Pursuant to a sale of assets (no assumption of liabilities, etc.), buyer hires seller's employees and assumes sponsorship of seller's 401(k) plan, effective as of the first day of the last quarter of the calendar/plan year. Buyer maintains no other qualified plans and has no employees of its own, pre-sale. If the IRS audits that particular plan year, can both entities ultimately be responsible for responding to the audit?

On the flip side of that, when plans change TPA firms, the buying firm usually adds a clause to indemnify themselves from any errors or ommission made prior to the takeover. I would assume (bad word) that in your case, both firms would be asked to responde, maybe not together, but if something happened in years past, I'm sure the current owner would name the prior as the responsible party.

Might check and see if there is any case law or PLR's for reference.