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Tax Lien Notices

The Bankruptcy Court for the District of Nevada has ruled that two tax liens filed by the Internal Revenue Service were ineffective against third parties and creditors as they misidentified the name of the debtor. In re Crystal Cascades Civil, LLC, No. 06-1082-BAM (Dec. 3, 2008).

The plaintiffs filed deeds of trust on the debtor's property that they claimed were senior to two tax liens filed by the IRS in a winner take all priority dispute. There was no question that the plaintiffs recorded their deeds of trust after the IRS recorded its tax lien notices, but the IRS notices identified the taxpayer only as “Crystal Cascades, LLC, a corporation.” The debtor's full and proper name from the time it acquired the real property, however, was “Crystal Cascades Civil, LLC, a Nevada limited liability company.” The IRS's notices thereby left out one of the nontrivial words of debtor's name, and misidentified its organizational form. The court found that that a reasonable search would not have revealed either tax lien, and therefore federal law provides that the proceeds are free of the IRS's liens.

The court reasoned that “this is not a case where the IRS made a minor mistake in filing its tax lien notice, such as by using a common abbreviation or making a minor misspelling in the taxpayer debtor's name that notwithstanding the error would require a searcher to investigate further ' Rather, the IRS's notices of tax lien in this case omitted a key part of the debtor's name.” Because of the search methods used in that county, the IRS's omission “made the notices inaccessible to searchers who later used the debtor's real name, or any reasonable truncation of that name.”

Tax Lien Notices

The Bankruptcy Court for the District of Nevada has ruled that two tax liens filed by the Internal Revenue Service were ineffective against third parties and creditors as they misidentified the name of the debtor. In re Crystal Cascades Civil, LLC, No. 06-1082-BAM (Dec. 3, 2008).

The plaintiffs filed deeds of trust on the debtor's property that they claimed were senior to two tax liens filed by the IRS in a winner take all priority dispute. There was no question that the plaintiffs recorded their deeds of trust after the IRS recorded its tax lien notices, but the IRS notices identified the taxpayer only as “Crystal Cascades, LLC, a corporation.” The debtor's full and proper name from the time it acquired the real property, however, was “Crystal Cascades Civil, LLC, a Nevada limited liability company.” The IRS's notices thereby left out one of the nontrivial words of debtor's name, and misidentified its organizational form. The court found that that a reasonable search would not have revealed either tax lien, and therefore federal law provides that the proceeds are free of the IRS's liens.

The court reasoned that “this is not a case where the IRS made a minor mistake in filing its tax lien notice, such as by using a common abbreviation or making a minor misspelling in the taxpayer debtor's name that notwithstanding the error would require a searcher to investigate further ' Rather, the IRS's notices of tax lien in this case omitted a key part of the debtor's name.” Because of the search methods used in that county, the IRS's omission “made the notices inaccessible to searchers who later used the debtor's real name, or any reasonable truncation of that name.”