The IRS May Collect the Tax Debt of a Company’s Predecessor from the Successor Corporation, when the Successor Corporation Is Essentially the alter ego of Its Predecessor

When an Illinois Corporation went out of business on March 12, 2009 without paying all of its payroll taxes, a successor corporation began operating in the same physical location. The successor corporation purchased all of its predecessor’s assets, hired its employees, used its website and phone number and pursued the same line of business. In addition, the president of the predecessor corporation continued to play a leading role in the successor corporation. The IRS treated the successor corporation as the continuation of the predecessor and levied $400,000 of the successor corporation’s assets. The Seventh Circuit relied on the state law and affirmed the district court’s ruling which had concluded that the successor corporation was the continuation of the predecessor’s business operations. The 7th Circuit issued its ruling on December 16, 2016 in Eriem Surgical Inc. v. U.S.; 7th Circuit; No....

United States Tax Court Holds Defect in Notice of Deficiency Issued by the IRS Doesn’t Invalidate It

On February 2, 2017 U.S. Tax Court ruled in favor of the IRS and held that the court could exercise jurisdiction over a case involving a defective notice of deficiency. On his 2014 tax return, taxpayer claimed a refundable credit under the Internal Revenue Code § 36B. The IRS disagreed and issued a notice of deficiency which erroneously showed zero liability on its first page. The IRS notice, however included a computations page which showed a decrease in the amount of the credit but mistakenly stated that no tax was due. The issue was whether the taxpayer could reasonably rely on such a defective notice as to whether he owed any taxes. The tax court held that it could exercise jurisdiction over the case because under the circumstances, a reasonable taxpayer could infer from the IRS notice that he owed taxes. Tax court held that when the IRS notice is ambiguous about the existence of tax deficiency, the party seeking to establish the court’s jurisdiction carried the burden of proving that the IRS had determined a tax deficiency and the taxpayer wasn’t misled by the defective IRS notice. 148 T.C. No....