As a former IRS agent and teaching instructor there were occasions that taxpayers transfer assets beyond the reach of the Internal Revenue Service. The IRS has ways of reaching those assets that were transferred and claiming them back through various methods.
1. There are a variety of situations where a third party can be held liable for the tax liability of another. This IRM discusses the different legal theories for third party liability.
A. Transferee liability
B. Fiduciary liability
C. Successor liability
D. Nominee or alter ego
3. Although these theories require the application of different laws and different methods for collection, common elements exist in any analysis of third party liability. The legal theory that is pursued by the Service will ultimately depend on the specific facts of a case.
4. Because the legal theory applied depends on the specific facts, Field Collection will want to fully develop the factual background for each case. This includes, but is not limited to, any information or facts regarding the transfer and the relationship between the parties.
5. Many of the legal theories for third party liability also involve the assertion of fraud by the Service and, therefore, any evidence or facts suggestive of fraud should also be included when developing the factual background.
6. This IRM section also discusses the different methods available to the Service for collecting tax liability from a third party.
A. The Service can use administrative remedies where a Notice of Federal Tax Lien was properly filed before a transfer to the third party. In these cases, the federal tax lien can be enforced by lien or levy without first making an assessment against the transferee under IRC § 6901 or filing suit in district court.
B. The Service can also use administrative collection procedures to collect from a taxpayer’s property that is held by a nominee or alter ego.
C. Where no federal tax lien attaches to the property before it is transferred to a third party, the Service must generally make an assessment against the transferee using the IRC § 6901 procedures before pursuing administrative collection procedures. In these situations, the Service can also file suit in district court to seek to set aside the fraudulent conveyance.
8. These methods of collection are all discussed in greater detail in the provisions that follow. A determination of the best approach to take will depend upon the particular facts of the case.
After the factual background of a case has been fully developed, Area Counsel is available to assist Field Collection in determining such matters as the applicable state law, or the best legal theory to proceed under given the specific facts. See IRM 25.3.2.2.1, Area Counsel Assistance.
Ssuccessor liability doctrine
1. Under the successor liability doctrine, the government seeks to impose liability because the taxpayer sold or transferred assets to or merged with another corporation and the recipient or surviving corporation is liable under state law for the debts of the predecessor corporation.
2. The successor corporation may be liable as a transferee, as more fully discussed in IRM 5.17.14.2.3.4, or the successor corporation may be primarily liable, as more fully explained in IRM 5.17.14.5, Successor Liability as Primary Liability.
5.17.14.1.4 (01-24-2012)
