[WSBAPT] IRS and creditor claim

[Tara]

The Internal Revenue Manual (IRM), Part 5 Collecting Process is a great
resource, especially section 5.5 on Decedent Estates and Estate Taxes

http://www.irs.gov/irm/part5/

 

Section 5.5.2.4 of the IRM states that “A state statute may not subordinate
a federal tax lien to interests that Congress has not specifically permitted
to prime the lien.  State law is nullified to the extent that it conflicts
with federal law.”



Section 5.5.2.6 states that the IRS considers the family allowance an
administrative expense of probate that the Service may *in its discretion*
permit.

The federal tax lien is created by operation of law, 26 USC 6321, and the
collection period and assets subject to collection are usually determined
according to the date that the tax is assessed.  The Notice of Federal Tax
Lien (NFTL) and the date of its recording deal more with priority against
other secured-type creditors.  “The filing of a NFTL is not a step required
to give rise to or to perfect the lien against the taxpayer. The act of
filing protects the Government’s right of priority as against certain third
parties, typically a purchaser, holder of a security interest, mechanic’s
lienor, or judgment lien creditor. IRC § 6323(a).”  IMR 5.17.2.3.1.

 

Also, IRM 5.5.3.6 is helpful describing the priority of the tax with regard
to estate property, based on the date of the tax assessment:
If assessment is made:            - Then the assessment lien attaches to:

before death   - property owned by the taxpayer and follows property into
probate or to the transferee.

after death      - any probate property in the taxpayer's estate at the time
of assessment.

 

Litigation on the decedent’s Federal tax liability against the IRS will
probably lead you off into Federal District Court to get an order binding
against the Service.  On the other hand, I’ve talked to revenue agents that
are just as confused by the probate process and collection priority as the
rest of us are confused by the tax laws.  Negotiating with a local revenue
agent or collection officer for an allowance for the surviving family will
probably get you further and get more reassurance for the heirs, especially
since collection efforts can follow to property in the hands of the
transferee.

 

Good luck!

Tara M. Roberts

Puget Sound Law

roberts at pugetsoundlaw.com

 

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From: wsbapt-bounces at lists.wsbarppt.com
[mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Marcus Fry
Sent: Monday, December 15, 2014 11:47 AM
To: 'wsbapt at lists.wsbarppt.com'
Subject: [WSBAPT] IRS and creditor claim

 

IRS has filed a late creditor claim in probate proceeding (no real property
to lien).  Is the IRS subject to our 4-month creditor filing bar?  If not,
anyone successfully litigate a family allowance claim to trump the debt owed
to the IRS?

 

Marcus J. Fry

Lyon, Weigand & Gustafson, P.S. 

P.O. Box 1689 
Yakima, Washington  98907 
Telephone:  (509) 248-7220 
Facsimile:  (509) 575-1883 

 

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