The IRS wants to foreclose mom's house

Posted by porpora1686 on August 26, 2009, 11:57 pm

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Greetings all! My brother, two sisters, and I formed an LLC to
administer the ownership of my mom's house when she died. Each of us
is has a 25% partnership interest. The LLC was formed in 2005. Well,
it turns out my brother has tax debts to the IRS dating back to 2002,
and now the IRS wants to put mom's house on the auction block.

We received a summons last week stating that the IRS has filed suit
against the LLC. The suit has three counts:

1. To set aside the "fraudulent conveyance" of my brother's one-fourth
interest in the LLC.

2. To foreclose the federal tax liens upon the subject property
incurred by the delinquent partner. What really frightens us here that
the unpaid IRS balances owed by the delinquent partner far exceed the
market value of the house. The summons states, "The unpaid balances of
the assessment described above are secured by federal tax liens on all
the property and rights to property of [the delinquent partner], and
all the property and rights to property held in the name of any entity
or individual, or purportedly owned or controlled by any entity or
individual, as nominee, alter ego, and/or transferee of [the
delinquent partner]. The US is entitled to foreclose its federal tax
liens upon the property and rights described above and to rec. the
proceeds from the sale of the property to be applied towards
satisfaction of the outstanding and unpaid tax assessments against
[the delinquent partner]."

3. In the alternative, for foreclosure upon [the delinquent partner's]
interest in the LLC

Mom's house has been in the family for 70 years, and it's truly
upsetting to think that it could be auctioned off to pay off the my
brother's tax debts, even though we other three siblings are
completely innocent. I called the US Attorney here, and he referred my
to a US Attorney in DC. The DC US Atty was surprisingly kind and
sympathetic, or so it seemed at least. He told me that if we could buy
out my brother's one-fourth share and hand it over to the IRS, no
foreclosure action would be taken. The one-forth share would be
determined by the IRS, probably based on the property tax assessment.
This seems like a reasonable solution, and we're greatly relieved that
mom's house won't end up being auctioned off.

Any thoughts on this situation would be greatly appreciated. Should we
go forward with the the buy-out of my brother's share? Does the IRS
even have a leg to stand on when it threatens to foreclose on the
house simply because my brother had tax debts unknown to us when we
created the LLC?

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Posted by paultry on August 27, 2009, 1:11 am

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porpora1686@yahoo.com wrote:

> Any thoughts on this situation would be greatly appreciated. Should we

> go forward with the the buy-out of my brother's share?

Yes, if you want to resolve the tax lien administratively
and head off the court action.

Does the IRS even have a leg to stand on when it threatens
to foreclose on the

> house simply because my brother had tax debts unknown to us when we

> created the LLC?

In general, absolutely! Happens frequently. Specific to
your situation, something that should be asked of competent
legal counsel fully aware of all aspects of the case.
Failure to answer timely may result in default judgment and
loss of the property.

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Posted by HLunsford on August 27, 2009, 10:46 am

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paultry wrote:

> porpora1686@yahoo.com wrote:

> Does the IRS even have a leg to stand on when it threatens to foreclose

> on the

>> house simply because my brother had tax debts unknown to us when we

>> created the LLC?

> In general, absolutely! Happens frequently. Specific to your situation,

> something that should be asked of competent legal counsel fully aware of

> all aspects of the case. Failure to answer timely may result in default

> judgment and loss of the property.

I think you hit the nail on the head when you just advised to "seek
COMPETENT legal counsel. I would add "for a change." Sounds to me
like the lawyer who advised the LLC was thinking an LLC was just like a
corporation.

ChEAr$,
Harlan Lunsford, EA n LA

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Posted by Phil Marti on August 27, 2009, 6:14 am

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> Any thoughts on this situation would be greatly appreciated. Should we

> go forward with the the buy-out of my brother's share? Does the IRS

> even have a leg to stand on when it threatens to foreclose on the

> house simply because my brother had tax debts unknown to us when we

> created the LLC?

Any creditor can go after a joint tenant's share of a property. I suspect
that you may not understand that if the property was sold, only your
brother's share of the proceeds would go to the government. The rest would
go to the co-owners.

In any event, if you want to keep the house in the family, buy him out,
paying the government in exchange for a "discharge" of the property from the
Federal tax lien. Since a suit has been filed you can no longer do this
administratively through the IRS, but you'll have to work with the Justice
Dept. That means lawyers, and that means ka-ching!

By the way, the villain in this piece is your brother. The reason you
didn't know what a mess you were getting into is that he withheld that
information from you. This could have been so much easier, not to mention
cheaper, to resolve.

Phil Marti
Clarksburg, MD

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Posted by Steve Pope on August 27, 2009, 3:19 pm

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> Any creditor can go after a joint tenant's share of a property.

> I suspect that you may not understand that if the property was

> sold, only your brother's share of the proceeds would go to

> the government. The rest would go to the co-owners.

I would say this sort of clean split, with none of the
co-owners' funds going elsewhere (court costs, IRS lawyers, etc.),
is by no means assured.

Steve

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