Sample Subordination Agreement Letter



Sample Subordination Agreement LetterMay 25, 2016Internal Revenue ServiceAttn: Revenue Officer XE "Revenue Officer" 6230 Van Nuys Blvd.Van Nuys, CA 91401Re: Client Name, Client Federal ID#Application for Subordination AgreementTo Whom it May Concern:Please consider the following application for subordination agreement under IRC section 6325(d)(2) for the above referenced taxpayer. [Your Clients Name] would like the Internal Revenue Service subordinate to current (And future) lenders all accounts receivable, inventory, & fixed assets owned by [Your Clients Name].AB Factors, Inc. dba AB Bancorp the company’s current lender is now in 1st position with respect to the above referenced collateral, including but not limited to all accounts receivable, inventory, and fixed assets owned or hereafter acquired by the company. AB Factors, Inc. dba AB Bancorp will agree to continue the 45 day rule AB Factors, Inc. dba AB Bancorp will be forced to discontinue lending resulting in the possible bankruptcy of the taxpayer.[Lessor Name] is the current lessor of equipment to [Your Client’s Name] (See payment proposal below). We estimate the fair market value of the referenced assets at approximately $1,500,000. We propose to pay the appropriate amount owing of $560,000 as follows:$80,000 down payment$10,000 per month until August 2009$25,000 per month beginning August 2009 until paidThe payment of approximately $70,000 per month to Lessor end in July 2009 which would give the company sufficient cash flow to facilitate this large increase in payment.Background: The Company has been in business since 1978 and has no prior history of tax delinquency. From late 2003 until early 2005 the taxpayer’s contact manufacturing industry suffered from a number of significant negative factors as follows:A stagnant economy, both domestically and abroad, which is our customer base;The Administration’s failed steel tariff policy leading to record high steel prices (50% increase in 6 months), which represents about 30% of our total operating expense;Skyrocketing health and worker’s compensation insurance costs in California; Dramatic rises in utilities and transportation costs.These factors lead to over $1 million of losses in 2004 and the first half of 2004, during which time the company fell behind in its payment of these taxes. Since then however, things have turned around by controlling costs while all of the above factors have begun to improve. Since the 3rd quarter of 2005 customers have become less resistant to rising prices which has also helped offset most of these rising costs. The company is currently profitable.We believe that this course of action is in the best interest of the United States in that the only source of repayment is the continuing operation of the business which would be impossible without continued funding by AB Factors, Inc. dba AB Bancorp and subordination by the Internal Revenue Service. I am the Taxpayer’s representative and I am submitting the protest and accompanying documents, which have been provided to me by the Taxpayer. Please feel free to contact me at the above referenced telephone number if you have any questions or need clarification of the foregoing. Sincerely, Your Name ................
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