It is bad enough these days paying our own taxes, but being responsible for someone elses taxes - how could that be. Yet, it is true that you can be held responsible to pay someone elses taxes and sometimes without even knowing that this could happen to you.
Section 6901 of the Internal Revenue Code provides a method for the IRS to collect on an unpaid tax liability "at law or in equity" of a transferee of property. This allows the IRS to proceed to collect the tax that the transferror owed from the transferee in the same manner as that of a delinquent taxpayer pursuant to the provisions of IRC Section 6901. How the IRS actually uses this provision will depend on your state law regarding transferee liability.
As mentioned, the liability can be established "at law or in equity." In reality, the most common approach for the IRS is in equity. The transferee liability in equity is based on the law of fraudulent conveyances. To find transferee liability in equity, the IRS must prove the following elements: 1) the taxpayer - transferror transferred property to the transferee for less than full and adequate consideration; 2) at the time of the transfer and at the time transferee liability is asserted, the taxpayer-transferror was liable for the tax; 3) the transfer was made after liability for the tax accrued, whether or not the tax was actually assessed at the time of the transfer; 4) the taxpayer - transferor was insolvent at the time of the transfer or the transfer left the taxpayer-transferor insolvent; and 5) the IRS has exhausted all reasonable remedies against the taxpayer - transferor.
If these elements are met the IRS can assert transferee liability and proceed to collect the tax due from the transferee.
Section 6901 of the Internal Revenue Code provides a method for the IRS to collect on an unpaid tax liability "at law or in equity" of a transferee of property. This allows the IRS to proceed to collect the tax that the transferror owed from the transferee in the same manner as that of a delinquent taxpayer pursuant to the provisions of IRC Section 6901. How the IRS actually uses this provision will depend on your state law regarding transferee liability.
As mentioned, the liability can be established "at law or in equity." In reality, the most common approach for the IRS is in equity. The transferee liability in equity is based on the law of fraudulent conveyances. To find transferee liability in equity, the IRS must prove the following elements: 1) the taxpayer - transferror transferred property to the transferee for less than full and adequate consideration; 2) at the time of the transfer and at the time transferee liability is asserted, the taxpayer-transferror was liable for the tax; 3) the transfer was made after liability for the tax accrued, whether or not the tax was actually assessed at the time of the transfer; 4) the taxpayer - transferor was insolvent at the time of the transfer or the transfer left the taxpayer-transferor insolvent; and 5) the IRS has exhausted all reasonable remedies against the taxpayer - transferor.
If these elements are met the IRS can assert transferee liability and proceed to collect the tax due from the transferee.
