The order, made by Judge Larry Burns in San Diego's District Court on Friday, overturns a previous order by a federal judge on November 4, which froze the assets temporarily while the government pursued its case.

The case itself centres on the firm Xelan Inc and several related companies, including the charitable Xelan Foundation and an insurance firm based in Barbados. The IRS has accused the firm of selling illegal tax reduction schemes to around 4,000 doctors, who now face bills for back taxes, penalties and interest approaching the $420 million mark.

IRS Commissioner Mark W. Everson recently described the case as “one of the biggest cases we have seen in years” concerning illegal tax sheltering.

However, according to the New York Times, Judge Burns argued that the Justice Department and the IRS have not yet proven that the group of companies related to Xelan were selling questionable tax shelters, and that therefore it was inappropriate to freeze any assets suspected to be connected to the abusive transactions.

The report revealed that the government intends nonetheless to press ahead with its case against Xelan, which is in bankruptcy and is also the subject of a criminal investigation by a federal grand jury.