Source: http://www.irs.gov/irm/part5/irm_05-017-013.html
Timestamp: 2013-05-18 16:48:00
Document Index: 660885657

Matched Legal Cases: ['§ 3713', '§ 3713', '§ 3713', '§ 6871', '§ 3713', '§ 3713', '§ 3713', '§ 3713', '§ 3713', '§ 3713', '§ 21', '§ 7501', '§ 7501', '§ 6323', '§ 6323', '§ 6323', '§ 6323', '§ 6323', '§ 6323', '§ 6321', '§ 6323', '§ 6332', '§ 3713', '§ 6323', '§ 3713', '§\n6321', '§ 6323', '§ 6323', '§ 6323', '§ 1011', '§ 3713', '§ 3713', '§ 3713', '§ 3713', '§ 3713', '§ 3713', '§ 7701', '§ 3713', '§ 3713', '§ 3713', '§ 3713', '§ 6323', '§ 3713', '§ 3713', '§ 3713', '§ 7402', '§ 6901', '§ 3713', '§ 3713', '§ 6901', '§ 3713', '§ 6901', '§ 3713', '§ 301', '§ 6323', '§ 6503', '§ 2206', '§ 3713', '§ 3713', '§ 7403', '§ 3713', '§ 3713', '§ 6323', '§ 6036', '§ 301', '§ 6871', '§ 301', '§ 301', '§ 6871', '§ 301', '§ 6871', '§ 6871', '§ 6503', '§ 6323', '§ 6323', '§ 6323', '§ 6873', '§ 6871', '§ 6503', '§ 6323', '§ 6323', '§ 3713', '§ 3713', '§ 6323', '§ 7403', '§ 7403', '§ 6323', '§ 6323', '§ 3713', '§ 3713', '§ 3713', '§ 7403', '§ 6901', '§ 6672']

Internal Revenue Manual - 5.17.13 Insolvencies and Decedents' Estates
Section 13. Insolvencies and Decedents' Estates
5.17.13 Insolvencies and Decedents' Estates
5.17.13.1
Insolvencies and Decedents' Estates Overview
5.17.13.2
Priority of Government Claims Under 31 USC § 3713(a), the Federal Priority Statute
5.17.13.3
Exception for Certain Interests That Would Have Priority Under the Federal Tax Lien Act; United States v. Estate of Romani
5.17.13.4
5.17.13.5
Administrative Expenses and Family Allowances
5.17.13.6
Filing the Proof of Claim
5.17.13.7
Personal Liability of the Fiduciary Under 31 USC § 3713(b)
5.17.13.8
Asserting Personal Liability Against a Fiduciary
5.17.13.9
5.17.13.10
5.17.13.11
5.17.13.12
State-law Corporate Dissolutions
(1) This transmits revised IRM 5.17.13, Legal Reference Guide for Revenue Officers, Insolvencies and Decedents’ Estates.
This section provides guidance on collecting tax liabilities in cases of probate and insolvency proceedings.
(1) IRM 5.17.13.1 - added cross reference to IRM 5.9.20, Non-Bankruptcy Insolvencies, and 5.5, Decedent Estates and Estate
(2) IRM 5.17.13.3 - added note discussing case in which the holding in Romani was not applied because the IRS was not relying
on a claim for which a tax lien arose.
(3) Material in 5.17.13.5 has been incorporated into 5.17.13.2.
(4) IRM 5.17.13.6 - revised to clarify the IRS may, in its discretion, allow payment of administrative expenses unless the
amounts are excessive or unreasonable. References that the IRS should concede expenses have been removed. Also added cross
references to applicable provisions in IRM 5.5.2, Probate Proceedings and the State Law Guides on the My SB/SE Counsel website.
(5) IRM 5.17.13.7 - added references to IRM procedures for filing proofs of claim in non-bankruptcy insolvency proceedings
and probate proceedings; revised discussion of advantages and disadvantages for filing proofs of claim; added note regarding
importance of timely removing state court proceedings to federal district court; and added references to newly revised IRM
5.5.4, Proof of Claim Procedures in Decedent Cases.
(6) IRM 5.17.13.8(6) - clarified that as a requirement to impose personal liability, the Government must show that the fiduciary
had either actual knowledge of the tax liability or knowledge of such facts as would put a reasonably prudent person on notice
as to the existence of the tax debt before making the challenged distribution or payment. Added new (7) to address sending
notice to successor administrator.
(7) IRM 5.17.13.10.3 - revised to clarify that the Federal Priority Statute, 31 USC § 3713(a), applies when the assets of
a decedent's estate in the custody of the executor or administrator are not enough to pay all debts of the decedent; and that
the assets of the estate will include any claims the executor has against holders of property that can be used to pay the
(8) IRM 5.17.13.12.1 - clarifies that an assignee for the benefit of creditors is subject to the federal tax lien even though a Notice of Federal Tax Lien has not been filed.
(9) IM 5.17.13.11.2(2) - changed "must"
to "may"
because IRC § 6871(a) provides that the IRS "may"
make an assessment under this provision.
(10) Editorial changes were made throughout this section to add or update cross-references to applicable IRM provisions, to
clarify provisions by revising or removing confusing, redundant or outdated information, and to update or correct citations.
This supersedes IRM 5.17.13 dated October 16, 2007.
5.17.13.1 (07-09-2012)Insolvencies and Decedents' Estates Overview
This section discusses how to collect tax liabilities in insolvency proceedings. IRM 5.17.13.1 through IRM 5.17.13.9 discuss
general principles, and IRM 5.17.13.10 through IRM 5.17.13.13 discuss specific types of insolvency proceedings. Examples of insolvency proceedings include: • Receiverships,IRM 5.9.20.2
• Assignments for the Benefit of Creditors,IRM 5.9.20.3• Corporate Dissolutions IRM 5.9.20.4• Insolvent decedents' estates, in IRM 5.5.2, Probate Proceedings
These distinct proceedings have a significant similarity. In each one, a fiduciary acquires property of a debtor or decedent,
which becomes "property of the estate."
The fiduciary then has the duty of administering and distributing the property of the estate.
The term "insolvency proceedings"
does not refer to bankruptcy cases. The Bankruptcy Code (Title 11 of the United States Code (USC)) governs bankruptcy
cases, which are addressed in IRM 5.17.8 through IRM 5.17.11 of this Handbook, and also in IRM 5.9, Bankruptcy and Other Insolvencies. Bankruptcy cases are under the jurisdiction of the federal courts.
Insolvency proceedings are usually under the jurisdiction of state courts (except for federal receiverships). Insolvent debtors
and unsecured creditors usually prefer the bankruptcy procedures. Therefore, bankruptcy cases are more common than insolvency
In the case of an insolvency, the IRS may be entitled to payment of federal taxes ahead of other creditors under the Federal
Priority Statute, 31 USC § 3713(a). If a fiduciary pays other claimants ahead of the IRS in violation of the Federal Priority
Statute, then the fiduciary might be personally liable under 31 USC § 3713(b). Note:
The IRS may also be able to assert transferee liability against persons who receive property from insolvent estates. See IRM 5.17.14, Fraudulent Transfers and Transferee and Other Third Party Liability.
5.17.13.2 (07-09-2012)Priority of Government Claims Under 31 USC § 3713(a), the Federal Priority Statute
Under 31 USC § 3713(a)(1)(A), the Federal Priority Statute, the Federal Government is entitled to have its claims paid first
when a person indebted to the Government is insolvent and: a debtor without enough property to pay all debts makes a voluntary assignment of property;
property of an absent debtor is attached; or
an "act of bankruptcy is committed."
"Act of bankruptcy"
, defined below in 5.17.13.2.3, does not refer to cases brought under Title 11 (the Bankruptcy Code). The Federal Priority
Statute does not apply to cases under Title 11. In bankruptcy cases, the priorities in the bankruptcy laws apply rather than
the Federal Priority Statute.
Section 3713(a)(1)(B) of the Federal Priority Statute covers decedents' estates. The Federal Government is entitled to have
its claims paid first if the estate of the deceased debtor, in the custody of the executor or administrator, is not enough
to pay all debts of the debtor. This means, among other things, that the Government is entitled to be paid before the heirs
Pursuant to the Federal Priority Statute, the general rule is that in an insolvency proceeding or a decedent’s estate case,
the fiduciary must pay a federal claim before other claims.
5.17.13.2.1 (07-09-2012)Insolvency
under 31 USC § 3713(a) refers to "balance sheet"
insolvency. This occurs when the debtor’s liabilities exceed the debtor’s assets. Lakeshore Apartments, Inc. v. United States, 351 F.2d 349 (9th Cir.1965); United States v. Golden Acres, 684 F.Supp. 96 (D.Del. 1988); United States v. Blumenfield, 128 B.R. 918 (E.D. Pa. 1991).
The inability or failure to pay debts as they become due does not, by itself, constitute insolvency under 31 USC § 3713(a).
United States v. Oklahoma, 261 U.S. 253 (1923). For example, the debtor might have far more assets than liabilities, but may not be able to liquidate
the assets to pay off the debts on time.
The relevant time for testing insolvency is at the time of distribution of assets. Thus, although an estate might not be insolvent
at the commencement of a proceeding, the federal priority will arise if the estate is insolvent when assets are later distributed.
Schwartz v. Commissioner, 560 F.2d 311 (8th Cir. 1977); Hatch v. Morosco Holding Co., 61 F.2d 944 (2d Cir. 1932).
5.17.13.2.2 (07-09-2012)Transfer of Assets
Section 3713(a)(1)(A)(i) applies where the debtor’s property is transferred to a fiduciary in a legal proceeding brought to
liquidate the insolvent debtor’s property and pay the debtor’s debts. United States v. Oklahoma, 261 U.S. 253 (1923); Bramwell v. United States Fidelity and Guaranty Co., 269 U.S. 483 (1926). Section 3713(a)(1)(A)(i) applies to the following proceedings:
general assignments for the benefit of creditors (a debtor transfers all property to an assignee)
general receiverships (a receiver takes control of all of the debtor’s assets)
liquidations of insolvent corporations, either judicial (fiduciary appointed by a court) or nonjudicial (officers of the corporation
act as the fiduciaries)
Section 3713(a)(1)(A)(ii) applies when the absent debtor’s property is administered for all of his creditors. See United States v. Clover Spinning Mills Co., 373 F.2d 274 (4th Cir. 1966). The term “attachment” in this section “is not the familiar attachment made at the instance
of and for the benefit of one creditor, …, but to a form which was in use in some states when the federal statute was enacted
in the late 18th century, by which the absconder’s property was sequestered and administered for the benefit of all his creditors.“
William T. Plumb, Federal Tax Liens, 195, n. 23 (1981).
5.17.13.2.3 (07-09-2012)Act of Bankruptcy
Section 3713(a)(1)(A)(iii) applies when an act of bankruptcy is committed. In defining “act of bankruptcy,” courts look to
the definition in the Bankruptcy Act of 1898, (11 U.S.C. § 21a) (repealed 1978), even though the Bankruptcy Reform Act of
1978 (Bankruptcy Code) generally superseded the Bankruptcy Code and the concept of “acts of bankruptcy” is not used in the
Bankruptcy Code. The Bankruptcy Act of 1898 stated that: Acts of bankruptcy by a person shall consist of his having:
concealed, removed, or permitted to be concealed or removed any part of his property, with intent to hinder, delay, or defraud
his creditors or any of them, or made or suffered a transfer of any of his property, fraudulent under the provisions of section
67 or 70 of this Act; or
made or suffered a preferential transfer, as defined in subdivision a of section 60 of this Act; or
suffered or permitted, while insolvent, any creditor to obtain a lien upon any of his property through legal proceedings or
distraint and not having vacated or discharged such lien within thirty days from the date thereof or at least five days before
the date set for any sale or other disposition of such property; or
made a general assignment for the benefit of his creditors; or
while insolvent or unable to pay his debts as they mature, procured, permitted, or suffered voluntarily or involuntarily the
appointment of a receiver or trustee to take charge of his property; or
admitted in writing his inability to pay his debts and his willingness to be adjudged a bankrupt.
Under the definition, an act of bankruptcy may arise even when there has been no transfer of property to a fiduciary, and
multiple acts of bankruptcy may exist in one transfer. In United States v. Golden Acres, Inc., 684 F.Supp. 96 (D. Del. 1988), an insolvent corporation owing a debt to the United States paid $466,760.54 to its sole officers
and directors. In doing so it committed three independent acts of bankruptcy: it made a preferential transfer of assets
to its sole officers and directors; it conveyed property with the intent to hinder, delay, or defraud any creditor, which
was a fraudulent conveyance; and it conveyed property without receiving fair consideration, which also was a fraudulent conveyance.
The district court imposed liability on the payees/officers under section 3713(b) because they were representatives of Golden
Acres and were “liable to the extent of the payment for unpaid claims of the government.” In a lawsuit asserting an act of bankruptcy, care must be taken to ensure that all of the elements for a particular act of
bankruptcy are proven. For example, in Jonathan’s Landing, Inc. v. Townsend, 960 F.2d 1538 (11th Cir. 1992), the district court granted the Government’s motion for summary judgment, which asserted
that the third act of bankruptcy applied to the debtor: the debtor suffered or permitted, while insolvent, any creditor to
obtain a lien upon any of his property through legal proceedings or distraint. The Eleventh Circuit reversed the district
court, reasoning that summary judgment should not have been granted because the Government had failed to prove that the taxpayer-debtor
had been insolvent prior to committing an act of bankruptcy.
A Section 3713 claim against the debtor-taxpayer does not preclude the Government from also asserting claims under other section
of the Internal Revenue Code, such as IRC §§ 7501 and 6672. In Jonathan's Landing, 960 F.2d at 1546 n.40, the Eleventh Circuit was "puzzled"
as to the Government's failure to assert additional claims against the debtor under IRC §§ 7501 and 6672.
5.17.13.2.4 (07-09-2012)Debt Due the United States
For the purposes of the Federal Insolvency Statute, taxes are "debts"
due the United States. United States v. Estate of Romani, 523 U.S. 517, 525 n.8 (1998); Massachusetts v. United States, 333 U.S. 611, 625-625(1947). Taxes are "debts"
even if they are unassessed. It is sufficient if the tax liability has accrued. Viles v. Commissioner, 233 F.2d 376 (6th Cir. 1956); see Estate of Frost v. Commissioner, T.C. Memo. 1993-94.
The Federal Priority Statute applies not only to tax liabilities incurred before the proceeding, but also to tax liabilities
incurred after the proceeding commences (i.e., taxes incurred by a receiver in operating a business). See IRM 5.17.13.6 (9),
5.17.13.3 (07-09-2012)Exception for Certain Interests That Would Have Priority Under the Federal Tax Lien Act; United States v. Estate of Romani
The Federal Priority Statute does not apply if, before the insolvency proceeding begins, another person has obtained an interest
in the property that would prevail over the federal tax lien under IRC § 6323. United States v. Estate of Romani, 523 U.S. 517 (1998). If the interest of a creditor prevails over the federal tax lien under IRC § 6323(a), (b), (c), or (d), then the federal
claim does not have priority over the creditor’s interest.
Under IRC § 6323(a), the following creditors prevail unless the IRS has filed a Notice of Federal Tax Lien: (a) purchasers,
(b) holders of security interests, (c) mechanic's lienors, and (d) judgment lien creditors. Generally, creditors meeting the
requirements in IRC § 6323(a), (b), (c), or (d), will have a higher priority claim than the IRS if the creditor’s interest
arises prior to the insolvency proceeding and prior to the filing of the Notice of Federal Tax Lien. See Note, below.
In Estate of Romani, the Supreme Court held that a judgment lien creditor who recorded its liens on real property before the IRS filed its Notices
of Federal Tax Lien prevailed over the IRS’s tax claims in an insolvent decedent’s estate case.
The general rule is that if the creditor would prevail against the IRS under IRC § 6323 outside of an insolvency, it will
also prevail against the IRS in the insolvency.
Under Estate of Romani, many priority disputes in insolvency proceedings will be resolved by determining lien priorities under IRC § 6323.
The Romani case applies only where the Government is relying on a claim for which a lien arose under IRC § 6321 and the competing interest
is one identified in § 6323. In Law Offices of Jonathan A. Stein v. Cadle Company, 250 F.3d 716 (9th Cir. 2001), the Service levied the compensation of the president and CEO of an insolvent company. The
company ignored the levy and continued to pay the president. The Service then sued the company to enforce the levy, and obtained
a judgement under IRC § 6332(d). A third party also obtained a judgement against the company. The company then received a
damages award to which the Service and the third party both claimed priority. In the ensuing interpleader proceeding, the
Government claimed priority under 31 USC § 3713. The third party claimed priority by virtue of a judgement lien under IRC
§ 6323. The district court held for the Government under 31 USC § 3713, and the appellate court affirmed, finding that under
Romani, the judgement lien would have priority if the United States were relying on claim for which a tax lien arose under IRC §
6321. However, in this case, the IRS did not have a federal tax lien claim against the company, so section 6323 did not apply.
The Government won because section 3713 gave its claim priority over the third party's judgement lien.
If a competing interest does not have priority over a tax claim under IRC § 6323, the Romani exception would not apply.
For example, the priority of a federal tax lien against a state tax lien is not governed by IRC § 6323. Instead, the Federal
Priority Statute applies and the federal tax claim has priority over a state tax claim for distribution from an insolvent
estate. This is true even if outside of insolvency the state claim would prevail because it was choate before the federal
lien arose. Straus v. United States, 196 F.3d 862 (7th Cir. 1999).
Persons such as heirs and devisees who receive distributions from decedents’ estates generally do not have priority interests
under IRC § 6323(a). Therefore, their interests are generally subject to the federal priority.
5.17.13.4 (07-09-2012)Other Exceptions
In United States v. Fabe, 508 U.S. 491 (1993), the Supreme Court held that the federal priority yields if it interferes with the McCarran-Ferguson
Act (15 USC § 1011 et seq.). The McCarran-Ferguson Act provides that no federal law can supersede any state law regulating
the insurance business. In Fabe, the Federal Priority Statute did not trump state law that subordinated federal tax claims to insurance claims of policyholders
in the liquidation of an insolvent insurance company.
The Service may, in limited circumstances, cede priority for purposes of funding claims for family allowances, funeral expenses, or administrative expenses, even though
debts to the Government technically have priority over these claims.
The Federal Priority Statute does not apply in bankruptcy cases (i.e., bankruptcy petitions filed under Title 11.
5.17.13.5 (07-09-2012)Administrative Expenses and Family Allowances
Although the Federal Priority Statute, 31 USC § 3713, does not provide for any exceptions to the Government's priority, courts
have held that certain classes of claim can be paid before the tax debt. These excepted classes include administrative expenses,
funeral expenses, and homestead or family allowances.
Administrative expenses are expenses incurred for the general welfare of creditors. Administrative expenses include: court costs
reasonable compensation for the fiduciary and fiduciary’s attorney
expenses incurred to collect and preserve assets
Administrative expenses must be examined to determine if the expense is reasonable and necessary to the administration of
the estate. For more information, see IRM 5.5.2.6, Administrative Expenses. See also IRM 5.5.2.6.1.1, Necessary Administrative Expenses for factors to consider when determining what expenses should be allowed as necessary administrative expenses. For example,
reasonable and necessary expenses should not be permitted ahead of a tax lien if such expenses are already covered by an insurance
policy, trust or other similar benefit that covers such costs. See IRM 5.5.2.7, Insurance Policies.
Generally, state statutes provide limits on the amounts allowed for payment of reasonable administrative expenses. Some state
law guidelines are based on the size of the estate, other provisions allow a set percentage to be paid as an allowable expense.
Some expenses can be negotiated to a certain extent by the estate administrator, others, such as court filing fees, are not
negotiable. State standards should be considered, but are not controlling, when determining whether administrative expenses are reasonable. See IRM 5.5.2.6.1, Reasonable Administrative Expenses. Information regarding a particular state's laws may be found in the State Law Guides on the My SB/SE Counsel website under
the link for law guides, http://ccintranet.prod.irscounsel.treas.gov/OrgStrat/Offices/sbse/Pages/LawGuides.aspx. The family allowance is not considered an administrative expense of the estate. In limited circumstances, the Service can exercise discretion to allow
payment ahead of a tax lien. Consideration needs to be given to circumstances such as whether there are minor children who
do not have another parent to support them. For example, if the surviving parent has sufficient income, trust distributions
or life insurance proceeds to support minor or incapacitated children, this payment would not be allowed ahead of the tax
A federal tax lien, arising before death, continues in the property to which it attached and therefore is prior to funeral
costs, the surviving spouse's exempt property allowance (widow's allowance) and any support allowances (for the surviving
spouse and minor children during administration of the estate). Consult with Area Counsel if you have any questions regarding
the allowance and payment of such expenses ahead of IRS claims.
Fees paid to the fiduciary or the fiduciary's attorney may be deemed unreasonable if:
the fees are excessive in amount, or
they are incurred in support of unreasonable activity, e.g., positions that are frivolous or without substantial merit,
or they have been estimated or not incurred.
Reasonable attorney fees are those incurred for preserving or marshalling estate assets. See IRM 5.5.2.6.1.1(1), Necessary Administrative Expenses. In proceedings other than probate proceedings, such as receiverships or corporate dissolutions, the Government may also argue
that "reasonable"
fees are limited to fees that benefit the Government as the priority claimant (e.g. fees incurred to sell receivership
assets or to pursue claims against third parties).
The expenses of a decedent's last illness are a debt of the decedent and not entitled to priority under section 3713. Rev.
Rul. 80-112, 1980-1 C.B. 306.
Taxes incurred by the estate during its administration should be paid as an administrative expense of the estate. See IRM
5.5.2.6.1.1.1, Claiming Taxes as an Administrative Expense. It is less clear whether administrative taxes, taxes incurred during a receivership, are entitled to priority by virtue of the Federal Priority Statute or by virtue of being "administrative"
expenses. Consult local Area Counsel if a question involving the priority of administrative taxes arises.
5.17.13.6 (07-09-2012)Filing the Proof of Claim
The IRS may file a proof of claim to collect any tax liability from the assets in a judicial insolvency proceeding. See IRM
5.9.20, Non-Bankruptcy Insolvencies, for procedures for filing claims in certain types of non-bankruptcy insolvency proceedings. See IRM 5.5.4.6, Proof of Claim Procedures for procedures for filing proofs of claim in decedent cases. Note:
To share in distribution from the probate estate, you must file a timely claim against the estate, because most probate courts
will not consider payment of a debt unless a timely claim is submitted.
The time for filing a claim will generally be specified either by state law or by notice from the court. State statutes of
limitation, including those fixing a time for filing proofs of claim in a decedent’s estate or other proceeding, do not apply
to the United States. United States v. Summerlin, 310 U.S. 414 (1940); United States v. Bushlow, 832 F. Supp. 574 (E.D.N.Y. 1993); see also Bresson v. Commissioner, 213 F.3d 1173 (9th Air. 2000), affirming 111 T.C. 172 (1998). Note:
The IRS should file a proof of claim within the time specified by state law to avoid litigation and ensure that taxes will
be considered in distribution of estate assets. See IRM 5.5.4.7, Comply with Bar Date.
Once the United States files a proof of claim in a judicial proceeding, such as a probate or receivership proceeding, the
court arguably has jurisdiction to determine the merits of the tax liability. It is generally not in the IRS’s interests for
a state court to rule on the merits of a tax liability. Note:
Time is of the essence when seeking to remove any dispute regarding the merits of a federal tax assessment to federal district
court. Generally, a notice of removal must be filed within thirty days of receipt by the IRS of the initial pleading raising
such an issue. See IRM 5.5.2.10(4)(i), Referral to Area Counsel for Judicial Action, and IRM 25.3.3.3, Removal of Action from State Court. It is essential that disputes regarding the merits of a tax assessment be litigated in federal district courts whenever possible.
There are several advantages to the Service timely filing a proof of claim, including the following:
It provides notice of the tax liability to the fiduciary. Notice is a prerequisite needed to establish personal liability
under USC § 3713(b).
It entitles the IRS to payment from the estate.
It avoids the necessity of tracing assets to collect taxes by levy or through transferee liability.
The IRS will receive notices of hearings and other matters in the proceeding.
The disadvantage of filing a proof of claim is the possibility that the state court may adjudicate the merits of the claim.
Where it is determined that filing a proof of claim will be disadvantageous to the Service, the following alternatives to
filing a claim may be taken:
The Government can give notice to the fiduciary of the tax liability by sending Form 10492, Notice of Federal Taxes Due, and rely on the fiduciary's personal liability under 31 USC § 3713(b) to encourage them to pay the claim. See IRM 5.17.13.8
The United States may bring a suit to reduce the tax assessments to judgement in federal district court. To the extent that
the federal court enters a final order before a state court does, the state court will be bound by the federal court's order.
The IRS may be able to assert transferee liability against the recipient of assets from an insolvent estate. See IRM 5.17.14, Fraudulent Transfers and Transferee and Other Third Party Liability.
Prepetition and post-petition interest and penalties are covered by the federal priority under 31 USC § 3713(a). See Rev.
Rul. 87-99,1987-2 C.B. 291 (the IRS maintains that the statute gives priority to post-petition interest if the IRS has a lien
and its claim is oversecured. Oversecured means the value of the property securing the IRS’s claim exceeds the underlying
tax liability). Note:
Some courts, however, have limited interest on debts incurred before the insolvency to the interest that accrued up to the
commencement date of the proceeding. Lapadula & Villani, Inc. v. United States , 563 F. Supp. 782, 785 n.7 (D. N.Y. 1983) citing United States v. Sullivan, 254 F. Supp. 254 (D. R.l. 1966) (analogizing the Federal Priority Statute to a bankruptcy proceeding). See also IRM 5.5.4.8, Claiming Penalty and Interest, for information on claiming penalties and interest in decedent cases.
5.17.13.7 (07-09-2012)Personal Liability of the Fiduciary Under 31 USC § 3713(b)
31 USC § 3713(b) imposes personal liability on a fiduciary or representative of an insolvent person or estate if the fiduciary:
has knowledge of the federal tax debt, and
pays other debts before paying the priority tax claims.
Section 3713(b) states: "A representative of a person or an estate (except a trustee under title 11) paying any part of a
debt of the person or estate before paying a claim of the Government is liable to the extent of the payment for unpaid claims
Examples of the types of fiduciaries include executors, administrators, and personal representatives of insolvent estates;
receivers; assignees; and officers of insolvent corporations. See IRC § 7701(a)(6). The common characteristic of persons
liable under 31 USC § 3713(b) is that "they are given possession and control of assets of debtors and are charged with the payment of debtors’ obligations consistent
with the creditors' rights and priorities. "
King v. United States, 379 U.S. 329(1964); United States v. Whitney , 654 F.2d 607 (9th Cir. 1981); United States v. Crocker, 313 F.2d 946, 949 (9th Cir. 1963) (holding the fact that a receiver is appointed by the court does not make the receiver
immune from liability).
Fiduciaries generally are charged with: gathering the debtor’s or decedent’s assets;
administering the assets, including liquidating the assets as appropriate;
paying creditors; and
distributing any remaining assets back to the debtor, heirs, or beneficiaries.
Section 3713(b), like 31 USC § 3713(a), does not apply to bankruptcy trustees in cases arising under Title 11 (the Bankruptcy
Personal liability under 31 USC § 3713(b) only applies if the fiduciary uses estate assets to pay a debt in violation of federal
priority under 31 USC § 3713(a). Personal liability only arises if the estate is insolvent.
There is no personal liability if debts are paid ahead of federal claims if such debts have priority over the United States
under IRC § 6323.
Knowledge of the federal claim is a requirement of personal liability. United States v. Coppola, 85 F.3d 1015 (2d Cir. 1996); Want v. Commissioner, 280 F.2d 777 (2d Cir. 1960); Leigh v. Commissioner, 72 T.C. 1105 (1979). The Government must show that the fiduciary had either actual knowledge of such facts as would put
a reasonably prudent person on notice as to the existence of the tax debt before making the challenged distribution or payment.
United States v. Coppola, 85 F.3d at 1020 (2d Cir. 1996); Bank of the West v. Comm'r, 93 T.C. 462 (1989). Thus, it is important to give notice of the tax debt to the fiduciary before any assets are distributed.
If a successor administrator is appointed, notice of taxes due should be sent to the new administrator to make them aware
of the outstanding tax liability. If notice was sent to the prior administrator, send a copy of that notice to the successor
administrator. Personal liability under 31 USC § 3713(b) is the "muscle"
behind the federal priority under 31 USC § 3713(a). Under 31 USC § 3713(b), the fiduciary must first pay known priority
debts of the United States or risk personal liability.
5.17.13.8 (07-09-2012)Asserting Personal Liability Against a Fiduciary
The IRS can assert personal liability against a fiduciary by either: Filing a suit under IRC § 7402(a) against the fiduciary in a federal district court, or
Issuing a notice of fiduciary liability to the fiduciary under IRC § 6901(a)(1)(B). The notice gives the fiduciary the right
to challenge the determination in the United States Tax Court.
Generally the statute of limitations for filing suit against a fiduciary under 31 USC § 3713(b) is the same as the statute
of limitations for collecting the underlying tax assessment United States v. Motsinger, 123 F.2d 585 (4th Cir. 1941). Some cases suggest that it may be possible to successfully assert a longer statute of limitations
for filing suit under 31 USC § 3713(b) against a fiduciary. See U.S. v. Moriarty, 8 F.3d 329 (6th Cir. 1993). Consult Area Counsel if the CSED is close or has expired and a fiduciary may be liable. The statute of limitations for issuing a notice of fiduciary liability to the fiduciary is the later of one year after the
fiduciary liability arises or the expiration of the statute of limitations for collecting the underlying tax liability IRC
§ 6901(c)(3).
The Government may be able to bring an action on the bond that fiduciaries are often required to post to serve as a fiduciary.
The Government may also seek removal of the fiduciary for misconduct.
A fiduciary’s defenses to liability under 31 USC § 3713(b) include: The fiduciary had no knowledge of the federal tax debt.
The estate was solvent when the distribution was made.
The statute of limitations on collection of the underlying tax and for asserting liability under IRC § 6901 has expired.
The distributions made by the fiduciary were for claims over which the United States did not have priority.
5.17.13.9 (10-16-2007)Decedents' Estates
A decedent’s estate, or probate proceeding, is governed by state law. The purpose of the proceeding is to gather and distribute
the decedent’s assets. The assets administered in the probate proceeding are part of the decedent’s estate. These consist of assets that the decedent
owned prior to the decedent’s death.
A personal representative or administrator is appointed by the probate court to administer the assets of the estate. The personal
representative’s duties include a) gathering the assets of the deceased; b) paying the administrative expenses, taxes and
other debts of the deceased; c) distributing the remaining assets as specified in the will or state law.
The decedent may have executed (signed) a will or died intestate (without a will). If the decedent has executed a will, the
executor named in the will is appointed as personal representative. If the named executor is deceased or declines to act (and
the will does not name a successor who is willing to serve as executor), or if no will has been executed, then the court will
appoint an administrator as personal representative.
Some assets are not subject to probate administration including a) property held jointly with the right of survivorship; b)
proceeds from life insurance policies; and c) property transferred to a trust during the decedent’s life. Such assets may
transfer at death directly to the survivor without going through probate. In such a case, these assets will not be within
The probate proceeding may be court supervised or may be an informal proceeding not requiring court supervision. If the proceeding
is court supervised, the personal representative must obtain court approval to take many actions such as distributing assets.
Usually the IRS will assert a tax claim against an estate by filing a proof of claim in any judicially supervised probate
proceeding. This is because the decedent’s probate estate is under the jurisdiction of the state court. Notice of the tax
liability should be given to the personal representative to ensure that the representative will be subject to 31 USC § 3713(b)
State laws typically direct that the fiduciary must distribute estate assets in the following order of priority: costs and expenses of administration (including homestead and family allowances)
expenses of the decedent’s last illness
However, insofar as state priority laws conflict with the federal priority, the federal priority controls.
5.17.13.9.1 (07-09-2012)Administrative Collection
A statutory lien that arises against property of a taxpayer before a taxpayer’s death continues to attach to the property
after the taxpayer’s death. United States v. Bess, 357 U.S. 51 (1958).
Collection by levy: As a general rule, when property to which the federal tax lien attaches passes into the control or custody
of the court, collection by levy is not used because it would interfere with the court's processes. United States v. Silverman , 621 F.2d 961 (9th Cir. 1980) (Collection is prohibited while the assets are in custody of the court.). Where the proceeding
has progressed so far that levy would not interfere or where the court grants permission to levy, levy may proceed. Treas.
Reg. § 301.6331-1(a)(3). Consult Counsel before taking any enforced collection action after the claim is filed or notice and
demand is made if estate assets are under the control of the court. But, if there are non-probate or other assets not subject
to the court's jurisdiction or under the control or custody of the court, then the IRS may levy on those assets. Property will not be in the custody of the court if: There is no judicial probate proceeding (e.g., there is an informal non-judicial proceeding, or no proceeding at all); or
The property is not part of the probate estate (i.e., non-probate/exempt assets).
Persons who receive distributions from a decedent’s estate, such as heirs and devisees, generally do not fall within any of
the priority categories of IRC § 6323. The IRS may collect from such distributed property without the filing of a Notice of
Federal Tax Lien (NFTL) if the assets are not under the custody of the court.
If a statutory lien arises after the death of the decedent, it may attach to property in the decedent's estate as of the assessment
date. Some property may pass outside of the probate estate; for example, life insurance and property held by joint tenancy.
Because a determination of rights to property is dependent upon state law, contact Area Counsel to determine if the federal
tax lien will attach to probate property.
The period of limitations for collection is suspended under IRC § 6503(b) while a decedent’s assets are under the control
or custody of a court and for 6 months thereafter. Collection from the non-probate assets and the assets of the surviving
spouse on joint liabilities with the decedent will have the normal 10-year statute for collection. The probate action will
extend the collection statute for the decedent's liabilities only with respect to the probate assets in control of the court
and then only if the probate assets are substantial in value relative to the entire estate. United States v. Silverman, 621 F.2d 961, 967 (9th Cir. 1980).
5.17.13.9.2 (07-09-2012)The Probate Court
State courts have jurisdiction over a decedents’ estate. Usually, state statutes designate a particular court to supervise
the administration of estates. These courts are often known as probate courts. A decedent’s estate is generally administered
in the probate court of the county in which the decedent resided at the time of death.
Specific procedures for the probate court vary depending on the law of each state. Note:
Many of the State Law Guides on the My SB/SE Counsel website include a discussion of applicable state law regarding probate
proceedings. http://ccintranet.prod.irscounsel.treas.gov/OrgStrat/Offices/sbse/Pages/LawGuides.aspx. Generally, the first step in the judicial probate of a will is to file the will with the probate court. After a party proves
a will to be genuine, the court will issue letters of administration to an executor. The executor then has the duty of gathering
together and inventorying the estate assets, paying the debts of the decedent, and making distributions of the assets.
If there is no will, a party may file a petition with the probate court to request that the court appoint an administrator.
The court will issue letters of administration and charge an administrator to perform the same tasks as the executor.
Both the executor and the administrator are known as personal representatives. The personal representative may be required
to post a bond before appointment to act for the estate.
Creditors, including the IRS, can file claims against the estate. The personal representative will approve or disapprove each
claim. If the fiduciary disapproves the claim, then the creditor may argue the case before the probate court. The creditor
may also appeal an adverse decision to a state appellate court. After all disputes are settled, the personal representative
distributes the assets. Heirs and devisees get any remaining assets after creditor’s claims are satisfied.
5.17.13.9.3 (07-09-2012)Fiduciary Liability of Personal Representatives
Section 3713(a) priority applies to a decedent’s estate when the assets of the estate in the custody of the executor or administrator
are not enough to pay all debts of the decedent. Assets of the estate do not include certain property passing outside of probate, such as jointly held property. However, the
estate does include any claims the executor has against holders of property that can be used to pay the tax liability. For
example, under IRC § 2206 and 2207, the executor has the right to compel contributions toward the estate tax from life insurance
recipients and property subject to a power of appointment.
If the 31 USC § 3713(a) priority applies, then the personal representative can be liable under 31 USC § 3713(b) for distributions
that violate federal priority.
5.17.13.10 (07-09-2012)Receiverships
A receivership usually has one of two purposes: A receivership can be a secondary proceeding brought to protect property until a primary legal proceeding is completed. For
example, a mortgagee in a mortgage foreclosure suit may ask for the appointment of a receiver to take custody of the specific
property subject to the mortgage, such as a hotel or other commercial property that is producing income. The receiver must
collect the rents and operate the property during the foreclosure proceeding. This might preserve the value of the property
pending the foreclosure sale.
A receiver can also be appointed to liquidate all of the debtor’s assets and to pay the debtor’s debts. A receivership is
an alternative to an assignment for the benefit of creditors and a bankruptcy proceeding.
A receivership can be a: general receivership in which the receiver takes control of all assets of the debtor, or
a limited receivership in which specific assets are in the custody of the receiver. Ordinarily a limited receivership is for
the benefit of specific creditors (e.g., a mortgage foreclosure).
A receivership, especially a limited receivership, does not always involve an insolvent debtor.
Generally, an interested party may initiate a receivership by filing a motion that seeks to have a receiver appointed by the
court. An interested party might want to begin a receivership proceeding to: conserve, preserve, protect or administer property that is involved in a legal action;
Creditors might want to initiate a receivership if a debtor is on the border between successful business operations and failure.
The creditors might hope that a receiver will be able to operate profitably to make the business solvent. In such a case,
the receiver will take charge of the property of the debtor and manage it for a period of time. The goal is to earn an amount
sufficient to pay the creditors. If this cannot be done, the receiver may, with court permission, liquidate as much of the
property as is necessary to pay the debts. The receiver can then distribute the proceeds to the creditors and return the balance,
if any, to the debtor.
A majority of receivership actions arise in the state courts because the basis for federal district court jurisdiction is
The United States can request the federal district court to appoint a receiver as part of a federal tax lien foreclosure action.
IRC § 7403(d). The United States should seek such a receivership if it believes that it is necessary for the collection,
preservation or orderly liquidation of property it wants to foreclose upon. See Suit and Litigation Guide for Revenue Officers,
Training 29957-101, Catalog #55451Z, beginning on page E-95, for additional information and a sample suit narrative for a
Suit for Appointment of a Receiver.
5.17.13.10.1 (10-16-2007)Receiver
State statutes generally provide the purposes and conditions necessary to appoint a receiver. The party seeking the receivership
must show the court that a receivership is necessary. Generally, there is no absolute right to the appointment of a receiver.
Instead, the decision rests in the sound judicial discretion of the court. The court may also appoint a receiver on its own
The receiver is usually an independent party without an interest in the case. The receiver must impartially protect the property
or interests of the parties to the suit. A party in interest may be appointed receiver because of the nature of the property
or special knowledge of the business. Generally, a court will allow a party in interest to serve as a receiver only if all
of the parties to the suit agree.
The receiver is a fiduciary who can be personally liable under 31 USC § 3713(b) for violating the Federal Priority Statute
in 31 USC § 3713(a). However, government claims might not have top priority in many receiverships because: there is no insolvency;
there was no "act of bankruptcy"
(e.g., the receivership is a limited receivership); or
other creditors have priority pursuant to IRC § 6323.
5.17.13.10.2 (07-09-2012)Assessment and Collection in Receiverships
Pursuant to IRC § 6036, a receiver in a receivership proceeding (and similar fiduciaries, including assignees for the benefit
of creditors) who is in control of all or substantially all of the assets of a debtor must give notice of the appointment
to the Area Director within 10 days of the receiver’s appointment. Treas. Reg. § 301.6036-1.
Under IRC § 6871(a), assessments for income, estate and gift taxes may be made immediately after the appointment of a receiver
in any receivership proceeding before any federal or state court. Treas. Reg. § 301.6871(a)-1. In these instances the IRS
does not issue a notice of deficiency, and the taxpayer is deprived of access to Tax Court. Treas. Reg. § 301.6871(b)-1(a).
The IRS may advise the receiver if it makes an immediate assessment pursuant to IRC § 6871(a). Treas. Reg. § 301.6871(b)-1(c).
Even if the IRS has issued a notice of deficiency, the taxpayer is prohibited from filing a Tax Court petition after the appointment
of the receiver. IRC § 6871(c)(1); Levine v. Commissioner, T.C. Memo. 1987-564 (1987). However, the Tax Court will have jurisdiction if the debtor files the petition before the receivership
Section 6871(a) applies to any judicially supervised liquidation proceeding in which a fiduciary is appointed with the powers
of a receiver. Williams v. Commissioner, 44 T.C. 673 (1965) (IRC § 6871 applied to assignment for the benefit of creditors under supervision of court).
The IRS may file a proof of claim in the receivership proceeding to collect from the assets in the custody of the court. The
IRS may not engage in administrative collection from assets in the custody of the court. Accordingly, the period of limitations
for collection is suspended under IRC § 6503(b) if all or substantially all of the taxpayer’s assets are in the control or
custody of the court. Note:
Formal intervention rather than merely filing a claim will give the United States standing as a party to the proceeding to
challenge court orders. Usually the United States intervenes only in federal court receiverships.
The receiver takes property subject to prior tax liens. The 6321 lien is not valid against the creditors listed in IRC § 6323(a),
unless an NFTL was filed before the creditor took an interest in the property. Receivers are not on the IRC § 6323(a) list,
so the tax lien encumbers the property in the receiver's hands. One or more of the § 6323(a) creditors may have an interest
in the property when the receiver takes it, however, and that interest would have priority over the 6321 lien if the interest
predates the filing of the NFTL. Unlike bankruptcy cases, receivership proceedings do not provide a discharge. The IRS may collect any tax claim that remains
unpaid once the proceeding ends. IRC § 6873.
5.17.13.11 (10-16-2007)Assignments for the Benefit of Creditors
An assignment for the benefit of creditors is a state law proceeding in which the debtor voluntarily transfers his property
to another party (the assignee) in trust. The assignee then uses or sells the property to pay the debtor’s debts.
The assignment can be a general assignment of all or substantially all of the debtor’s property or a partial assignment of
only some of the debtor’s property.
Most assignments are under the jurisdiction of a state court. If the court supervises the assignment, then the proceeding
may essentially be a receivership. In this case, the same rules applicable to receiverships may apply. For example, the IRS
may immediately assess under IRC § 6871. Also, the IRS may not levy. Accordingly, the statute suspends the collection period
of limitations while the property of a general assignment is under the control or custody of the court. IRC § 6503(b).
Under most state laws, a valid assignment for creditors vests the legal title of the debtor’s property in the assignee. The
property is beyond the control of the assignor or the reach of any of the assignor’s creditors, other than their rights under
the assignment to share in the distribution of the assigned property. Normally, the assignee takes title to the assigned property
as a trustee, and in general the assignee’s duties, powers, and liabilities are those of a fiduciary.
The assignee takes the assigned property subject to all liens and encumbrances.
Some states have enacted statutes prohibiting an assignor from preferring one or more creditors over other creditors in making
an assignment for the benefit of creditors. Under these statutes, the assignment must be for the equal benefit of all the
assignor’s creditors.
Like a receivership, the assignment differs from a bankruptcy case in that the debtor does not receive a discharge of debts.
5.17.13.11.1 (07-09-2012)Assessment and Collection
Like a receiver, an assignee for the benefit of creditors does not fall within one of the protected categories of IRC § 6323.
Therefore, the assignee is subject to the federal tax lien even though a Notice of Federal Tax Lien has not been filed. If
the tax liability is assessed before the assignment, a valid tax lien exists against all the assignor’s property. The effect
of the assignee taking the property is that the Government retains its interest in the property to the extent of its lien
and the Government is entitled to enforce its lien against the property. The priority of competing creditors claiming an interest in the assets will be determined under IRC § 6323.
The IRS cannot take administrative collection action against the assigned assets if the assignment is judicially supervised
and the assets are within the control or custody of the court. Instead, the IRS may file a claim in the proceeding to assert
a right to the assets. See IRM 5.17.13.7, above, for considerations before filing a proof of claim.
If the tax liability is assessed after the assignment, the taxpayer no longer has an interest in the property at the time
of assessment, so the tax lien does not attach to the assigned property.
The United States can assert a priority claim under 31 USC § 3713(a) for voluntary assignments for the benefit of creditors.
United States v. Cole, 733 F.2d 651 (9th Cir. 1984). The assignee is a fiduciary who can be personally liable under 31 USC § 3713(b) for using
property of the insolvent estate to pay lower priority creditors ahead of known federal tax liabilities. If other creditors
have priority over the United States under IRC § 6323 (e.g., mortgages and other consensual security interests), however,
the federal priority statute will not provide superior priority.
5.17.13.12 (10-16-2007)State-law Corporate Dissolutions
A corporation is considered a "person."
A corporation exists separately from the identity of its stockholders and officers. This means that the corporation itself can own property, can sue and be sued, and can incur tax liability.
It also means that this separate existence may come to an end. When the corporation’s existence does end, the corporate affairs
are wound up (the corporation must pay its debts and distribute its remaining assets). This process is a "corporate dissolution."
A corporation’s existence is artificial, created by state law. State statutes provide for: the creation of the corporation;
the period of its existence; and
termination of its life.
Stockholders of a corporation may decide to terminate the corporate existence. They may voluntarily dissolve the corporation
and forfeit the corporate charter.
The state may also initiate a proceeding to forfeit the corporate charter. Usually a state will do this as a method of enforcing
some state law requirement. The most common example of this is the state requirement that corporations pay a state franchise
tax. If the required payment is not made, the state may bring an action to forfeit the charter, thereby terminating the corporate
5.17.13.12.1 (10-16-2007)Dissolution Proceedings
If difficulties arise in the liquidation of assets, payment of claims, or distribution of assets, or if state law requires,
dissolution may be conducted in a court proceeding. Usually the court appoints a receiver, liquidator, or other fiduciary. The fiduciary must attend to the dissolution under
orders of the court and the court will hear and determine all controversies that arise during the course of the dissolution.
The IRS should file a claim in such a proceeding to collect from the assets of the corporation.
The IRS cannot levy on any property within the custody of the court.
A bankruptcy corporate liquidation differs from a non-bankruptcy corporate judicial liquidation in that the bankruptcy proceeding
is governed by federal bankruptcy law and is supervised by a federal court, while the non-bankruptcy judicial proceeding is
governed by state corporate law and is supervised by a state court.
If the parties are able to liquidate the corporation without the help of a court and if all parties and creditors are satisfied
that justice is being done, there is no reason for court action. The parties may conduct the liquidation entirely out of court
if state law permits. A nonjudicial liquidation is likely if there is either enough money to pay all corporate creditors or if the value and disposition
of the assets and the priority among claimants is not disputed.
A nonjudicial dissolution is usually conducted by the officers of the corporation. Such officers become trustees for creditors
and act in a fiduciary capacity.
If at any time during a nonjudicial dissolution the Government determines that the interests of the United States are not
protected, then the Government may bring suit to subject corporate properties to payment of tax under IRC § 7403.The Government
can seek to appoint a receiver under IRC § 7403(d). Such action converts the nonjudicial dissolution into a judicial dissolution.
The Government may also consider administrative collection action in nonjudicial dissolutions.
5.17.13.12.2 (10-16-2007)Duties of Fiduciaries
The fiduciary who is charged with liquidating the corporation will first collect all corporate assets, inventory the assets,
value, liquidate them and make distributions to creditors and stockholders.
The fiduciary must ordinarily give notice of the dissolution to all who might hold claims against the corporation. This will
usually be a public notice such as newspaper publication in addition to specific notice to each known creditor as required
by state law. The notice will give the place where claims are to be filed and the date by which they should be filed.
If money or property remains in the hands of the liquidator after satisfaction of claims against the corporation, the balance
will be distributed to the stockholders. All valid claims against the corporation must be paid before anything is distributed
to stockholders, but after payment of claims all equity remaining in the corporation belongs to the stockholders.
5.17.13.12.3 (10-16-2007)Priority of Federal Taxes
Priority of the United States versus other creditors of the corporation will often be determined by IRC § 6323.
However, with respect to persons without priority under IRC § 6323, such as state entities and stockholders, the United States
can claim priority pursuant to 31 USC § 3713(a).
Where the United States has priority under 31 USC § 3713(a), it can assert personal liability under 31 USC § 3713(b) against
fiduciaries who pay claims with lower priority than the federal claim, so long as the fiduciary had knowledge of the tax liability.
5.17.13.12.4 (07-09-2012)Collection Options
If a tax claim against the corporation is not paid, and corporate assets are distributed to stockholders, collection may be
effected from such stockholders to the extent of the property received by each. There are three possible grounds for collection
from stockholders: If federal tax liens attached to the corporate property before the distribution, the transfer would not divest the tax liens
and, therefore, the property received may be foreclosed in the hands of the stockholders by a suit under IRC § 7403(a).
Transferee liability may be asserted against the stockholders under IRC § 6901. See IRM 5.17.14.2.3.5, Transferee Liability of a Shareholder or Distributee of a Corporation.
Where appropriate, a suit could be filed to set aside the transfer as a fraudulent transfer. See IRM 5.17.14.2.3.2,Transferee Liability Based on Fraudulent Transfers.
In the event of a corporate merger or consolidation, the successor corporation often takes all the assets and assumes all
the liabilities of the old corporation. Collection from the successor corporation can be effected by the same means as discussed
with respect to stockholders.
Corporate mergers or consolidations can take many forms. Before attempting to collect from a successor corporation, contact
the successor corporation to obtain documents describing the transaction and consult with Chief Counsel.
Where the tax in question is a withheld employment tax or collected excise tax, the Trust Fund Recovery Penalty under IRC
§ 6672 provides an effective means to collect the unpaid liability from corporate officers who were responsible for payment
An offer in compromise may be considered when it is unlikely that the tax liability can be collected in full and the amount
offered reasonably reflects collection potential. An offer in compromise may achieve the goal of collecting what is potentially
collectible at the earliest possible time and at the least cost to the government. Refer to IRM 5.8. - Offer in Compromise.