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Supreme Court Decision Update - EC Term of Years Trust v. United States

irs.jpgThe Supremes ushered out five opinions today, and we’re gonna’ talk about EC Term of Years Trust v. United States (PDF of the opinion) first, because it’s nice and short. In a unanimous opinion written by Justice Souter, the Supremes were looking at a very specific situation involving a third party challenging the IRS when it levies upon that third party’s property to collect taxes owed by another.

If that doesn’t make much sense to you, I don’t blame you. Here’s the deal. The IRS may sometimes levy upon some property to collect on taxes someone else owes. In this case, a couple had formed the EC Term of Years Trust back in 1991. This couple owed the IRS some money, and the IRS took a tax lien against the Trust, assuming the couple had illegally transferred money to it. The Trust denied any tax obligation on the couple‚Äôs behalf, but to avoid further financial issues, it put money in a bank account which the IRS then levied, eventually getting a $3 million check from the bank. A year later, the Trust sued the IRS, claiming a wrongful levy. However, the Internal Revenue Code says that you have nine months (from the date of the levy) to challenge a levy you think was wrongful. So the case was thrown out for being filed too late.

The Trust tried to claim that it was allowed to sue the IRS under the auspices of seeking a tax refund, but the Court was unpersuaded. And today, the Supremes agreed that this argument is no good. When your property is wrongfully levied by the IRS, your only remedy is to sue them under that 9-month provision of the Internal Revenue Code. And since the Trust didn’t sue within nine months, the IRS just made a cool $3 million which it might not otherwise be entitled to keep. Government at work, baby!

It should be noted that this decision was also yet another Supreme slap in the Ninth Circuit’s face, as it has previously ruled that this 9-month provision “is not the exclusive remedy for third parties challenging a levy.”

Wat a minute. Where’s your long-winded analysis, with all the questions like this one? Well, QuizLaw is changing these Supreme Court Decision Updates up a little. Quite frankly, it’s just too much for us to do the in-depth breakdowns on every case, while also holding down day jobs, trying to maintain semblances of a life, personal relationships, etc. I mean, the Supremes issued five opinions today, coming in at over 140 pages. That’s a lot, and our long-winded breakdowns take time. If some wealthy, VC-type QuizLaw reader wants to talk to us about underwriting the Updates, we’d be happy to listen. But as that’s rather unlikely to occur, we’re all going to have to settle for shorter, quick and dirty updates (although we’ll try our best to give more in-depth looks at really “big and important” decisions, but no promises).

S’all right?

S’all right.