Academic journal article Journal of Accountancy

An Offer You Can't Refuse

Academic journal article Journal of Accountancy

An Offer You Can't Refuse

Article excerpt

On August 3, 1994, Irma Drye died without a will, leaving her son and sole heir, Rohn, an estate worth $236,000. Rohn was insolvent and owed the IRS approximately $325,000. The IRS had valid tax liens against all of his property. So, Rohn disclaimed all interest in his mother's estate, letting it pass to his daughter, Theresa.

Theresa subsequently established a trust naming her parents and herself as beneficiaries. She gave a third-party trustee the discretionary power to dispense funds to the family for health care and financial support.

The IRS served a notice of levy on the trust assets to satisfy Rohn's federal tax debt. The trust countered with a suit for wrongful levy.

The district court, however, sided with the IRS and ruled the tax liens were valid and Rohn's disclaimer was fraudulent. On appeal, the Eighth Circuit Court of Appeals affirmed the decision. It held that a federal tax lien attaches to property inherited by a taxpayer, even if that taxpayer later disclaims any interest in the property under state law. Since this result conflicted with other court decisions, the U.S. Supreme Court agreed to review the appellate court ruling.

According to IRC section 6321, if a taxpayer doesn't pay his or her federal taxes, the IRS can attach a tax lien to any property a taxpayer owns or subsequently acquires. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.