34 NewsQuarterly 1 (2014-2015)

handle is hein.journals/newsqtrly34 and id is 1 raw text is: 


Fighting the Post-Bankruptcy

Survival of Federal Tax Liens on

Property That Is Excluded from

the Bankruptcy Estate (Part 2)

By Michael DeBlis*

  Editor's Note: This is the second of a two-part article, which provides an
  overview of the federal tax system's forced collections tools. Part 1 appeared in
  the NewsQuarterly, Vol. 33, No. 4, Summer 2014 issue.

Judicial   Collection Actions
  Although its administrative enforcement tools are at the heart of federal tax collection,
the Service can seek judicial assistance to enforce a tax liability. As a practical matter,
the Service seeks judicial assistance only when its administrative procedures for
collecting taxes are ineffective. Because the Service employs judicial collection actions
sparingly, a taxpayer is unlikely to be subject to a section 7403 action. For example,
in 2010, the Service filed roughly 1.1 million NFTLs and 3.6 million notices of levy on
third parties, but civil actions under section 7403 produced only 46 judicial opinions.
Internal Revenue Service, Data Book 2010, Table 16 (2011), available at http://www.
irs.gov/pub/irs-soi/lOdatabk.pdf; National Taxpayer Advocate, 2010 Annual Report
to Congress, Executive Summary, at 43, available at http://www.irs.gov/pub/irs-pdf/
  There are two chief reasons why the Service uses judicial collection actions as a last
resort. First, as section 7421 recognizes, a federal lawsuit to enforce a lien can be a
potentially long and drawn out adversarial process. Second, the Service cannot, itself,
bring an action in federal court to enforce the lien through foreclosure. Instead, it must
persuade the Department of Justice, which has its own priorities and demands on its
resources, to commence the action on behalf of the United States. I.R.C. § 7401.
  The purpose of a collection action is to reduce the federal tax assessment to
judgment and to foreclose the tax liens on specific property. But the Service can also
request more unusual relief. For example, it may obtain certain relief on an ex parte
basis, including the authority to open, or at least be present at the opening of, a safety
deposit box, and to obtain a warrant to enter property without the owner's consent.
In re Gerwig, 461 F. Supp. 449, 451 (C.D. Cal. 1978).
  The Service may also attempt to set aside a conveyance as fraudulent. Such action
is taken when it believes that the taxpayer transferred property prior to the federal tax
lien (or levy) in order to avoid payment. I.R.C. § 6901. Generally, when a conveyance

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continued on page 8

Point to Remember
Fighting the Post-Bankruptcy Survival
of Federal Tax Liens on Property That
Is Excluded from the Bankruptcy Estate
(Part 2)                         1

From the Chair
Armando Gomez

Interview: Stanley S. Surrey



14th Annual Law Student          6
Tax Challenge: J.D. Problem

Book Excerpt
The Statute of Limitations in   12
Equitable Relief Cases

Tax Bites                       14
Autumn Serenade

Government Submissions
(1) Comments on Summary of      16
Staff Discussion Draft on Reforming
Tax Administration
(2) Follow-up on Funding for the 17
Internal Revenue Service
(3) Boxscore                    19

CLE Calendar                    22


                American Bar Assoc ation

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