Non payment of taxes may allow IRS to seize property in Nebraska

IRS permitted to foreclose on property in Nebraska

UNITED STATES OF AMERICA, Plaintiff, v. JENNIFER L. MEISNER, SCOTTS BLUFF COUNTY, Nebraska, STATE OF NEBRASKA, Nebraska Department Of Revenue, FIRST NATIONAL BANK, FEDERAL NATIONAL MORTGAGE ASSOCIATION, and NEBRASKA DEPARTMENT OF REVENUE, Defendants.
8:05CV100

Case Law
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEBRASKA
2007 U.S. Dist. LEXIS 32539; 2007-1 U.S. Tax Cas. (CCH) P50,513; 99 A.F.T.R.2d (RIA) 2627

May 2, 2007, Decided
May 2, 2007, Filed

Facts: Delinquent taxpayer A had a long history of litigation with the Internal Revenue Service (IRS) owing from her failure to pay income taxes on certain royalty income she received in accordance to a divorce. Although the taxpayer's royalty income ranged from $ 75,000 to $ 200,000 per year, she failed to file income tax returns for five years. Government now wishes to foreclose on the taxpayer's home to secure payment on the tax liabilities. Citing an IRS manual, A argued that the IRS could not foreclose because it failed to exhaust other collection options.

Issue: Whether the government can foreclose

Ruling: Yes. The court also held that there was no requirement for exhaustion of alternative collection methods when the IRS pursued lien foreclosure under 26 U.S.C.S. § 7403. Unlike a lien foreclosure action, enforcement of a levy permits the government to take possession of property to which it ultimately may not be entitled.

Lesson Learned: The lien foreclosure procedure adjudicates any property interests that may compete with the lien, and affords those claiming to hold a property interest with a judicial forum and an opportunity to be heard before the Internal Revenue Service forecloses on its lien. If the federal government is adjudged to have a superior interest in the property, it can then proceed to execute on its judgment.

Written by Kevin Levonas and Jerry L.