RECOVERING TAXES PAID FOR ANOTHER PARTY AT TRADINGCREDIT.NET

Recovering Taxes Paid for Another Party at Tradingcredit.net

Recovering Taxes Paid for Another Party at Tradingcredit.net

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CA

The answer is generally “noOne such consent is the ability to sue for a refund. The rules that allow for a refund are limited to refund suits by the taxpayer. One might think that there is no remedy in this situation.

There may be another option, however. No. 2022-1015 (Fed. Cir. 2023)case provides an example of this. It involves an ex-husband who paid his ex-wife’s taxes and the question of whether he can sue the IRS to recover the taxes paid.

Taxpayers should take note of this caseWhile this case involves an ex-husband and ex-wife, the same principles can apply to abusiness owner or investor and a business

Facts & Procedural History
This case involves a husband and wife who were divorced in 2009. As part of the divorce, the husband agreed to pay the wife $150,000 in exchange for the couple’s residence.000 tax.

It is difficult to tell from the case,but it appears that the parties treated the transfer to the spouse as a sale. They apparently did not treat it as a transfer of assets between a then-married couple–which are generally not taxable.It also appears that the husband agreed to pay the tax, as he believed there would be no tax given the $500,000 exemption allowable for the sale of a primary residence. Continuing to read between the lines

The court opinion does say that the IRS revenue officer attempted to collect the taxes but did not accept the taxpayer’s husband’s explanation that no tax was due, and the IRS revenue officer threatened to collect the taxes by as the IRS generally does not have a lien against property owned by a third party–particularly if they paid fair market value for it and no lien notice was filed by the IRS (it would likely even have to be a nominee lien in a case like this, which is rare).

Is the Ex-Husband the “Taxpayer”
With that background, we can get to the questions in the case. The first question the court had to address was whether the ex-husband was the “taxpayer” who could file a refund suit. This starts with an analysis of Section 1346(a)(1) of Title 28 of the United States Code.

Section 1346(a)(1) deals with the jurisdiction of courts. Section 1346(a)(1) gives the district courts original jurisdiction, concurrent with the United States Court of Federal Claims to have been erroneously or illegally assessed or collected, or any penalty claimed to have been collected without authority or any sum alleged to have been excessive or in any manner wrongfully collected under our tax laws. this works in tandem with Section 6511 of the tax code.

Other Options to Consider
This may not have been the party’s only remedy in this case. if disallowed This would have resulted in the ex-wife recovering the refund. The ex-husband may have then had to use the family law court to recoup the funds from the ex-wife.

The parties may have also filed a collection due process hearing request in response to the IRS levy notice and challenged the issue in the U.S. Tax Court. With this option, at least the funds would not have been paid to the IRS in the first place.as getting the funds back can add an additional layer of complexity.

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