Who's Liable for IRS Tax Lien Complex Situation

[Jake Plumber]

Thanks in advance for the help!

John has 5 properties. John has a $100,000 IRS Tax Lien. Buyer 1 buys one of John's property through a tax foreclosure sale, no notice is given to IRS of sale and it is in a non-judicial foreclosure state. Buyer 1 has 10 other properties. Buyer 2 buys another property John owned a year later, same circumstance of sale. Buyer 2 has only 1 property. Buyer 1 and Buyer 2 did not send notice to IRS after buying. John still has 3 properties.

Who is liable for IRS Lien?
Does John owe the IRS $10,000 anymore?

If Buyer 1 is liable for the tax lien does it attach to all 10 of his properties. So if tried to sell another property of his he wouldn't be able to without curing the defect?

I'm interested in learning how IRS Tax liens flow when not cured correctly through closing. So I could add that Buyer 1 sold foreclosure property that John owned through a quitclaim deed. Maybe the grantee of the quitclaim would be liable.

[Dion DePaoli]

John owes the IRS not the other folks.  John owes the IRS until the IRS is paid off.  Until it is paid the IRS can attach to John's assets in order to create a collection opportunity.

If John has equity the lien will be paid from the proceeds.  If John has no equity he can ask the IRS to discharge the lien and allow the sale.  That is the IRS's decision but they generally do not stand in the way too much if they can not collect.  If the lien is discharged from the property John still owes the amounts due, it is just a lien on the property any longer.

If the buyers choose to take title subject to the lien the lien retains the right to foreclose those junior interests until the lien is discharged by being paid or voluntarily released.

As a buyer you would want to clear title to the property thus forcing John to deal with the lien.  Whether that means John pays or asks for removal is John's business.

As far as future conveyances of a property with a lien still attached, as long as the lien survives it retains it's superior power to foreclose.  

If the IRS chooses to foreclose on its lien at any time all interested parties will be granted the ability to redeem the lien by paying the amounts due.  If you own the property and want to keep then at this time you would be paying John's IRS bill solely to keep the property you already paid for.  Usually not a good idea to buy subject to IRS liens as they can and do foreclose when needed.