My brother & I own property in MS that we want to develop. It used to also be 1/3 owned by my parents. We quit-deeded the property in mine & my brothers name about a year ago. They received a notice recently about a 1040 lien on any/all property they own. Can the IRS go back and put a lien on the property that is in my brother & my name ? My brother and I are developing the property to pay off the IRS debt they owe, but we are afraid of developing the land if the IRS can put a lien on it & interfere with the development process. Thx
It's going to depend on the facts and circumstances that you don't go into, and you may not want to in such a public forum. But if you transferred the property ~~~knowing~~~ about the IRS problems, then they may claim that it wasn't a transfer in good faith. That meaning, the transfer was done to protect the property from seizure by the IRS (and/or state), that it was for less than fair value (you didn't buy-out your parents it seems). Even if the IRS were to put a lien on the property, it shouldn't slow development because as the property gets sold off, the proceeds will go to pay the back taxes. Any lien would assure that some or all of the proceeds went to the taxes. To be sure of your position in all this, consult a tax attorney or real estate attorney (which you should have done in the beginning).
If the tax liability was incurred before the property was transferred, then yes, the IRS can lien the property as it is now titled.
The tax liability was incurred as of the end of the year in which it accrued. The Federal Tax Lien (FTL) came into existence when the tax liability was assessed, demand was made for payment, and your parents neglected or refused to pay. A Notice of Federal Tax Lien (NFTL) filed in the jurisdiction (generally the county) where the property is located will cause the FTL to directly attach real property owned by your parents. If the property was quit-claimed before the NFTL was filed, the FTL won't immediately cloud the property title. However, the IRS (and other affected creditors, for that matter) can take administrative and/or judicial nominee/transferee actions to extend their lien to the transferred property. Some of the nominee/transferee indicators the IRS will look at in your case are a transfer to related parties, for less than adequate consideration, with taxpayers retaining a beneficial interest in the property. Whether the IRS will pursue the property depends on, among other things, the amount of the tax liability, the value of the transferred property, the ability to collect from other sources, and the experience and degree of effort exerted by the collection personnel working your parents' case.
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