U.S. District Court Holds IRS Alter-Ego Levy on Law Firm Account Was Wrongful

The U.S. District Court for the District of Maryland held that the IRS’s alter-ego levy on a law firm’s operating account was wrongful under I.R.C. §7426, entering judgment in favor of the firm. Taxpayer, a Maryland corporation, was a holding company formed by a law firm on behalf of a foreign client to make investments in commercial real estate partnerships. The law firm served as the taxpayer’s officers and directors, maintained the taxpayer’s funds in the firm’s client trust account, and kept detailed records of all transactions on client-matter trust ledgers. After the IRS examined the taxpayer’s tax returns and ...