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Home » LLC » Attorney Reports Charging Lien Assigns Tax Liability to Creditor

Attorney Reports Charging Lien Assigns Tax Liability to Creditor

ByJon Alper April 18, 2014May 22, 2020

Many people believe that one of the principal benefits of LLCs or partnerships is that a creditor’s charging lien makes the creditor liable for the debtor’s share of income tax associated with his LLC or partnership interest pursuant to Rev. Rul 77-137. I have never encountered a situation where a creditor holding a charging lien was responsible for the debtor’s income, and I have advised my clients not to rely on this aspect of charging lien protection. I have recently seen a report where this protection worked.

Attorney Jeffrey Verdon reported the tale of a debtor who owned part of a California LLC that, in turn, held significant real property. A judgment creditor obtained a charging lien against the debtor’s LLC interest. The debtor sent his LLC k-1-s to a judgment creditor citing Rev. Rul. 77-137. Years later, the LLC sold a property resulting in a $2.0+ income liability associated with the debtor’s LLC interest subject to the charging lien. The attorney reports that the judgment creditor strongly protested but thereafter the creditor settled the judgment for 10 cents on the dollar.

Last updated on May 22, 2020

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Jon Alper

About the Author

Jon Alper is an expert in asset protection planning for individuals and small businesses.

Book a consultation with Jon.
Jon Alper

About the Author

Jon Alper is an expert in asset protection planning for individuals and small businesses.

Book a consultation with Jon.

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  • Home
  • Learn More
    • Asset Protection
      • Asset Protection Guide
      • Annuities
      • Asset Protection Trust
      • Bank Account Protection
      • Car Accidents
      • Doctors
      • Equity Stripping
      • Exemptions
      • Florida Residency
      • Fraudulent Transfers
      • Homestead Protection
      • How Attorneys Help
      • Strategies
      • Tenants By Entireties
      • UTMA Accounts
    • Business Planning
      • Business Entities
      • LLCs
      • LLC Operating Agreement
      • Real Estate Investors
    • Offshore Planning
      • Nevis LLC
      • Offshore Bank Accounts
      • Offshore Planning
      • Offshore Trusts
    • Judgment Collection
      • Judgment Collection
      • Bitcoin and Cryptocurrency
      • Deficiency Judgments
      • Fact Information Sheet
      • Head of Household
      • IRS Tax Debt
      • Not Paying Judgments
      • Statute of Limitations
      • Wage Garnishment
      • Writ of Garnishment
    • Wills and Trusts
      • Avoiding Probate
      • Estate Planning
      • Gun Trusts
      • Inheritance Tax
      • Irrevocable Trusts
      • Last Will and Testament
      • Living Trusts
      • Living Will
      • LGBT Estate Planning
      • Power of Attorney
      • Probate
      • Special Needs Trust
      • Trust Administration
    • Bankruptcy
      • Attorney Fees
      • Chapter 7 Bankruptcy
      • Chapter 13 Bankruptcy
      • Dealing With Creditors
      • Involuntary Bankruptcy
      • Moral Issues
      • Orlando Bankruptcy
    • Real Estate
      • Lady Bird Deed
      • Land Trusts
      • Quit Claim Deed
      • Warranty Deed
    • Adoption
      • Grandparent and Relative Adoption
      • Readoption
      • Same-Sex Couples
      • Stepparent Adoption
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