Tax Procedure: A Look at Jeopardy Assessments, Part Two.

As I outlined in the prior post, a jeopardy assessment permits the IRS to start collection activity before a judge has determined whether the assessment is actually correct, including third party collection actions. In the case of former Senator Fumo, Sunday’s article in The Philadelphia Inquirer suggests that the IRS has levied against one or more of his bank accounts, and also apparently filed nominee liens against his son, his fiancée or both. Given the impact of the jeopardy assessment on the taxpayer and his property, what are the safeguards?

First, the taxpayer has the option of posting a bond, which will stay all collection activity and permit the taxpayer to pursue Tax Court review of the assessment.Read More

Look Before You Leap: A Cautionary Tale for Purchasers.

Parents tell their children to “look before you leap.” That is also good advice for adults, as illustrated by a recent tax lien case, Gregory v. United States, 2012 U.S. Dist. LEXIS 159307 (W. D. Va. 2012).

The story starts in 2002, when the IRS filed a tax lien against Joe Watson. Mr. Watson and his wife owned real estate as tenants by entireties, and the lien therefore attached to Mr. Watson’s one-half interest in the property under United States v. Craft, 535 U.S. 274 (2002). A year later, they deeded the property to their daughter, Tammy, who assumed the existing mortgage and took the property subject to the tax lien.Read More

Too Clever by Half- A Tax Lien Tale.

Sometimes people do the dumbest things when they think they are being tricky, clever, or both. This principle is illustrated nicely by a recent opinion in an action brought to enforce a federal tax lien, United States v. Tyler, 2012 U.S. Dist. LEXIS 34093 (E.D. Pa. Mar. 13, 2012).

David J. Tyler, the taxpayer, was assessed in 2002 for additional tax liabilities from 1992 through 1998 but failed to pay, triggering a federal tax lien under Section 6321 of the Internal Revenue Code. In August 2003, the taxpayer and his wife transferred their residence, which was held in a tenancy by the entirety, to Mrs.Read More

The IRS Presses for a Uniform Federal Standard in Alter Ego Cases.

A federal tax lien attaches to all of a taxpayer’s property or rights to property under Section 6321 of the Internal Revenue Code. What about particular property that is held by an entity such as a corporation, a trust or a limited liability company? The IRS has a variety of tools at its disposal to reach property in that context; some, such as fraudulent conveyance claims, are dependent upon state statutes generally available to any creditor. Others are common law theories, such as arguing that the entity is simply a nominee of the taxpayer or is his alter ego. See, e.g., United States v.Read More