Attorney-at-Law

ALTER EGO TRIP

In Uncategorized on 05/29/2020 at 07:50

Having wholly-owned or controlled corporate-type entities as placeholders or fronts isn’t necessarily a tax dodge. But IRS is distinctly inhospitable when taxes are on the table.

Ch J Maurice B (“Mighty Mo”) Foley expatiates thereon in River X, Inc., Docket No. 22324-19L, filed 5/29/20.

There’s a bunch of years, taxes, TFRPs and assorted penalties. And IRS claims River X is a nominee or alter ego of the Xaviers.

But missing from this picture is a SNOD or NOD. The case comes up on a motion to restrain or refund.

After the usual “we’re only a little court with limited jurisdiction” patter, Ch J Mighty Mo man-splains the alter ego-nominee story.

“Petitioner’s assertion that as a ‘person liable for the tax’ it is entitled to its own CDP rights is misplaced. Regulations promulgated under sections 6320 and 6330 state that known nominees of, or persons holding property of, the taxpayer are not entitled to a collection due process or equivalent hearing. Secs.301.6320-1(b)(2), Q&A-B5; 301.6330-1(b)(2), Q&A-B5, Proced. & Admin. Regs. The Internal Revenue Manual (IRM) also explains that the ‘terms often interchange or overlap, but “alter egos” are usually corporate and business entities controlled by the taxpayer, whereas “nominees” are usually individuals who clearly have a separate physical identity.’ IRM pt. 5.17.2.5.7(3) (Jan. 8, 2016). The IRM further explains that although a nominee or alter ego is not entitled to CDP rights, the nominee or alter ego may appeal the filing under the Collection Appeals Program (CAP) process. IRM pt. 5.12.6.3.11(2) (Jan. 19, 2018). Any determination resulting from a CAP appeal, however, is not sufficient to invoke this Court’s jurisdiction. See e.g., IRM pt.5.1.9.4(5)(Feb.7.2014).” Order, at p. 3.

Note- A CAP is sort of equivalent hearing lite.

And since there’s no CDP or petition therefrom, Section 6330(e)(1) bars restraining levies. And in any case, even with a CDP or petition therefrom in play, nothing bars or lifts a NFTL.

If the Xaviers think IRS grabbed improperly, “…I.R.C. section 7426 provides that a person, other than the taxpayer, who is subject to a wrongful levy may bring an action in a District Court.” Order, at p. 5. More about that in my blogpost “Whose Money Is It Anyway?” 1/11/12.

 

 

 

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