As a parent, today’s topic may sound a bit crazy to you, but it can be a critical tool for protection for taxpayers who end up with IRS problems. In particular, it could impact those adult taxpayers that have received loans from parents or spouses to purchase a business or some other asset. Many parents can’t imagine filing a lien against their child, thinking, I trust my child, but even if they didn’t pay me back, I would never consider taking their assets, and I don’t want them to think that I don’t trust them. Considering that, why would I ever make such a suggestion?
Here’s why. Each week, our Richardson, Texas Firm, has taxpayers come into our office with tax debt. If the IRS has a lien against the taxpayer or business, it has rights to the assets, except those in which another lender has a priority claim. That’s the case even if that lender is a family member. If the family member has a legitimate priority claim to the asset(s), it could keep those assets out of the IRS’s hands. Below is an example.
Let’s say that I have a client named Bob, that owns a business, and that business owes $250,000 in payroll taxes. The business has now ceased operations and its sole assets are trucks and equipment, that have a value of approximately $200,000. When Bob started the company, his parents lent him $300,000, and when they lent him the money, they completed a proper loan document, a security agreement, and a UCC filing for the loan, that attaches to all assets purchased at that time or subsequently. To date, Bob has not made any payments on this loan, and with interest the balance is now $350,000. Having this loan and filing in place, could permit the parents to foreclose on the loan and seize the assets. If the lien did not exist, the IRS would have been in first position to seize the assets.
Remember that this is not a matter of trust. It is to protect both the taxpayer and the family member. At the time of the loan, create a loan agreement, security agreement, have a clean audit trail of the funds and file a UCC lien against assets held before or after the loan date. It is important to do this at the time of the loan and not attempt to backdate documents when the problems begin. Although I used parents in this case, the same would hold true for all family members and those close to the taxpayer. It can also hold true with personal loans to family members who have assets to protect.
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