Wednesday, December 5, 2007

Statute of Limitations on an IRS levy - section 6502

The amendment to Code Sec. 6502 by the Revenue Reconciliation Act of 1990 (P.L. 101-508), which replaced the six-year limitations period with a ten-year period, extended the collection period with respect to a married couple whose tax collection waiver agreement specified an earlier cut-off date. Notice of assessment and demand for payment had been sent to the taxpayers prior to amendment of the statute, but within the former six-year limitations period. The terms of the taxpayers' waiver did not preclude the application of the ten-year period because the waiver was not a contract. The IRS was not barred from making a collection after the date specified in the waiver.

R. Behren, CA-11, 96-1 USTC ¶50,254.

The mailing of a deficiency notice to a taxpayer's former address did not begin tolling the statute of limitations for collecting the tax deficiency. The notice was abated by the IRS, based upon a reasonable belief that it was invalid, two years before the IRS mailed a second deficiency notice to the taxpayer at her correct address. The Tax Court proceeding against the taxpayer arose out of the second notice, which was mailed within the limitations period.

E.K. Taylor, CA-10 (unpublished opinion), 95-1 USTC ¶50,042.

The 10-year statute of limitations applied to a partnership, even though the six-year statute of limitations would have expired prior to the effective date of the 10-year statute, because the general partners of the partnership signed consents to extend the limitations period. The consents extended the last day for collection to a date beyond the effective date of the 10-year limitations period. In addition, levies against the partners' bank accounts were properly commenced within the limitations period because the partners' received sufficient notice of the levies through bank statements and IRS notices.

E. Kaggen, CA-2, 95-1 USTC ¶50,304. Confirmed, CA-2, 95-2 USTC ¶50,635.

Similarly, as to an individual.

L.B. Foutz, CA-10, 96-1 USTC ¶50,029.

Similarly with respect to an offer in compromise.

A. Hussein, CA-2, 99-1 USTC ¶50,565.

Complaint for collection must be filed no later than 5 years and 365 days after assessment (excluding any period during which the statute is suspended during consideration of an offer in compromise). Elapsed days must be cumulated in determining the expiration date of the limitations period.

H.J. Tyrrell, CA-7, 64-1 USTC ¶9328, 329 F2d 341.

IRS tax liens, which attached more than six but less than ten years previously to married debtors' property that was transferred to a realty trust of which the wife was the sole beneficiary, were still in existence because the collection period had been statutorily extended from six to ten years. However, the IRS was required to file new notices of the liens but failed to do so prior to the expiration of the refiling period. Thus, the IRS's claims lost their priority status with respect to existing mortgages as well as the bankruptcy trustee.

G.C. Cole, BC-DC Mass., 97-2 USTC ¶50,794.

Successive offers in compromise, which tolled the limitations period for collecting 1981 assessments, also had the effect of extending the collection period for an additional ten years due to the enactment of the Revenue Reconciliation Act of 1990 (P.L. 101-508). Thus, a 1997 complaint to collect the 1981 assessment was still timely. The taxpayer offered no evidence for his claim that the government had acted in bad faith by enticing him to make offers of compromise and then failing to consider them.

C.W. Georgi, DC Mich., 98-1 USTC ¶50,406.

An action to foreclose tax liens on real property was not barred by the limitations period because the action to reduce the assessments to judgment had been timely filed.

J.C. Dunkel, DC Ill., 98-2 USTC ¶50,610.

An IRS action to foreclose tax liens on property which the taxpayer fraudulently conveyed to her daughter was timely brought within ten years after the taxes were assessed. The action to collect the fraudulently conveyed property from the daughter was not governed by the six-year statute of limitations under the Federal Debt Collection Procedures Act of 1990 because that Act does not limit the federal government's right to collect taxes. Although the IRS's right to set aside the conveyance was based on state (Florida) fraudulent conveyance law, the IRS was not bound by any state statute of limitations.

D.D. Fitzgerald, DC Fla., 97-1 USTC ¶50,238.

The statutory amendment that changed the statute of limitations on collection actions from six years to ten years and applied the change retroactively was not unconstitutional. The amendment did not give rise to a due process claim because its purpose, to raise revenue without imposing additional prospective tax liabilities, was rational and reasonable. Moreover, the extended limitations period did not abrogate any rights of or create any new liabilities for a partner. The taxpayer did not rely on the expiration of the six-year limitations period to avoid the tax, and the length of the retroactivity was not inappropriate given the purpose of the statute. The amendment did not give rise to an equal protection claim because the classification purportedly created by its retroactive application was rationally related to a legitimate governmental purpose.

M. Rocanova, DC N.Y., 96-2 USTC ¶50,494. Aff'd, per curiam, CA-2, 97-1 USTC ¶50,300. Cert. denied, 10/6/97.

An action to collect taxes that were assessed prior to the date of amendment to Code Sec. 6502 (March 21, 1986) was timely commenced exactly ten years after the date of assessment (March 21, 1996). The 10-year period applied because the original six-year period for collection had not yet expired as of the date of the amendment (November 5, 1990).

R.C. MacElvain, DC Ala., 97-1 USTC ¶50,248.

Taxes timely assessed in 1988 could be collected by the IRS any time within ten years after the date of assessment. The three year limitation period for assessments under Code Sec. 6501 does not govern collections.

R. Black, DC Mich., 97-1 USTC ¶50,153.

The statute of limitations for enforcing a levy against two consulting firms that failed to surrender funds owed to a bankrupt company was suspended as long as the company was in bankruptcy proceedings and for six months thereafter. The firms' argument that the limitations period should not have been tolled because the IRS could have sued the firms or the bank to which the funds were paid once they surrendered the funds to the bank was rejected.

Giffels Assocs., DC Mich., 96-1 USTC ¶50,253.

The government was not barred from making further levies merely because previous levies on an individual's salary had been released. The statute of limitations on collection of the taxes owing remained open. The taxpayer's argument that the government was barred from collecting the taxes under the doctrine of laches because the original assessment was made 12 years earlier was rejected because there had been no laches on the part of the government. Moreover, the court noted that efforts by the IRS to collect the taxes were delayed by the taxpayer's actions.

M. Humer, DC Fla., 95-2 USTC ¶50,515.

The ten-year statute of limitations for collection properly applied in a case where the six-year limitations period, in effect before its amendment by Congress in 1990, had not expired as of November 5, 1990. Although an initial District Court order stated that the IRS had six years from the date of assessment to collect the taxes, a subsequent opinion issued in the same proceeding by a successor judge properly revised the limitations period to reflect the newly enacted ten-year period. The "law if the case" doctrine did not prevent the successor judge from amending the order to reflect the longer period of limitations because, at the time the order was entered, the change did not prejudice the taxpayer. Under either limitations period, the IRS was not time-barred from collecting the assessed taxes as of the time the order was entered. Moreover, collateral estoppel prevented the taxpayer from rearguing the limitations period. The taxpayer had ample opportunity at his prior District Court proceeding to argue that the six-year limitations period should apply.

R.E. Cleveland, DC Ill., 95-2 USTC ¶50,530.

The extension by new law of the collection period from six to ten years extended the collection period even though the taxpayer and the IRS had executed an offer in compromise with a waiver setting the end of the limitations period at a certain date. Since the effective date of the extension from six to ten years fell within the extended limitations period provided for in the offer, the 10-year period applied.

D.C. Simons, CA-10, 97-2 USTC ¶50,945.

An action by the federal government to reduce assessed taxes to judgment and to foreclose tax liens was not subject to the six-year statute of limitations contained in the Federal Debt Collection Act (FDCA) (28 USC §3001 et seq.). The FDCA does not apply to the collection of taxes by the United States. Rather, the 10-year period for collection after assessment, as set forth in Code Sec. 6502(a)(1), was applicable in this case.

W. Werner, DC N.Y., 94-2 USTC ¶50,345.

The IRS's enforcement action to collect an individual's unpaid taxes was time barred because the IRS failed to levy on the taxpayer's property within six years after the liability assessment. Although the applicable statute was later amended to extend the time period for levying on an assessment, the amendment did not apply to the levy at issue because the amendment went into effect after the IRS's right to levy expired. Thus, the levy was unenforceable.

R.E. Hillyer, DC Pa., 94-1 USTC ¶50,187. Aff'd, CA-3 (unpublished opinion), 95-1 USTC ¶50,155.

An action to foreclose tax liens was governed by the 10-year federal statute of limitations and not the six-year state (Minnesota) statute of limitations governing fraudulent conveyances.

L. Scherping, DC Minn., 92-2 USTC ¶50,345.

The IRS's failure to meet the 60-day mailing deadline for giving notice and demand of payment of tax did not void the otherwise valid assessments. The court concluded that the purpose of the 60-day notice requirement was to allow the taxpayer an opportunity to make voluntary payments of tax before the IRS could use its lien and collection powers. Thus, the IRS's failure in this case resulted only in the removal of its nonjudicial collection powers. The taxpayer remained liable for the amounts assessed. Further, the IRS's counterclaim to reduce to judgment the assessments made for two of the years at issue was not barred by the statute of limitations as a result of its not meeting the 60-day deadline for notice and assessment.

L. Blackston, DC Md., 91-2 USTC ¶50,507, 778 FSupp 244.

The court determined that the assessments were timely made and, accordingly, the action was timely filed. Even by assuming that the sixty-day period (during which the statute of limitations was suspended) and the date that the assessments could be made commenced on the first date that a stipulation was entered into between the taxpayer and the IRS, allowing the IRS to make the assessments, the 60th day fell on a Saturday, thereby making the assessments on the following Monday timely.

J.A. Ashton, DC Pa., 87-2 USTC ¶9616, 678 FSupp 561.

Liens for taxes did not lapse with the passage of time inasmuch as (1) the administrative procedure of collecting the assessment did not have to be completed within six years after the tax lien was perfected, and (2) an action was instituted within the statutory period of six years.

Valley Bank of Nevada, DC, 82-1 USTC ¶9122, 528 FSupp 907.

The IRS complied with the six-year statute of limitations in an action to enforce tax liens because the assessment date of April 17, 1964 was excluded from, and the date the original complaint was filed, April 17, 1970, was included in, the computation of time. Although the complaint was filed at 6:12 p.m., this did not result in a filing after the termination of the business day.

J. Besase, DC, 70-2 USTC ¶9626, 319 FSupp 1064.

Suit begun May 21, 1938 was begun within the six-year statutory collection period (assessment, May 21, 1932), and not one day late.

Barber, DC, 38-2 USTC ¶9478, 24 FSupp 229.

Genuine issues of material fact precluded summary judgment as to whether the statute of limitations barred the government's collection efforts. The parties agreed that the taxpayer submitted a Form 656, Offer in Compromise, but it was apparently destroyed before trial pursuant to regular IRS procedures. The taxpayer claimed that the offer was not a valid agreement to extend the collections period because he manually crossed out language on the form that provided for the extension, and because his offer was not accepted and signed by an IRS representative. The government countered that it accepted the taxpayer's offer and would not have done so if he had removed the limitations extension language.

J.D. Schurz, DC Ind., 99-1 USTC ¶50,116. Motions for reconsideration denied, DC Ind., 99-2 USTC ¶50,692.

A tax judgment in favor of the IRS against a debtor remained enforceable because the IRS was not subject to state-imposed limits on enforceability. Because the judgment was rendered within the 10-year limitations period, it was enforceable under the terms of the Federal Debt Collection Procedure Act. The statutory language of Code Sec. 6502 does not waive the IRS's immunity from state statutes of limitations.

J.A. Hill, DC Tex., 99-2 USTC ¶50,821. Aff'd, per curiam, CA-5 (unpublished opinion), 2000-2 USTC ¶50,570, 224 F3d 766. Cert. denied, 4/2/2001.

A tax shelter investor's contention that the IRS was barred by the 10-year statute of limitations from seizing his assets was without merit. The IRS timely assessed the tax liability determined by the Tax Court in earlier proceedings within the extended assessment period agreed to by the taxpayer. He was precluded from arguing that the agreement was invalid because he failed to raise that argument during the Tax Court proceedings and did not appeal the Tax Court's determination. The IRS properly made its assessment less than 150 days after the Tax Court issued its final decision.

J.B. Evseroff, DC N.Y., 2000-2 USTC ¶50,807. Aff'd on another issue, CA-2 (unpublished opinion), 2001-2 USTC ¶50,486.


J.B. Evseroff, DC N.Y., 2001-2 USTC ¶50,783.

The government was entitled to the portion of proceeds from the sale of a delinquent, insolvent individual's property that were attributable to fraudulent enhancement of the property. Although a 6-year limitations period applied at the time the IRS assessed the taxpayer's unpaid liabilities, it was subsequently changed to 10 years. Because the 6-year limitations period had not expired at the time of the amendment and the government's fraudulent enhancement claim was within the 10-year limitations period, it was timely.

S.L. Craft, CA-6, 2000-2 USTC ¶50,860, 233 F3d 358. Rev'd and Rem'd on another issue, SCt, 2002-1 USTC ¶50,361.

A court order to foreclose and sell business property fraudulently conveyed by a husband to his wife to satisfy their tax debt was not barred by the two-year statute of limitations prescribed in section 3306(b) of the Federal Debt Collection Procedures Act of 1990. Because the district court had jurisdiction pursuant to Code Sec. 7402, the use of the longer limitation period under Code Sec. 6502 was proper.

L.S. Brown, CA-10 (unpublished opinion), 2002-1 USTC ¶50,116.

The government's collection action was timely filed when begun within ten years after the assessment of the tax. The prior-law, six-year statute of limitations did not apply since this assessment was made well after the November 5, 1990, effective date of the ten-year limitation rule.

T.M. Bidegary, DC Nev., 2004-2 USTC ¶50,315.

The statute of limitations did not bar the government's suit to reduce assessments to judgment. The ten-year statute of limitations on collection was extended for the period the taxpayer was in bankruptcy and for six months thereafter. Consequently, the ten-year period did not expire until ten days after the government filed its suit to reduce the assessments to judgment.

J.A. Frein, DC Fla., 2005-1 USTC ¶50,253.

The IRS was granted summary judgment regarding an individual's unpaid tax liability, interest and penalties for one tax year the government has ten years after making an assessment to begin collection proceedings. Since the government instituted its action four days before the expiration of the ten-year period, it was not barred by the statute of limitations.

P. Lavi, DC N.Y., 2006-1 USTC ¶50,208. Aff'd, CA-2 (unpublished opinion), 2006-1 USTC ¶50,209

IRS collection actions against an individual were timely because the statute of limitations had not run on its ability to pursue the collection of unpaid taxes. The interaction of the amendments relating to offers in compromise made to Code Sec. 6502 by the Internal Revenue Service Restructuring and Reform Act of 1998 (P.L. 105-206), the Community Renewal Tax Relief Act of 2000 (P.L. 106-554) and the Job Creation and Worker Assistance Act of 2002 (P.L. 107-147) did not cause the collection action to be untimely. Also, the doctrine of laches did not bar the enforcement of government tax claims.

J.C. Ryals, DC Fla., 2006-1 USTC ¶50,293. Aff'd, per curiam, CA-11, 2007-1 USTC ¶50,397.

The IRS's collection action against an individual was timely even though it was filed more than ten years after the taxes were assessed. The statute of limitations on collection was tolled during the taxpayer's two bankruptcies and during the time his offers-in-compromise were pending. The individual's offers ceased to be pending on the date of the IRS letters stating that the offers were withdrawn, not on the date of the taxpayer's letters to the IRS withdrawing the offers. Moreover, under the IRS Restructuring and Reform Act of 1998 (P.L. 105-206), the limitation period expired on December 31, 2002, plus an extension for the period of the taxpayer's bankruptcies.

R.D. Elton, DC N.Y., 2006-1 USTC ¶50,335.

An IRS levy on an individual's wages to collect his unpaid tax liability was timely because the 10-year limitations period for collection was extended for the period of time that his two installment agreement requests were under consideration. Since the taxpayer failed to contradict the government's evidence that the installment agreements were requested, the government's calculation of the length of time the requests were considered, and the limitations period extended, was accepted.

B. Seagrave, CA-7 (unpublished opinion), 2007-1 USTC ¶50,479, aff'g an unreported District Court decision.

A married couple did not have a meritorious defense against the government's claim relating to their tax liability. The husband's tax liability was not negated by the government's late filing of its suit to collect taxes because the government filed its complaint within the 10-year limitations period set forth in Code Sec. 6502(a).

A. Goldstein, CA-2 (unpublished summary order), 2007-1USTC ¶50,372, aff'g an unreported District Court decision.

The IRS's action to enforce tax assessments against an individual for income taxes, penalties and interest was timely. Even though it was originally filed in a different jurisdiction, the government's complaint to reduce the assessments to judgment was a "proceeding in court," and it was timely because the original filing was made within 10 years from the date of the assessment. The statutory 10-year limitations period was extended because the last day of the limitations period fell on a Sunday that was followed by a legal holiday.

R.B. Shacklette, DC Fla., 2007-2 USTC ¶50,742.

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