for $140,000 in March 1981 to Gladys Foris. As with the two previous properties, Gladys Foris made her monthly payments to TIA, which disbursed the funds first upon the Mungles' indebtedness on the property, and second to the Mungles. Consequently, the Mungles received monthly checks from TIA in the amount of $761.25 from April 1981 through November 1986. In January 1987 the note was paid off, and the Mungles received a check for $96,931.

IV. FINANCIAL STATUS IN 1987

12. In February 1987 the Mungles' property included the following:

a. cash in the amount of $136,760 as a result of the notes being satisfied in October, 1986, and January, 1987, less several months of normal living expenses;

b. Their beneficial interest in the VanDelinder promissory note and deed of trust, with a principal balance due, net of the Mungles' indebtedness on the property, of approximately $200,000;

c. Their house on Douglas Island, across Gastineau Channel from Juneau. On a January 1984 financial statement Mr. Mungle had valued the house at $450,000, and the principal amount due on his mortgage as $149,000;

d. A condominium on the island of Maui, Hawaii, which the Mungles purchased in 1977 for $87,500. On the January 1984 financial statement Mr. Mungle valued the condominium at $275,000. In 1987 there was no mortgage indebtedness;

e. An undivided one-third interest in 9 acres of raw land on North Douglas island. Thomas Mungle had purchased the property with       4 ABR 181  Howard Jaeger and Dave Allison in November 1981 for a total price of $75,000. On the January 1984 financial statement Mr. Mungle had valued the property at $150,000, with a mortgage debt of $40,000;

f. An undivided one-half interest in 4 acres of raw land in Auke Bay, several miles north of Juneau. The Mungles purchased the property with Robert and Joan Didier in January 1980 for $31,000. On the January 1984 financial statement Mr. Mungle valued the property at $70,000, with no mortgage debt;

g. An interest in a business partnership. The business began as insurance agency and real estate sales agency. In the January 1984 financial statement Mr. Mungle valued the business at $75,000;

Other than the items listed in this paragraph the Mungles had no other assets or liabilities of substantial value during 1987, 1988 or 1989, with the possible exception of federal tax liabilities. The parties do not intend in this paragraph to stipulate to the amount or timing of any of the Mungles' federal tax liabilities.

V. CREATION OF CORPORATIONS

13. On July 29, 1988, Articles of Incorporation were filed with the Secretary of State for the State of Nevada for three new corporations with the names "Turn Buckle Corp.," "Main Sheet, Inc.," and "Down Rigger Corp." The incorporator of each corporation was Lewis E. Laughlin, who signed the Articles of Incorporation for each corporation on July 27, 1988. Mr. Laughlin was also the first sole first member of the board of directors for each corporation. The initial resident agent for each corporation was "Laughlin Associates, Inc." at 1000 East William Street, Suite 100, Carson City, Nevada 89701. "Laughlin Associates, Inc." is a business that provides incorporation services for businesses that wish to incorporate in Nevada and acts as resident agent for Nevada corporations that do not otherwise have a physical presence in Nevada.

14. On July 30, 1988, Mr. Laughlin executed a form resigning from the Board of Directors of each corporation.

15. For the filing period July 1988 through July 1989, each corporation submitted to the Secretary of State a list identifying their officers and directors. For each corporation the officers and directors consisted of the same three names: Ana Quiros Vasquez, Rosibel Gonzales       4 ABR 182  Sosa and Maria Isabel Gonzales Sosa. Each person's address was given as "POB 608-039, Orlando, Florida 32806."

16. On August 16, 1989, Laughlin Associates submitted a resignation as resident agent for each corporation.

17. On August 21, 1989, Laughlin Associates accepted an appointment as resident agent for each corporation.

18. On November 1, 1989, each corporation submitted a list of officers and directors for the filing period of July 1989 through July 1990. The officers and directors of each corporation did not change from the prior year.

19. On August 20, 1990, Laughlin Associates again resigned as resident agent for each corporation.

20. On October 24, 1991, each corporation submitted to the Secretary of State a list of officers and directors for the filing period July 1991 through July 1992, and a corporate resolution changing the resident agent. The new resident agent for each corporation was "Corporate       4 ABR 183  Services Company," P.O. Box 7346--516 South Fourth Street, Las Vegas, Nevada 89125. The new officers and directors consisted of Rosibel Gonzales Sosa and Maria Isabel Gonzales Sosa, who gave their address as the same as the resident agent.

21. On October 28, 1992, each corporation submitted a statement showing no change in the officers, directors, or their addresses for the period from July 1992 through July 1993.

22. On January 5, 1994, Corporate Services Company resigned as resident agent for all three corporations.

23. On June 5, 1995, the Secretary of the State of Nevada responded to a subpoena duces tecum issued by the United States in connection with this lawsuit. The subpoena sought the complete certified official files for the above three named corporations. The documents produced are submitted as stipulated exhibits. There are no documents in the files indicating the officers or directors of the corporations for the period after July 1993, and there are no documents indicating whether there was a successor resident agent after January 5, 1994.

24. On August 1, 1995, Laughlin Associates, Inc., responded to a subpoena duces tecum issued by the United States in connection with this lawsuit. Neither the Laughlin Associates files, nor the Corporate Services Company files, contain any record of any of the three corporations ever having been sued or served with anything other than routine documents from the Secretary of State.

25. The manager of Corporate Services Company, Jo Ann Amick, was deposed in this case on July 10, 1995. Ms. Amick testified that her company's contacts with Main Sheet, Turn Buckle and Downrigger have been via mail or facsimile transmission, with an address in Costa Rica. Ms. Amick further testified that she has been her company's only employee since July 1991, and has handled all correspondence with the corporations. Ms. Amick further testified that Corporate Services Company had not been served with any legal process on behalf of the three corporations as long as it had been the resident agent. Ms. Amick further testified that Corporate Services Company had not received any telephone calls regarding the three corporations other than from government counsel in this case.

26. The IRS files reflect that the three corporations did not file Federal Corporate Income Tax Returns (Form 1120) for the years of 1988, 1989, 1990, 1991, 1992 and 1993.

VI. 1989 TRANSACTIONS

27. In June 1989 the Mungles executed an "Assignment of Deed of Trust" purporting to assign their interest in the VanDelinder deed of trust to Main Sheet, Inc. There is no documentary evidence that the Mungles received any consideration for the assignment.

On or about October 23, 1989, the Mungles delivered instructions to TIA to begin sending the payments previously paid to the Mungles on the VanDelinder contract, to Main Sheet. In January, 1990, TIA began issuing its checks to Main Sheet.

28. On January 28, 1991, Thomas Mungle entered the Juneau branch of KeyBank and opened a checking account in the name of Main Sheet. He explained to the bank employee handling the opening of the account that he was not going to be a signer on the account, but that he was just going to represent Main Sheet in Juneau, and that he would have to send the card out for the signatories to sign. Mr. Mungle further explained that he wanted to open the account that day, and he paid $100 as an initial deposit. Mr. Mungle left the bank with the unsigned signature
      4 ABR 184  card for the account. The card was later returned to the bank with two signatories, neither of them Mr. Mungle. The signature card sets forth the Laughlin Associates' address as Main Sheet's address, and the Mungle's home telephone number in Juneau as Main Sheet's telephone number. The account was closed in December 1992.

Deposits to the account consist primarily of disbursements from TIA as a result of the VanDelinder deed of trust. The checks written consist of the following:

The only account activity between July 1, 1992, and November 20, 1992, consists of monthly bank service charges. On November 20, 1992, the account balance was $15.17 when the bank received an IRS levy. The bank charged the account $15.17 for processing the levy, and closed the account.

      4 ABR 185  29. In April 1989 the Mungles executed a Warranty Deed transferring title to their house on Douglas Island to Down Rigger Corp. A deed of trust was executed, purportedly by Down Rigger in San Jose, Costa Rica, to secure a deed of trust note for $40,000. There is no documentary evidence that Down Rigger paid any consideration to the Mungles, or that Down Rigger ever made any of the payments required by the deed of trust note.

30. In March 1989 the Mungles executed an "Agreement of Sale" regarding the Maui condominium. The Agreement recites that the Mungles were selling the condominium to Turn Buckle Corp. for $165,000, of which Turn Buckle was paying $110,000 at closing and giving the Mungles a note for $55,000 plus interest at 10%, payable over ten years. There is no documentary evidence that Turn Buckle paid the $110,000 or made any payments called for by the promissory note.

31. In October 1989 the Thomas Mungle executed two promissory notes, in the principal amounts of $51,000 and $52,000, plus interest at 13.5%, in favor of an entity identified in the notes as "Inversiones Quizzarra, S.A." Marlene Mungle signed one of the notes. At the same time, Thomas Mungle (with Marlene, in one case) executed deeds of trust to secure payment encumbering the Mungles' interests in the raw land which they owned as cotentants with the Didiers, Howard Jaeger and Dave Allison, as described above. Mr. Mungle has testified that he signed a third promissory note in the approximate amount of $50,000, also in favor of Inversiones Quizzara, S.A., purportedly secured against the Mungles' stock in United Financial Corporation, the company they controlled with Dave Moe. The third note is not in evidence.

VII. FACTS OCCURRING AFTER 1989

32. Following the March 1989 transaction regarding the condominium, the Mungles continued to have unrestricted access to the condominium. Marlene Mungle also rented the condominium out to vacationers who would pay her to stay in the condominium. The records of the condominium complex in which the condominium is located, the "Maui Kai," continue to show the Mungles as the owners. The management of the complex continues to look to the Mungles to pay the expenses associated with the condominium, which the Mungles have continued to pay since March of 1989.

      4 ABR 186  In September 1994 Marlene Mungle signed a lease permitting Jim Price to occupy the condominium for $900 per month, beginning October 1, 1994. Mr. Price has occupied the condominium continuously since October 1994. Mr. Price pays his rent directly to the Maui Kai management, which applies it to the Mungles' account. The funds credited go first to satisfy the maintenance and other assessments imposed by the Maui Kai, and the balance, if any, remains as a credit on the Mungles account. None of the rental income has been paid to Turn Buckle.

33. The Mungles have continued to reside in the Douglas Island house continuously since April, 1989, when they executed a Warranty Deed transferring title to Down Rigger Corp. The property includes a garage, which has been converted into an office, out of which Marlene Mungle has operated the Budget Insurance agency since April 1991. Budget Insurance has not paid rent for the use of the shop. There is no documentary evidence, such as receipts, cancelled checks, copies of money orders, or the like, to establish that the Mungles have paid rent to Down Rigger Corp.

34. There is no documentary evidence, such as receipts, cancelled checks, or copies of money orders, to establish that the Mungles made any payments in satisfaction of the three promissory notes in favor of Inversiones Quizzarra. On or about July 5, 1994, the Mungles "reaffirmed" a debt to Inversiones Quizarra in the amount of $97,520.

VIII. BUDGET INSURANCE AGENCY AND COLONIAL INSURANCE COMPANY

35. Marlene Mungle operates a business known as "Budget Insurance" (hereafter "Budget"). Budget sells insurance for Colonial Insurance Company of California (hereafter "Colonial"), among others. Budget is not an employee of Colonial. Rather, Budget is an independent insurance agency which can and does sell insurance for other companies.

36. Colonial does not routinely conduct backup withholding upon commissions due to the independent agencies that sell Colonial Insurance. However, Colonial will do backup withholding if it receives a properly documented request from the agency or from the IRS.

37. Budget Insurance became effective as an agency selling Colonial Insurance on March 30, 1991.

38. Colonial received an IRS levy with regard to the commissions       4 ABR 187  due Marlene Mungle on April 16, 1991. The levy identified the Mungles' 1983 tax liability.

39. Colonial's first payment of commissions to Budget Insurance, which was based upon April 1991 premiums, was paid on May 13, 1991, to the IRS in response to the levy. The IRS applied the proceeds to the Mungles' 1983 liability.

40. Prior to the May 13, 1991, payment to the IRS, neither Budget Insurance nor the IRS had submitted to Colonial a request for Colonial to perform backup withholding.

41. The Mungles' accountant, Cliff James, wrote to Colonial on December 18, 1992. The letter requested that Colonial mark the checks it sent to the IRS in such a manner that the IRS might apply the money to current years rather than the years identified on the levy. Colonial did not consider this letter or any other sent by Mr. James to have satisfied the requirements for backup withholding, and did not conduct any backup withholding.

42. In 1993 the IRS submitted a request to Colonial that Colonial perform backup withholding on commissions due to Marlene Mungle. Marlene Mungle was notified of the request, and Colonial began conducting backup withholding with the January 1994 commissions which were paid in February 1994.

43. Later in 1994 Marlene Mungle submitted proper paperwork, including IRS verification, for which reason Colonial terminated the backup withholding arrangement. Colonial ceased doing backup withholding on July 21, 1994, pursuant to Marlene Mungle's request.

44. Colonial sent the IRS checks in response to the levy on an approximately monthly basis from May 1991 through January 1994. The revenue officer who received the checks applied the proceeds to the Mungles' 1983 liability until August 1993. Around March 1, 1993, the 1983 liability became satisfied, and the IRS computers began automatically transferring the excess credits to the 1980 and 1981 liabilities. In August 1993 the revenue officer who received the checks began applying the proceeds to the Mungles' 1981 liability. On January 3, 1994, the 1981 liability became satisfied and the IRS computers began automatically transferring the excess credits to the 1982 liability.

      4 ABR 188  Analysis

11 U.S.C. § 523(a)(1)(C) excepts tax debts from discharge "[W]ith respect to which the debtor made a fraudulent return or willfully attempted in any manner to evade or defeat such tax." The United States concedes that the returns filed by the plaintiffs were not fraudulent. The sole issue before the court is whether the plaintiffs willfully attempted to evade or defeat federal income taxes.

The Sixth Circuit, in In re Toti, 24 F.3d 806, (6th Cir. 1994), helped define the term "willfully attempted" as used in § 523(a)(1)(C). It approved of the District Court's definition, which equated "willful" with "voluntary, conscious, and intentional evasions of tax liabilities." The United States has the burden of proof in establishing the nondischargeability of the debt by the preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 287-88 (1991); In re Graham, 973 F.2d 1089 (3d Cir. 1992).

The Sixth Circuit, in Toti and the Fifth Circuit, in Matter of Bruner, 55 F.3d 195 (5th Cir. 1995), both held against the debtor when the debtor failed to file tax returns. The Toti court stated:

The district court correctly held that failure to file a tax return and failure to pay a tax fall within the definition in § 523(a)(1)(C) of a willful attempt to evade or defeat a tax liability. The court also correctly held that Toti willfully attempted to evade or defeat his tax liability.

In re Toti, 24 F.3d at 809. In Matter of Bruner the Fifth Circuit reached a similar conclusion, stating:

A pattern of non-payment such as is presented here, particularly when accompanied by a pattern of failure to file returns and coupled with conduct obviously aimed at concealing income and assets, certainly constitutes a willful attempt to evade or defeat taxes for purposes of § 523(a)(1)(C).

Matter of Bruner, 55 F.3d at 200.

The Mungles filed tax returns for the years 1978 and 1979. They filed timely requests for extensions of time to file returns for the years 1981, 1982, 1984, 1986, 1987, and 1988. They bought and sold property, realizing profits of hundreds of thousands of dollars, and received those profits in the form of monthly checks from Title Insurance Agency (TIA). Those checks varied from $3,500 to $4,200 through 1986. In 1984 they authorized TIA to disburse $7,700 to the IRS to obtain a
      4 ABR 189  release of the federal tax lien. In October of 1986 a note was paid off and the Mungles received a check for $39,829. A second sale paid off in January of 1987, and the Mungles received additional consideration of $96,931. The Mungles continued to receive payments each month on a third note throughout 1987, 1988, and 1989. The Mungles also developed substantial wealth through equity in their house, a condominium in Maui, and substantial equity in two undeveloped parcels of land.

With their tax liabilities for most of the 1980s undetermined and unpaid, the Mungles liquidated their assets and made a series of fraudulent transfers to Nevada corporations. I conclude that the 1989 transfers from the debtors to "Turn Buckle Corp.," "Main Sheet, Inc.," and "Down Rigger Corp." were fraudulent transfers conducted with the intent to hinder, delay, or defraud the United States as a creditor. Each of these transfers represents an effort to evade or defeat taxes owed the United States. Mr. Mungle's testimony to the contrary is unbelievable and contrived. His frequent memory lapses, the absence of complete authenticating documentation, his continued control of the assets, and the Mungles' failure to produce witnesses verifying corporate transactions lead me to the unequivocal conclusion that all transfers by the Mungles were part of their scheme to willfully evade and defeat their tax liabilities. Additionally, Mr. Mungle's testimony with regard to obligations paid to "Herradura Corporation" for the purchase of securities in a real estate investment, and of his obligations to "Inversiones Quizzara, S.A." are also unbelievable and fraudulent.

I conclude that the requisites for nondischargeability have been clearly established. The debtors failed to file timely tax returns for the years 1980-1989. The debtors failed to pay taxes due with the returns in a timely manner. The debtors engaged in a scheme obviously aimed at concealing their income and assets through their use of phony corporations and foreign nationals. They have voluntarily, consciously and intentionally evaded and defeated their tax liabilities. The Mungles do not qualify as the sort of honest debtor the Bankruptcy Code is designed to protect. In re Griffith, 161 B.R. 727 (Bankr. S.D. Fla. 1993); In re Lewis, 151 B.R. 140 (Bankr. W.D. Tenn. 1992).

Liabilities for the tax year 1990 and later years are not discharged because the returns for those years were not due more than three years       4 ABR 190  before the date on which the petition was filed. 11 U.S.C. § 523(a)(1)(A).

Finally, as previously ruled, the funds collected by the IRS on insurance commissions due Mrs. Mungle were properly applied by the IRS to 1983 and 1981 tax liabilities that were in collection status. An assessment had been made and the IRS had sent the Mungles a 30-day notice of its intention to levy. It lawfully applied the payments to the Plaintiffs' 1981 and 1983 obligations.

The original complaint filed in this action sought a determination of the amount of tax liabilities owed by the Mungles for the years 1990-1994. The plaintiffs have submitted no evidence with regard to their tax liability for these years. To the extent the plaintiffs may seek to claim the deduction for losses on an alleged investment in "Herradura Corporation," their request is denied. The alleged investment in "Herradura Corporation" is a fraud and the plaintiffs are entitled to no relief whatsoever for any alleged losses arising out of their investment.

Conclusion

Plaintiffs' complaint will be dismissed with prejudice. A separate order and judgment will be entered.

DATED: November 8, 1995.

BY THE COURT
DONALD MacDONALD IV
United States Bankruptcy Judge