In Chief Counsel Memorandum GL-101770-08 (No. 200836002; released 9/5/2008) the Service ruled that a levy served on an LLC will attach to the property rights of the sole owner of the LLC. In this case it was a lawyer receiving income from the LLC as a result of contingent fee agreements between the LLC and the clients.
The lawyer owed income tax to the government. Notices of tax liens were filed by the IRS. The only asset available to satisfy these liens was the income generated by the LLC. The Chief Counsel concluded that the right to receive a return of a member's capital contribution and to share in the LLC's profits is a property right subject to the levy. Accordingly, the LLC would be required to turn over the income in its possession to the IRS. However, the contingent rights represented by the contingent fee agreements belonged to the LLC and were not subject to the levy.
-Marc Ward
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