Property Lien Attachment

Posted on by katemley

IRC 7425(b)(1)


The United States District Court for the Eastern District of Missouri held in Tavis Merriman v. United States of America, Case No. 4:25 CV 476 CDP, entered on August 14, 2025 that the United States Tax lien remains attached to real property post transfer even though the taxpayers for whom a tax lien was filed were no longer owners. The Plaintiff in this action for quiet title was seeking to prove that the tax lien did not attach to property he acquired at a Collector’s Deed tax sale. The taxpayers who owed the debt resided in St. Louis County where the IRS filed a notice of tax lien on August 8, 2019. After failing to pay their real property taxes for a number of years, the Collector sold their property for taxes owed to Plaintiff on October 23, 2023. Plaintiff filed a State quiet title action to clear title, but for the Federal Tax Lien. The Plaintiff then filed this action in Federal Court. The Court ruled that the same rule used by any lender or other party that executes a non-judicial sale of property on which the US has a tax lien, applies. More particularly, IRC section 7425(b)(1), (c)(1) states that a tax lien will remain attached to property if notice of the lien was recorded more than 30 days before the sale and the United States was not given notice of the sale “by registered or certified mail or by personal service, not less than 25 days prior to such sale.” The tax lien remained attached and the fact that the taxpayers no longer owned the property was irrelevant. 

Levy on Right to Property in Trust 

Posted on by katemley

IRC 6331

The United States District Court for the District of Massachusetts ruled in Marshall F. Newman, trustee of the Angelo C. Todesca, Jr. Family Trust II v. United States of America v. Albert M. Todesca, filed August 9, 2023 as Civil Action No. 20-10632-FDS, that pursuant to IRC 6331, a Trustee’s failure to subdivide property in accordance with trust terms does not impair the IRS’s ability to levy taxpayer’s right to distribution. In 2009, Albert Todesca pleaded guilty to tax evasion for failing to remit taxes withheld from employee wages to the IRS.  He was then assessed the trust fund recovery penalty, along with assessments for personal income tax liabilities. The IRS then placed two levies on family trust assets for which he was a beneficiary held at Santander Bank, N.A. The trustee of the trust, Marshall F. Newman, then sued the bank and the U.S. government arguing the levies were illegal.  The trust at issue was established by the taxpayer’s father, who was now deceased. Taxpayer and his brother were beneficiaries. The trustee was to divide the trust into two separate trusts at the death of taxpayer’s father.  However, he never did so. Both trusts were to provide net income, or principal distributions, at the beneficiary’s request or at the trustee’s discretion. The trust held cash and real property, primarily. The IRS ultimately issued levies to the bank for the approximate total of $379,000.00  The bank froze the funds in the accounts and turned them over to the Court. Pursuant to IRC section 6331, after notice and demand, the IRS may collect tax by “levy upon all property and rights to property,” of the taxpayer who owes the government taxes. The Court took up the issue of whether or not the lien attached to an interest of the taxpayer, in the Trust. The Court explained that the language of the statute is broad and that Congress meant to reach every interest in property that a taxpayer might have.  In this case, the Court applied Massachusetts law to determine what interest the taxpayer has in the trust, and ultimately what interest the federal tax lien attaches to. This was a fact specific analysis that looked at the following factors: transferability, pecuniary value, control and enjoyment. While this may not be the rule in all jurisdictions, it is extremely difficult for a trust to protect assets from the reach of the federal tax lien, while the beneficiary retains some level of control. The Court even comments on spendthrift provisions…generally used to protect beneficiaries from creditors. Fundamentally, the Court explained that a beneficiary’s interest is not immunized from the federal tax lien by using this common tool. Ultimately, the Court allowed the government to succeed on its relevant actions in this matter. 

Current Compliance and Installment Agreement

Posted on by katemley

The Tax Court ruled in Warren Keith Jackson and Barbara Ann Jackson v. Comm’r of Internal Revenue, T.C. Memo 2022-50, filed May 12, 2022 that it is not an abuse of discretion for IRS Appeals to sustain a proposed levy and deny a proposal of an installment agreement  for a taxpayer that has failed to make required estimated tax payments.  Taxpayers timely filed and failed to pay multiple years of 1040 income tax liabilities that totaled $128,095 as of 2018.  Taxpayers submitted a proposal for an installment agreement.  A field Revenue Officer rejected the proposal of $556 per month for the installment agreement and cited that the taxpayers had “sufficient  cash or equity in assets to fully or partially pay the balance owed.” Further, that rejection stated that taxpayers needed to make estimated tax payments to qualify for an installment agreement. Given the amount of the debt and monthly proposal, this was a Partial Payment Installment Agreement which requires the IRS to address equity prior to establishment of the payment agreement.  After the IRS rejected the agreement, a levy notice with appeal rights was issued. On Appeal, the IRS noted that the taxpayers did not appear to be current on estimates and that they had equity equal to $98,000 in real property.  Ultimately Appeals sustained the levy because of non-response. The Tax Court in its review made clear that it has consistently held that an Appeals officer does not abuse their discretion by declining a collection alternative for taxpayers that fail to remain compliant with current taxes.  The fundamental take away is that the taxpayer must fix the problem by showing they are capable of paying their current taxes, prior to seeking a collection alternative.  

Sale of property owned by Third Parties where tax lien attached

Posted on by katemley

I.R.C. 7403(c)

The United States District Court for the Western District of Michigan, Southern Division, in Case No.: 1:00-CV-885, Decided December 20, 2019 ruled that the government could sell a property that was sold to buyers other than the taxpayer, if the federal tax lien was attached at the time of the lien, unless the third party had a prior lien or comes within one of the exceptions of section 6323.  The taxpayer in this case put forth a handful of futile arguments regarding improper assessment of tax and invalidity of the federal tax lien.  The Court ruled on the plain language of the statutes and found that the assessment was proper, and that the lien arises at the time of assessment and continues until the liability is satisfied or becomes unenforceable due to the statute of limitations.  Therefore, the government had an interest in the property at issue before it was transferred, and the government’s interest remained intact.  The Court ordered the property sold.