Rev. Rul. 55-210

Advice has been requested whether a levy reaches only such property or money as may be due or owing the taxpayer at the time of the service of a notice of levy for Federal taxes.

Section 3670 of the Internal Revenue Code of 1939 provides:

If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount * * * shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.

Section 3692 of the Code provides that if the person liable to pay any tax neglects or refuses to pay the same within ten days after notice and demand the collector may levy:

* * * upon all property and rights to property, except such as are exempt by the preceding section, belonging to such person, or on which the lien provided in section 3670 exists, for the payment of the sum due, * * *

Section 3710(a) of the Code provides:

* * * Any person in possession of property, or rights to property, subject to distraint, upon which a levy has been made, shall, upon demand by the collector or deputy collector making such levy, surrender such property or rights to such collector or deputy, unless such property or right is, at the time of such demand, subject to an attachment or execution under any judicial process.

The lien arising under section 3670 applies to property owned by the delinquent at any time during the life of the lien. See Glass City Bank of Jeanette, Pa. v. United States , 326 U.S. 265, Ct.D. 1651, C.B. 1945, 330.

It has been held that a notice of levy does not attach to a taxpayer's right to money that is contingent upon the performance of future services. See United States v. Long Island Drug Company, et al. , 115 Fed.(2d) 983. The court in that case said that the indebtedness of a third party to a taxpayer is subject to levy, but not an indebtedness that is contingent upon the performance of future services. Compare United States v. Warren Railroad Co., et al. , 127 Fed.(2d) 134, 137.

It has been held that a notice of levy served upon a trustee of a spendthrift trust attaches to distributions by the trustee to the beneficiary even though such distributions are not due at the time the levy is served. United States v. Charles O. Canfield, et al. , 29 Fed.Supp. 734, appeal dismissed sub. nom. Security First National Bank of Los Angeles v. United States , 113 Fed.(2d) 491. Compare In re Rosenberg's Will , 199 N.E. 206, Ct.D. 1069, C.B. XV-1, 258 (1936); M. Israel Schwarz, et al. v. United States , 191 Fed.(2d) 618.

Upon the basis of the above cited opinions it is the position of the Internal Revenue Service that where a taxpayer has an unqualified fixed right, under a trust or a contract, or through a chose in action, to receive periodic payments or distributions of property, a Federal lien for unpaid tax attaches to the taxpayer's entire right, and a notice of levy based on such lien is effective to reach, in addition to payments or distributions then due, any subsequent payments or distributions that will become due thereunder, at the time such payments or distributions become due