Dealing with a stubborn IRS Revenue Officer re: equity in home

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    I have a client who owes a substantial sum of money related to his failed business. What we ended up doing for the short term was having the wife form a new business to employ him (he is in logging) and with help from family the new corp purchased the equity in his business assets (most outright but one asset is being bought out over 36 months). The IRS requested we look into borrowing against the home (owned by him 100% subject to a mortgage) as there is some equity in it.

    We received several rejection letters but the IRS Revenue Officer still wants us to try and borrow before considering an installment agreement. He even suggested that his wife borrow money to buy out his equity in the home. He also asked that my client get an appraisal. Which we did and surprise surprise there is still equity in the home but I doubt my client’s wife is going to get the funds to buy him out as she is using all the funds from the business to keep it running.

    My client’s wife asked around to get funds and no one is willing to lend to her. What other options should I consider?

    Any help is greatly appreciated.


    Terrence Power

    How much equity is in the home? Wouldn’t using the 80% quick sale value help? My understanding is that when looking at the value of real estate the IRS always uses 80% of value to take into account a reduction in selling price in order to effect a quick sale. Is there still equity using 80% of the appraised value less the outstanding mortgages?

    James Wade


    Unfortunately the home is worth $180k subject to a mortgage of $75-80k so even with the 80% valuation there will be equity.


    Terrence Power

    Sorry to hear that James. I guess we need Eric or someone else to pipe in. I remember Eric saying that getting loan rejection letters should work to prove the equity can’t be accessed.

    Eric Green

    James, have him apply online for loans or refinances on the home and get three rejection letters (online so you actually receive the rejection). Send them to the RO, tell him the wife is unable to borrow, and propose he set up the IA and file the Notice of Federal Tax Lien (if they have not already) to secure their interest in the house. They will either pay it off through the IA, or when the house sells. Worst case the IRS can send it to DOJ when the 10-year statute is going to run out and move to seize it then.

    James Wade


    Great, thank you. I have provided two rejection letters so I will go grab another one.

    Much appreciated.

    Jim Wade

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