(Westlaw) The transfer of a woman’s $259,400 home to a New York county to satisfy a tax lien of less than $19,000 was a fraudulent transfer that she is entitled to set aside, a bankruptcy judge has ruled.
In re Reynolds, No. 23-70879; Reynolds v. County of Suffolk, Adv. No. 24-8027, 2025 WL 2421228 (Bankr. E.D.N.Y. Aug. 20, 2025).
U.S. Bankruptcy Judge Alan S. Trust of the Eastern District of New York on Aug. 20 granted Jo Ann Reynolds’ motion for summary judgment, finding that she received less than a reasonably equivalent value in exchange for the transfer of her home to Suffolk County for failure to pay an $18,453 property tax debt.
History of the tax lien
According to Judge Trust’s opinion, Reynolds failed to make property tax payments due to Suffolk County for tax years 2017 and 2018.
The county obtained title to the property through a tax deed in January 2022 and sent Reynolds the first of a series of redemption notices in March.
A fifth and final extension letter was sent in June 2023, and Reynolds ran out of statutory redemption opportunities in July 2024, the opinion said.
Reynolds never paid the delinquent taxes and filed for bankruptcy under Chapter 13 in March 2023.
Reynolds filed an adversary complaint against the county in March 2024, saying the transfer of the property to the county through the tax deed was a fraudulent transfer under Sections 522(h) and 548(a)(1)(B) of the Bankruptcy Code, 11 U.S.C.A. §§ 522(h) and 548(a)(1)(B), and thus avoidable.
Section 522(h) says debtors can avoid involuntary transfers “to the extent that the debtor could have exempted such property if the trustee had avoided such transfer.”
Section 548(a)(1)(B) lets a trustee avoid a transfer made within two years of a bankruptcy filing if the debtor received less than a reasonably equivalent value in exchange and was insolvent at the time or was made insolvent by the transfer.
Insolvency
There was no dispute that Reynolds had an interest in the property before the transfer and that the transfer occurred within two years of the petition, leaving open only the questions of whether she was insolvent at the time of the transfer or was made insolvent, and whether she received less than reasonably equivalent value, Judge Trust said.
While the county disputed the value of Reynolds’ assets at the time of the transfer, properly filed proofs of claim, including a $77,000 proof of claim filed by the IRS in April 2023, established that her liabilities exceeded her assets at the time of the transfer, making her insolvent for purposes of Section 548(a)(1)(B), the judge said.
‘Reasonably equivalent value’
In determining whether a transfer was for “reasonably equivalent value,” courts consider whether the debtor received value substantially comparable to the worth of the transferred property, Judge Trust explained.
“The transfer of a substantial asset for a de minimis value, without the protections of judicial oversight or market forces, is not a transfer for reasonably equivalent value,” he wrote.
Reynolds’ property, with a value of $259,400, was transferred to the county to satisfy a tax lien debt of $18,453, which qualified as a de minimis value, the judge found.
Also, neither judicial oversight nor market forces were in play because Suffolk County’s administrative code made no provision for judicial oversight in obtaining fair or reasonably equivalent value and the property had not yet been sold to a third party, Judge Trust pointed out.
Consequently, the transfer was not for reasonably equivalent value, he concluded.
Richard F. Artura of Phillips, Artura & Cox represented Reynolds.
Jacqueline Caputi and Jeffrey Dayton of the Suffolk County Attorney’s office represented the county.
By Susan Swann, Esq.