In the last post, I described one way the government can try to collect taxes when the taxpayer itself is unable to pay -- by collecting from those to whom the taxpayer has transferred money or property recently. It's called "transferee liability." It's a little complicated at times, but most instances where the government trys this approach are fairly straight-forward. A father purchases his son's house at a far-below-market price and then allows him to live there, thinking that the IRS now can't seize the house for the son's taxes due. Or a corporation owes taxes but rather than paying the taxes, it sells all of its assets and distributes the proceeds to the shareholders, and then has nothing left to pay the IRS. Those are easy cases for the government to win; they normally only crop up because the transferee doesn't even realize that the government can go after them.
But the IRS is pursuing the transferees more often in recent years, as its best alternative when faced with a particular type of transaction -- an "intermediary transaction" or "midco transaction." Technically, any transaction between a buyer and a seller, when they deal with each other through another company, might be called an "intermediary transaction." What the IRS means by the term, however, is a particular form of the transaction that the IRS considers an abusive way to avoid paying taxes. One simplified verion of the abusive transaction (there are many different variations) goes something like this: