Problem 1: Oscar Oppressed consults you regarding his tax problems. Oscar tells you that he has not paid the $20,000 balance due on his 20X8 income tax return. He had sent some information to the Collection function of the IRS showing them that he had no money aside from the wages he earned as a janitor at the local packing plant. Oscar mailed in the information approximately six months ago and heard nothing further until he went to pick up his paycheck last Friday. The paymaster informed him that they had received a levy and had paid over the amount of his check to the IRS,
(A) Is the levy proper?
(B) Can the IRS take Oscar's entire check or must they leave something for Oscar and his three minor children to live on?
Problem 2: Bill and Betty Bankrupt have received a notice of seizure on their home. Title to the home is jointly held, and they have owned it for five years. They give you the following information regarding the home:
Fair market value $165,000
Mortgage $125,000
Equily $40,000
Bill and Betty want to know what will happen to the mortgage if the house is sold and they want to know whether the IRS will pay off the first mortgage for them. They also want to know whether the IRS can levy on their joint equity in the house or only on Bill's equity. In answering this question, assume that the tax being collected by the seizure is as follows:
(A) The assessment is $45,000, representing the balance due on their joint 200X5 and 20X6 federal income tax returns.
(B) The assessment is $45,000 and represents the balance due on Bill's separate returns for 20X7 and 20X8. Bill had filed using the married filing separate status because the marriage was on the rocks at the time. The time to elect to file a joint retun has not yet expired, and filing jointly would save them approximately $3,000.
(C) The assessment is $45,000 resulting from an audit of their 20X7 and 20X8 income tax return. The auditor found that Betty had not reported approximately $40,000 of gross receipts each year resulting from her real estate business. Bill did not know how successful Betty's real estate business was, and he never saw any of the money because Betty was always reinvesting it in new properties. The assessment was made jointly against Bill and Betty
Problem 3: Daryl Deadbeat owes the IRS $75,000 for delinquent income taxes. He owns real property with appraised equities of $85,000. The IRS seizes the properties and sets a minimum bid price of $75,000. Because no one trusts Daryl not to start legal hassles if they buy the properties, no one shows up to bid. Finally, the United States buys the properties at the minimum bid price and credits Daryl's account as being paid in full. All tax liens are released at the time of sale. Seven months after the sale, the United States receives an offer to purchase the properties. Because oil has been discovered on one of the parcels, the offer is in the amount of $150,000. Obviously the offer is accepted and the transaction closes. Does the IRS have to share the profit on the sale with Daryl?
Problem 4: Danny Disorganized is the sole shareholder of Envigrow, Inc., a corporation which markets environmentally safe lawn products. The IRS has completed an audit of Envigrow's 20X7 tax return, which was filed on March 15, 20X8. The revenue agent disallowed a majority of the deductions taken for travel and entertainment due to Danny's inability to substantiate the expenses. Apparently, Danny misplaced the box which contained the travel and entertainment records. As a result, Danny consented to the adjustments and the corporation was assessed an additional tax of $55,000 in February 20X9. In May 20X9, as the corporation was completing its move to a new high-rise on Milwaukee's skyline, Danny found the box containing the 2007 travel and entertainment records. Since the time has passed to file a claim for refund, Danny would like to know what, if anything, he can do to suspend collection efforts and abate the additional assessment?