IRM 5.10.5 – IRS SEIZURE SALE PROCEDURES

• 5.10.5.1   General
• 5.10.5.2   Employee Self-Disqualification
• 5.10.5.3   Adjournment Procedures
• 5.10.5.4   Public Auction — General
• 5.10.5.5   Condition of Title and of Property
• 5.10.5.6   Statement by Lienholders
• 5.10.5.7   Statement by Taxpayers
• 5.10.5.8   Conducting a Public Auction
• 5.10.5.9   Property Offered Under Only One Method
• 5.10.5.10   Property Offered For Sale by More than One Method
• 5.10.5.11   Sealed Bid Sale — General
• 5.10.5.12   Payment of Purchase Price
• 5.10.5.13   Default on Payment — Cash Sales
• 5.10.5.14   Default on Payment — Deferred Payment Sale
• 5.10.5.15   Certificate of Sale
• 5.10.5.16   Delivery and Removal of Personal Property
• 5.10.5.17   Cash Conversion
• Exhibit 5.10.5-1   Form 2435 — Certificate of Sale of Seized Property Reference: 5.10.5.15
• Exhibit 5.10.5-2   Letter 2274(P), Materials to Assist in the Sale of Documented Vessels Reference: 5.10.5.15.4(2)
• Exhibit 5.10.5-3   SF 215-A, Deposit Ticket Reference: IRM 5.10.5.17(4)
• Exhibit 5.10.5-4   Form 1963, Collection Register Reference: IRM 5.10.5.17(4)
• Exhibit 5.10.5-5   Form 2679, Cash Reconciliation Report Reference: IRM 5.10.5.17(4)
• Exhibit 5.10.5-6   Log for SF 215-A, Deposit Ticket Reference: IRM 5.10.5.17(6)

5.10.5.1  (10-01-2004)
General

1.       If the property has not been released or redeemed prior to sale, the sale should take place at the time and place as indicated in the Notice of Sale. The revenue officer should advise the PALS if the taxpayer files bankruptcy or if a resolution is reached prior to the scheduled sale.

Note:

Prior to conducting the sale, the PALS should check IDRS and contact the revenue officer to verify that no changes have been made to the account, such as bankruptcy filing or an alternative resolution, that would prohibit the sale of the seized property. This contact should generally be made within 2 days of the sale date. Employees may also consider contacting Technical Services to have the Public Access to Court Electronic Records (PACER) system researched if there is an indication the taxpayer may have filed bankruptcy.

2.       The PALS will conduct the sale, but an employee who has the authority to make a case decision regarding a proposed alternative, usually the seizing revenue officer and/or the group manager, may be present at the sale site in order to discuss possible case resolution alternatives with the taxpayer. If this employee is not present at the sale, he or she must be available to both the taxpayer and the PALS by phone on the day of the sale so the taxpayer can discuss any alternatives to the sale. If the taxpayer and this employee agree that an alternative resolution is appropriate, the employee will advise the PALS that circumstances exist which warrant adjournment of the sale and/or release of the levy and return of the seized property.

Note:

The statutory provision, section 6331 of the IRC, as amended by RRA 98, does not prohibit the sale of property that was seized before an offer or an installment agreement became pending. To determine when an offer or installment agreement is considered pending, see IRM 5.8.3 and IRM 5.14.1.3, respectively.

3.       Neither the seizing revenue officer nor any other revenue officer may be involved with any aspect of the actual sale under IRC 6335, including, but not limited to:

·         Grouping and lotting of property prior to sale after the Form 2433 has been completed

·         Registering bidders

·         Tabulating bids

·         Assisting in the collection of money

·         Issuing certificates of sale

·         Answering sale related questions

·         Any other sale related activity involving interaction with anyone attending or conducting the sale

Note:

Revenue officers may conduct or participate in sales of perishable goods since these sales do not take place under IRC 6335.

4.       Any person whose property has been seized can redeem the property ( IRM 5.10.4.2), or the property may be released ( IRM 5.10.4.3) at any time before the PALS declares the property sold to the highest bidder.

5.10.5.2  (10-01-2004)
Employee Self-Disqualification

1.       Any Service employee, regardless of his/her function at the sale, must be disqualified from the sale if a member of the employee's household is present as a bidder.

2.       When a Service employee involved in a sale becomes aware of a relative, close friend, or close associate offering to bid, that employee should usually self-disqualify and, if necessary, have the PALS adjourn the sale when their personal association with taxpayers or bidders could give the appearance of partiality in the proceedings. Any action taken in this respect should be well documented and made part of the seizure file (see 5 CFR 3101, Standards of Ethical Conduct). The adjournment will be for a period of time sufficient to permit a disinterested employee to be made available for continuation of the sale; however it must not exceed one month. Information on adjournment procedures is contained in IRM 5.10.5.3.

3.       If the PALS believes there are enough bidders to preclude any allegations of collusion, the sale may be continued without self-disqualification. The PALS must document in the case history the circumstances surrounding the determination not to self-disqualify, and will prepare a memorandum explaining the situation and will forward the memorandum through the manager for inclusion in the Technical Services seizure file.

5.10.5.3  (10-01-2004)
Adjournment Procedures

1.       Pursuant to Anderson v. United States, 44 F.3d 795 (9th Cir. 1995), the Service may adjourn, but not postpone, a sale of seized property (see IRM 5.17.3.3.7.2.3). The sale of seized property may not be delayed beyond the statutory time periods of IRC 6335(d). The sale must be held not less than 10 days, nor more than 40 days from the date public notice of sale is given, unless it is adjourned for a period not to exceed one month. A sale may be temporarily enjoined by a court order, in which case the actual period of suspension should not be included in computing the time for sale under the code.

Note:

If the taxpayer files bankruptcy after the notice of sale has been given, then the automatic stay prohibits the Service from conducting the sale as scheduled. Since the sale is cancelled, not adjourned, the time limitations in IRC 6335(e)(2)(F) do not apply. Since the sale never takes place, IRC 6335(e)(1)(D) is also inapplicable and the property does not have to be released. Although the property does not have to be released, consider releasing the property and re-seizing after there is no longer a bankruptcy preclusion when such action would present minimal additional harm or expense to the Service--i.e., the subject property is real property. Contact Technical Services and local counsel for additional information on how to proceed. Any subsequent sale of the seized property, including giving a new notice of sale, must take place following the statutory guidelines in IRC 6335(d).

2.       All adjournment(s) are limited to a new date not later than one month after the date fixed in the original public notice of sale (not including the time period for which the sale is enjoined by a court order). The announcement of adjournment should:

·         Be made in the presence of the prospective bidders

·         Include the date and time to which the sale is adjourned, if possible

3.       A sale may be adjourned at any time after the sale has commenced, including after the pre-established minimum price has been reached, until the property is declared sold. For sales with multiple minimum bids, portions of the property can be declared sold when the minimum bid is reached and the sale adjourned on the remaining items.

4.       Notice of the adjourned sale should be given to the taxpayer in the same manner as the original notice of sale ( IRM 5.10.4.11).

5.       It is not necessary to re-advertise the sale when the new sale date is set within the allowable time period; however, in some cases it may be advisable to re-advertise the sale if it is believed it would generate higher sale proceeds.

6.       Adjournments must be in the best interest of the government or the taxpayer.

7.       If facts are disclosed that indicate a basis for adjusting or re-determining the minimum bid, the PALS may adjourn the sale to re-evaluate the minimum bid so it will more realistically reflect the forced sale value of the seized property in light of the existing conditions. The re-evaluation will not be made for the express purpose of adjusting the minimum bid downward to facilitate the purchase of the property by the United States or to guarantee a sale to a third party.

8.       If the minimum bid is revised, managerial concurrence and taxpayer notification are still required. If time is a factor, managerial concurrence can be secured over the phone. If the taxpayer is willing to waive his/her right to the 10-day waiting period, the taxpayer should indicate his/her concurrence by signing the revised Form 4585. Taxpayer concurrence is only required if the revised minimum bid is used before the 10-day waiting period expires. A copy of the taxpayer's concurrence, when required, will be forwarded to Technical Services to be included in the seizure file.

9.       If, after the sale has commenced, conditions indicate that seizure should be released ( IRM 5.10.4.3), the PALS should adjourn the sale and if applicable, release the levy. The reason for the adjournment should be documented in the case history.

10.   If, after commencement, it is learned that the taxpayer filed bankruptcy, adjourn the sale and consult with Technical Services.

11.   If the new sale date for an adjourned sale is beyond the one month time period allowed for adjournments, the property must be released. There are no provisions that prevent the same asset from immediately being seized again unless circumstances have changed so that the seizure is now prohibited (collection statute expired, etc.).

Note:

If property must be seized again due to the time constraints related to an adjournment, all required approvals must be obtained prior to the second seizure.

12.   There is no statutory basis for the Service to rescind a sale after the Service becomes aware of a defect in the sale procedures. Where the taxpayer, owner of the property, or purchaser make a complaint, consult IRM 5.10.6.15 and 5.10.6.16 and confer with area counsel.

5.10.5.4  (10-01-2004)
Public Auction — General

1.       With the exception of perishable goods sales, the PALS will conduct the sale and at least one other Service employee, who may not be in the GS-1169 Revenue Officer series, must assist with the sale.

2.       The PALS must determine the number of personnel that will be required to assist with the sale. The complexity of the sale will influence the number of assisting employees that will be required. The assisting employees may be other PALS, revenue agents, secretaries, or any other service employee not in the revenue officer series. Some of the normal sales responsibilities for which assistance may be needed include:

·         Helping to group and lot the property prior to sale

·         Helping to organize the sale area prior to sale

·         Signing in bidders, assigning bidder numbers, and issuing bidder cards

·         Helping spot bids and recording bid amounts

·         Assisting in collecting or counting money

·         Meeting and greeting bidders, monitoring the crowd, answering questions or directing prospective bidders to the appropriate person

·         Assisting in the preparation of Form 2435, Certificate of Sale of Seized Property

·         Matching Form 2435 against property removed after the sale

3.       The PALS should be present at the place of the sale before the announced time so that he or she will be available to answer questions concerning the property, the conditions of the sale, or terms of payment. If there are changes to the payment terms, these should be announced prior to the commencement of the sale.

4.       The PALS should make no statements other than those prescribed by the instructions in IRM 5.10.5.5 at any time prior to the sale or when conducting the sale.

5.10.5.5  (10-01-2004)
Condition of Title and of Property

1.       The PALS will offer:

·         Only the right, title, and interest of the taxpayer in and to the property seized, subject to any outstanding mortgages, encumbrances, or other liens in favor of third parties which are valid against the taxpayer and are superior to the lien of the United States

·         The property "as is" and "where is" and without recourse against the United States

·         No guaranty or warranty, express or implied, on the condition of any of the property, or its fitness for any use or purpose

2.       Form 2434–B, Notice of Encumbrances Against or Interests in Property Offered for Sale (Exhibit 5.10.1–1), will be supplied, when requested, to provide prospective bidders with any information the Service has learned relating to encumbrances and interests of record. Most requests for such information will usually be received prior to the date of the sale; however, the PALS should have enough completed copies of Form 2434–B available at the sale to give a copy to prospective bidders.

3.       Form 2434–B should include all encumbrances and interests of record of which the Service became aware during the course of its investigation prior to seizure and sale (See IRM 5.10.1.3.3, Equity Determination). Advise recipients that the Service does not certify in any way how accurate or current this information is. Form 2434–B contains a statement advising bidders to verify for themselves the validity, priority, and amount of encumbrances against the property that is offered for sale.

4.       In situations where no encumbrances or interests of record other than the NFTL are reflected on Form 2434–B, if a potential bidder asks what encumbrances or interests the Service has learned about, the PALS may state that the Service is not aware of any others beside the NFTLs.

5.       Consult local counsel for the procedures to follow when there are questions as to the validity of a recorded lien.

6.       Since the sale of real property under IRC 6335 gives a 180 day right of redemption period after the sale, bidders should be advised that they cannot assume control of the property until this redemption period lapses, or the persons who have rights of redemption convey them to the successful bidder. See IRM 5.10.5.7(3) through (5). If, during this allowable redemption period, the successful bidder incurs any expenses to conserve, maintain, repair, or improve the real property and the property is later redeemed, the purchaser has no claim against the government or against the redemption proceeds to recover these expenses. Any claim for recovery must be made against the taxpayer/owner under appropriate state law.

5.10.5.6  (10-01-2004)
Statement by Lienholders

1.       In some cases involving personal property subject to a senior chattel lien, the lienholders are deprived of their security interests in the property as a result of the distraint sale. This occurs because the purchaser at the sale receives possession of the property immediately upon payment of the bid price. In some instances, the senior lienor cannot locate the purchaser or the property. In an effort to minimize the possibilities of losses of this type, senior chattel lienors who have established lien priority will be permitted to make an announcement concerning their liens prior to sale and to conduct a foreclosure sale immediately after the tax sale.

2.       Senior lienors should, however, be advised that the Service has no authority to withhold release of the property to the successful bidder. Thus, notwithstanding the announcement by the senior lienor, the PALS will give the purchaser a certificate of sale upon full payment of the bid price and will take no action to prevent removal of the property by the purchaser.

5.10.5.7  (10-01-2004)
Statement by Taxpayers

1.       The taxpayer may be allowed to explain the condition of his or her title to the prospective bidders. If, after the taxpayer's explanation, it is apparent that a greater sum may be realized by giving the bidders an opportunity to further investigate the condition of the title to the property, the sale may be adjourned at the discretion of the PALS. Any adjournment must follow the procedures in 5.10.5.3.

2.       When real property is seized, the following individuals have the right, under IRC 6337, to redeem the property at any time within 180 days after the sale:

·         The owner

·         His or her heirs, executors, or administrators

·         Any person having an interest in the property

·         Any person having a lien on the property

·         Any person on their behalf

3.       The right to redeem is conveyable, and the taxpayer and other parties possessing the right to redeem may be advised of their right to waive or sell the right to the successful bidder at the sale. If the parties having the right to redeem do not agree to convey this privilege, the validity of the sale is not affected.

4.       If the taxpayer and other parties having the right to redeem agree to convey this right, a greater amount may be realized from the sale. If the party possessing the right to redeem agrees to the sale of this right, the bidders should be informed and the party should announce the price of the right of redemption before bids are taken.

5.       Even though all parties convey the right to redeem to the successful bidder, a deed cannot be issued prior to expiration of the 180-day period for redemption.

5.10.5.8  (10-01-2004)
Conducting a Public Auction

1.       At the time and place set for the sale, the PALS should call the prospective bidders to order and announce the conditions under which the property will be offered. The statement provided on the reverse of Form 2434, Notice of Public Auction Sale, may be used and can be altered as necessary to fit any conditions peculiar to a particular sale. Since Form 2434 is made available to the public prior to the sale, it is not necessary that the opening statement be read aloud. However, a clear announcement directing the bidders to the statement must be made by the PALS.

2.       If the services of a professional auctioneer are used, the PALS is still responsible for reading the initial legal notice regarding right, title and interest, the condition of property, and no express or implied guarantee about the fitness of the property or for making the announcement directing the bidders to the statement on Form 2434.

3.       The terms of payment should have been determined at the time the Notice of Sale was prepared ( IRM 5.10.4.10.3), and these terms should be indicated on Form 2434. Any change in the terms of payment should be announced prior to the commencement of bidding.

4.       The manner in which the property is being offered for sale should also have been previously determined ( IRM 5.10.4.10.2). If the property is being offered for sale under only one method, the procedures in 5.10.5.9 should be followed. If the property is being offered for sale under more than one method, the procedures in 5.10.5.10 should be followed.

5.10.5.9  (10-01-2004)
Property Offered Under Only One Method

1.       The PALS will open the bidding. If it has been determined to announce the minimum price before the sale, the PALS will open the bidding by requesting that bids start with $___, identifying such as the minimum bid price.

2.       If mail-in bids have been received, they should be opened at the start of the bidding for each of the lots for which they were submitted.

3.       When a sale consists of two or more parcels being sold as separate items, the assisting employee should prepare a tabulation of the tentative high bids received. Form 4425, Public Sale Bid Tabulation, or a similar form, may be used for tabulating purposes. A running total of the tentative high bids should be maintained so it can easily be determined when the minimum bid has been reached. Any records pertaining to the tentative high bids received will be retained and submitted by the PALS with the report of the proceedings on Form 2436, Seized Property Sale Report, as provided in IRM 5.10.6.5.

4.       If sufficient parcels are sold (or tentatively sold) to satisfy the entire liability plus the costs of the proceedings, the PALS should end the sale and release the remaining parcels to the taxpayer.

5.       After the highest bid(s) have been determined and if the minimum bid has been reached, the PALS will announce the name of the successful bidder(s) and make a statement similar to the following: "In accordance with the provisions of section 6335 of the Internal Revenue Code, I hereby declare this property sold to the highest bidder for the sum of $___ ." If two or more highest mail-in bids are equal, determine the successful bidder by drawing lots.

6.       IRM 5.10.5.9.1 contains the provisions to follow if the minimum bid is not reached at the sale.

7.       If mail-in bids were received which were not the successful bid, the deposits should be returned by mail and the appropriate section of the mail-in bid form should be completed.

5.10.5.9.1  (10-01-2004)
Minimum Bid Not Reached

1.       If the minimum bid price is not reached,

A.      The property may be declared purchased at the minimum bid price for the United States .

B.      The property may be released to the taxpayer.

C.      The sale may be adjourned if it is in the best interest of the government or the taxpayer ( IRM 5.10.5.3).

2.       The decision whether or not to bid in the property for the government must have been made prior to the scheduled sale and documented in the case file (See IRM 5.10.4.6.1)

3.       If the property is bid in for the government, the PALS will make a statement similar to the following: "In accordance with the provisions of section 6335 of the Internal Revenue Code, I hereby declare this property purchased for the United States for the sum of $___ ."

5.10.5.10  (10-01-2004)
Property Offered For Sale by More than One Method