Question

Revenue Office Mike is assigned to collect XYZ, Inc.'s tax liability. XYZ, Inc. has been transferring assets to trusts in located in the Cayman Island and the Isle of Man. RO Mike suspects that XYZ, Inc. is transferring these assets to prevent the IRS from collecting its tax liability. Attorney Big advised XYZ, Inc. concerning state law creditor rights with respect assets transferred by XYZ, Inc. to the various Cayman Island and Isle of Man trusts. RO Mike has had several discussions about these asset transfers with XYZ, Inc.’s Tax Director, Mr. VP.

RO Mike served a third-party summons on Attorney Big. Besides Attorney Big, the only other person or entity named in the summons is XYZ, Inc. The summons requested that Attorney Big provide his written legal opinion and any other documents related to the advice he gave XYZ, Inc. on state law creditor rights with respect to the assets transferred by XYZ, Inc. to the various trusts. RO Mike does not provide any notice about this summons to XYZ, Inc. Assume the material requested is not subject to any privilege. Question: was this third-party summons served on Attorney Big enforceable?

No, RO Mike should have served a copy of the summons upon XYZ, Inc. within 3 days of serving the summons on Attorney Big.

No, Revenue Officers cannot issue third-party summons during collection investigations. Third-party summons are only used by Revenue Agents in civil audits.

Yes, but only if Revenue Officer Mike sent XYZ, Inc. a “last chance” letter as provided for in IRM 4.13.2.

Yes, because the Code’s notice requirements do not apply when a taxpayer has invested in a listed transaction. None of the above.

Answer 1

No, RO Mike should have served a copy of the summons upon XYZ, Inc. within 3 days of serving the summons on Attorney Big.

IRC 7609 (a) and (b) applies anytime when an examiner issue a third party summons to third party record keeper. This procedure require the examiner (RO mike) inform the taxpayer the third party summons has been issued and inform them of their right to intervene in any court proceeding brought to the enforce the summons. The examiner must notify the taxpayer within three days of issuing summons.

answered by: anonymous