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9 Nevada Lawyer 15 (Oct. 2001)


By "tax collection controversies," I mean cases in which it has been established that the taxpayer owes additional taxes, those taxes remain unpaid, and the IRS is attempting to enforce collection out of the taxpayer's assets. Such cases are numerous and involve attorneys in general legal practice as well as tax specialists. For example, the taxpayer may be your client for non-tax matters, and may expect you to handle her tax collection controversy as well. Or, your client may not be the taxpayer herself, but instead someone who co-owns property with the taxpayer. Your client expects you to make sure that his interest is not impermissibly infringed if the IRS tries to effect collection out of the taxpayer's interest in the jointly owned property. Or, the taxpayer owes money to your client as well as to the IRS, such that

your client and the IRS are competing for assets that, typically, are insufficient to satisfy all the claims against or debts of the taxpayer. Or, your client may be a financial institution or other party holding assets of the taxpayer, and the IRS has served a notice of levy on your client to satisfy tax liabilities out of those assets. In short, attorneys in general practice as well as tax specialists often need to understand the rules governing tax collection by the IRS. The IRS can effect enforced collection only out of assets to which its tax lien attaches. Fairly recently, in December 1999, the Supreme Court handed down a landmark decision clarifying the reach of the federal tax lien: Drye v. United States. After providing background, this column describes Drye and contemporary tax lien analysis in light of its teaching.