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Im purchasing all of the assets of a business owned by an

I'm purchasing all of the...
I'm purchasing all of the assets of a business owned by an LLC. The LLC bought this business in 2010 from another corporation.
In 2012 IRS has filed a lien for unpaid taxes against the corporation that sold the assets to the LLC.
Am I and my S Corp liable in this case?
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Answered in 2 minutes by:
10/29/2013
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 13,267
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified

Lane :

Hi,

Lane :

DO you know what tax year the lien regards ... Alien will typically be for a specific years' assessment

Customer:

Hello Lane

Customer:

Sure

Customer:

1120 for 07 and 09

Customer:

944 for 07,09,10

Customer:

and CIVP for 2005

Customer:

the date on assessment for all but the last one is in 2011

Customer:

July and August

Lane :

LIKELY not ... as (1) you paid consideration for those assets and this company has those proceeds with which to pay their lien, (2) Those assets were passed through sale before the assessment itself

Customer:

makes sense

Lane :

The lien DOES attach to what are called AFTER ACQUIRED assets of the company (or it's shareholders if involved) but this transaction took place before any assessment

Customer:

except for CIVP

Customer:

that was assessed on 11/08/2008

Customer:

is that legal fees?

Lane :

Ye,s but should this come up under the doctrine (followed by IRS in claim) is Substance over form ... assets received in exchange are attachable, but not the TRANSferred *exchanged) assets

Lane :

Civ = Civil
P = Proceedings

Lane :

Sounds like a previous Judgment, but not crimina;

Lane :

Do you think that the purchase reflected FMV, Fair Market Value (Your purchase)?

Lane :

Ahhh I see purchasing ... I'd be sure that no REASONABLE person would say you purchased for significantly less that FMV .. that might raise eyebrows

Customer:

It's about 1.25X EBIDTA

Customer:

plus inventory

Customer:

a bit on the low side, but the business is neglected

Customer:

80K for a business with 65K cash flow

Lane :

If they're solvent.. I'd get an attorney and have the sales contract have a warranty that if not delivered, you have claim ... but if that number is XXXXX in your business, your hands are clean ... again you're providing them with the liquidity that may be NEEDED to pay taxes

Customer:

even though it's not their taxes?

Customer:

Remember the taxes were for the corp that owned it initially

Lane :

Right ...

Customer:

then sold it to the entity I'm buying it from

Lane :

Just erring on the conservative side

Customer:

makes sense

Lane :

There's a concert called derivative title

Lane :

_first in time, first in lin

Lane :

line.... to collect

Lane :

But having it this far removed insulates you as well

Lane :

again you're not loaning them money nthat IRS may come and attach... this is a sale

Lane :

You could always have an attorney or bank give you a letter of clearance

Customer:

can you explain the letter of clearance please

Lane :

IF they GIFTED you the assets it could be very different ... that's why the sale needs to be reasonable in terms of the market for those assets

Lane :

Bank and some law firms, for a fee, will essentially research the situation and guarantee that he equipment is theirs to sell ... seen often in internal business exchanges

Customer:

I see

Lane :

not unlike title insurance for real property

Customer:

Is it reasonable to ask Seller's attorney for something like that?

Customer:

or have the Seller procure it on my behalf or possibly hold the amount owed in the escrow?

Lane :

I would ABSOLUTE plant that seed, lets them know that it's a concern

Lane :

Right, essentially hedging

Customer:

All right, I will do just that

Lane :

I will tell you this ... Ive seen IRS come after firms for alter ego (where the new company was esentially the same people or under the same control) but not for an arms length transaction for reasonable exchange,, not in my 25 years

Customer:

Thank you so much

Lane :

Yas, being vocal about your concerns may flush other issues, more disclosure etc. Unless you'e worried about losing the deal I don't thing it can hurt

Lane :

You're welcome

Customer:

I don't think I will lose the deal... the seller bought a business he has no interest in

Customer:

so he wants to sell it

Lane :

Then this may end up being leverage (to state the obvious)

Customer:

agreed

Lane :

By the way .... it's letter of credit (not letter of clearance)

Customer:

which is exactly what I will play for

Customer:

ultimately I'm transacting in good faith

Lane :

Right, be completely disclosed, expect the same

Customer:

thanks again

Customer:

Take care

Lane :

YW, good luck with it

Lane :

You too :)

Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 13,267
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified
Lane and 87 other Tax Specialists are ready to help you
Ask your own question now

Thanks Alex,

Lane
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Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 13,267
13,267 Satisfied Customers
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986

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