A recurring instinct of a taxpayer who sees a large tax bill coming is to move the assets — deed the house to a spouse, drop a building into an LLC, retitle accounts in a child’s name. The instinct is old, and the law that answers it is older. The federal tax lien reaches “all property and rights to property” belonging to the taxpayer, and the IRS is not stopped by whose name is on the title. Three distinct doctrines — transferee, nominee, and alter-ego liability — let the government follow the value. For anyone holding real estate in entities or for family members, knowing where the lines fall is the difference between durable structure and an unwound transfer.
Why title is not the end of the inquiry
The lien attaches to what the taxpayer truly owns, not to what the records nominally say. When assets have moved, the IRS asks two questions: was the transfer real, and did the taxpayer keep the benefit and control? The answers sort the case into one of three theories, each with its own mechanics and its own procedural path.
Transferee liability — § 6901
Section 6901 is the administrative mechanism that lets the IRS assess and collect a transferor’s tax from someone who received the transferor’s assets. It is purely procedural — the substantive liability comes from state voidable-transfer law (the Uniform Voidable Transactions Act, adopted in nearly every state) or from the federal debt-collection statutes (28 U.S.C. §§ 3301–3308). There are two flavors. A transferee at law is responsible by contract or statute — for instance, a shareholder who took a liquidating distribution. A transferee in equity received assets for less than fair, adequate consideration, leaving the transferor insolvent and unable to pay the tax. Either way, the transferee’s exposure is generally capped at the value of what was received. In a Tax Court proceeding the burden is on the IRS to prove transferee liability (§ 6902(a)); the assessment period is extended under § 6901(c), and state voidable-transfer limitation periods do not cut it off (Bresson v. Commissioner, 111 T.C. 172 (1998)).
Nominee liability
A nominee situation is a simulated transfer. The taxpayer parks legal title in another’s name — a spouse, a relative, a friendly LLC — while keeping the use, control, and benefit of the property as if nothing had changed. Because the taxpayer never truly gave the property up, the federal tax lien reaches the taxpayer’s beneficial interest in it, and the IRS can file a nominee Notice of Federal Tax Lien and levy. Courts look at familiar signals: who actually paid for the property, a close relationship between the parties, the taxpayer’s continued possession and control, a transfer for little or no consideration, and timing that lines up with the tax trouble.
Alter-ego liability
Alter-ego is the entity version of the same idea. Where a corporation or LLC has no real separate existence from the taxpayer — a unity of interest and ownership so complete that the separate personalities no longer exist, and respecting the separation would sanction a fraud or work an injustice — a court will pierce the veil and treat the entity’s assets as the taxpayer’s. The tell-tale facts are the classic veil-piercing ones: commingled funds, undercapitalization, ignored corporate formalities, and the taxpayer’s complete domination of the entity. The IRS can then assert an alter-ego lien and levy on the entity’s property.
The procedural difference that matters
The three theories do not all reach the property the same way. Because a nominee or alter-ego holding means the taxpayer retained an equitable interest — the transfer was never real — the IRS can generally proceed administratively, filing a nominee or alter-ego lien and levying. A genuine, completed transfer to a true third party is different: if no lien had attached before the transfer, the IRS usually cannot simply seize the asset. It must first either assess transferee liability under § 6901 or file a suit in district court. That distinction often dictates the IRS’s strategy — and the taxpayer’s defense.
Badges of fraud
Voidable-transfer law recognizes two routes. Constructive fraud needs no bad intent at all — a transfer for less than reasonably equivalent value while the transferor is insolvent is voidable on its face. Actual fraud turns on intent to hinder, delay, or defraud creditors, proven through the classic “badges of fraud.” No single badge decides it; courts weigh them together.
| Badge of fraud | Why it signals a voidable transfer |
|---|---|
| Transfer to an insider (family, a related entity) | Keeps the asset within the taxpayer’s reach |
| Taxpayer kept possession or control | The transfer was nominal, not real |
| Transfer concealed or left undisclosed | The point was to hide the asset from creditors |
| Made after the tax arose or a suit was threatened | Timed to defeat a known creditor |
| Substantially all assets moved out | The estate was stripped |
| Inadequate or no consideration | Value left the estate for nothing in return |
| Transferor insolvent, or made insolvent | Nothing remained to pay the tax |
The line between planning and unwinding
None of this condemns legitimate planning. There is a bright line between asset protection done early, for real value, with genuine separation of ownership and control — and a last-minute transfer made in the shadow of a known tax debt, for no consideration, with the taxpayer still holding the keys. The doctrines above target the latter. The further a transfer sits from the tax trouble in time, the more it is supported by real consideration, and the more completely the taxpayer relinquishes control, the more durable it is.
The practical takeaway
Title is not protection when control and benefit stay behind. Transfers made under the shadow of a tax liability — especially to insiders, for inadequate consideration — are the most vulnerable, and the IRS has both administrative and judicial tools to reach them. For real estate held in LLCs, trusts, or family members’ names, the time to get the structure and the timing right is long before a liability is on the horizon, not after.