Successor Liability for Unpaid Taxes

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Jason B. Freeman

Jason B. Freeman

Managing Member


Mr. Freeman is the founding member of Freeman Law, PLLC. He is a dual-credentialed attorney-CPA, author, law professor, and trial attorney.

Mr. Freeman has been named by Chambers & Partners as among the leading tax and litigation attorneys in the United States and to U.S. News and World Report’s Best Lawyers in America list. He is a former recipient of the American Bar Association’s “On the Rise – Top 40 Young Lawyers” in America award. Mr. Freeman was named the “Leading Tax Controversy Litigation Attorney of the Year” for the State of Texas for 2019 and 2020 by AI.

Mr. Freeman has been recognized multiple times by D Magazine, a D Magazine Partner service, as one of the Best Lawyers in Dallas, and as a Super Lawyer by Super Lawyers, a Thomson Reuters service. He has previously been recognized by Super Lawyers as a Top 100 Up-And-Coming Attorney in Texas.

Mr. Freeman currently serves as the chairman of the Texas Society of CPAs (TXCPA). He is a former chairman of the Dallas Society of CPAs (TXCPA-Dallas). Mr. Freeman also served multiple terms as the President of the North Texas chapter of the American Academy of Attorney-CPAs. He has been previously recognized as the Young CPA of the Year in the State of Texas (an award given to only one CPA in the state of Texas under 40).

Successor Liability

Generally, the purchaser of assets does not assume the liabilities of the seller.  Successor liability, however, is an exception to the general rule. Under the successor-liability doctrine, the IRS may seek to recover unpaid taxes from a “successor”—often a purchaser of corporate assets.

Successor liability is generally determined under state law, although some courts have bolstered state law with a purported federal common law of successor liability.

When does Successor Liability Apply?

In most jurisdictions, successor liability imposes liability in the following circumstances:

Express Assumption of Liabilities

Where a buyer expressly assumes the seller’s liabilities, the buyer succeeds to those liabilities and is liable for their payment under the successor-liability doctrine.  Unless the scope of an express assumption provision is at issue, most successor liability cases do not involve disputes under the express-assumption prong because liability is typically clear.

De Facto Merger and Mere Continuation

Where a taxpayer ceases to do business, a second or successor corporation may become liable for the taxes if the second corporation is the mere continuation of the taxpayer or the predecessor and successor underwent a def factor merger.

The interrelated concepts of de facto merger and mere continuation consider such factors as continuity of management, personnel, location, assets, and operations.

Where a taxpayer ceases to do business, a second or successor corporation may become liable for the taxes of the taxpayer if the second corporation is the mere continuation of the taxpayer.

To determine whether a de facto merger or mere continuation exists, courts have generally looked to whether:

Fraudulent Transfers to Escape Liability

Successor liability may also apply where a taxpayer engages in a transaction fraudulently with the purpose of escaping liability.  Courts have looked to a number of factors to determine whether a taxpayer has engaged in a fraudulent transfer intending to escape liability, including the following factors:


For more, see our Insights post, The IRS, Fraudulent Transfers, and Transferee Liability.


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Other Resources regarding successor liability:

i) Successor Liability, Wiki;

ii) Successor Liability, Scholarship Repository;

iii) Successor Liability, Westlaw