If someone owes back taxes and enters into a contract for deed, can the government seize that property?

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If someone owes back taxes and enters into a contract for deed, can the government seize that property?

Asked on August 16, 2019 under Real Estate Law, Minnesota

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 2 years ago | Contributor

If the back taxes are back property taxes, then definitely: property may be seized and sold for unpaid property taxes, and this cannot be avoided by entering into a contract to transfer or sell the property.
If back personal (e.g. income) tax, then if the property is sold or otherwise transferred for less than its fair market value, the government may be able to seize it: a transfer of an asset for less than fair market value when there is a known debt or obligation is seen as a way to defraud the creditor (the one owed the money; here, the government) and can be undone so the creditor can reach the property under the Uniform Fraudulent Transfer Act, a version of which has been enacted in all states. If the contract is to sell the property for fair market value, however, then no--a market value sale is not fraudulent, since the seller gets (and creditors can reach) the cash value value of the property or asset; no value is hidden or removed from the creditors, but instead the asset is essentially "converted" into cash which the creditor can go after.


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