Currently there is a two-part analysis that determines whether the IRS can seize property owned by a Single Member LLC:  first the a court must look to state law to determine whether the taxpayer has any rights to property owned by the e Member LLC and then whether the state-law rights constitute property or rights to property.

However Notice 2012-002, urges a different analysis.

Based on the Notice, the IRS is likely to argue to courts that the first question is whether an entity is an “alter ego” of the taxpayer and that such question should be determined based on federal common law. If the court answers in the affirmative, then all property of the entity is the property of the taxpayer who owns the entity and potentially subject to levy.

This theory, which will eventually be tested in court, has a more-than-fighting chance. Alter ego theory, and particularly alter ago theory as defined under federal case law, has been adopted in many non-tax contexts.