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Yearly Archives: 2012

IRS Summons? Meet John Doe.

How does the IRS get on to you, you might wonder?

Increasingly, one important technique is the John Doe summons.  It blew the lid off the hushed world of Swiss banking in 2008 when a judge allowed the IRS to issue a John Doe summons to UBS for information about U.S. taxpayers using Swiss accounts.

Swiss law prohibits banks from revealing the identity of account holders, but the rest is history.

With a normal summons, the IRS seeks information about a specific taxpayer whose identity it knows. A John Doe summons allows the IRS to get the names of all taxpayers in a certain group. The IRS needs a judge to approve it, but recent IRS success may to lead to more.

A John Doe Summons is ideal for pursuing investors in tax shelters, account holders at financial institutions, attendees at an event, donors of real estate, etc.

After sniffing out American taxpayers with UBS accounts, the IRS did the same with HSBC in India. But the IRS tells its own examiners to use a John Doe Summons only after trying other routes. The IRS Manual says it may be possible to obtain taxpayer identities without issuing a John Doe summons.

IRS Summons? Meet John Doe - Forbes

Read more at: Tax Times blog

New Theory for Levying upon LLC Assets in Collections Cases

A standard tool of defense in collections cases has been that the Internal Revenue Service cannot pierce state law entities such as a Single Member LLC.

Currently there is a two-part analysis that determines whether the IRS can seize property owned by a Single Member LLC:  first the a court must look to state law to determine whether the taxpayer has any rights to property owned by the e Member LLC and then whether the state-law rights constitute property or rights to property.

However Notice 2012-002, urges a different analysis.

Based on the Notice, the IRS is likely to argue to courts that the first question is whether an entity is an “alter ego” of the taxpayer and that such question should be determined based on federal common law. If the court answers in the affirmative, then all property of the entity is the property of the taxpayer who owns the entity and potentially subject to levy.

This theory, which will eventually be tested in court, has a more-than-fighting chance. Alter ego theory, and particularly alter ago theory as defined under federal case law, has been adopted in many non-tax contexts.

Read more at: Tax Times blog

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