IRM
5.10.4 –
IRS
ACTIONS PRIOR TO
SALE
OF SEIZED PROPERTY
5.10.4.1 (10-01-2004)
General
1.
Once the
property has been seized and the inventory has been completed, the
PALS should begin taking the necessary actions in order to prepare
for the sale. The PALS will be responsible for all sale related
activities for seizures conducted under IRC 6335. Revenue officers
are still permitted to conduct sales of perishable goods and sales
of acquired property; however, it is recommended that the PALS
conduct these sales whenever possible.
2.
In some
cases, the property may be released or redeemed prior to sale.
IRM
section 5.10.4.2 provides the procedures for redemption of the
property prior to sale and
IRM
5.10.4.3 provides the procedures for release of property prior to
sale.
3.
The ICS
seizure application should be updated for asset information, such
as the storage location, minimum bid, fair market value, etc. as
well as disposition information when the related action occurs.
5.10.4.1.1 (10-01-2004)
Actions Prior to
Sale
of Assets Seized Under Jeopardy or Termination Assessments
1.
For
jeopardy seizures, IRC 7429 provides that the taxpayer may request
the Service to review whether under the circumstances the:
·
Making of
the assessment was reasonable
·
Amount of
the assessment is appropriate
·
Levy is
reasonable
2.
Such
requests will be coordinated with the Compliance Examination
office that made the assessment. The sale of seized property will
generally be suspended during this administrative review process.
3.
IRC 6863(b)
and the regulations thereunder provide that any property seized
for the collection of a jeopardy assessment of income, estate, or
gift tax may not be sold during the period provided for filing a
petition with the United States Tax Court. If a petition is filed,
a stay of sale will be in effect until a final determination is
made by the Tax Court.
4.
IRC
6863(b)(3) provides exceptions under which property may be sold.
They include the following:
·
If the
taxpayer consents, in writing, to the sale
·
If it is
determined that the expenses of conservation and maintenance of
the property will greatly reduce the net proceeds from the sale of
such property
·
If the
property is of a type to which IRC 6336, perishable goods, is
applicable (see
IRM
5.10.4.13.1, Sale of Perishable Goods)
5.
If it is
determined that the expenses will reduce the net proceeds as
indicated above, the revenue officer will make a written report
stating the grounds for this determination and submit it through
channels for approval by the area director (unless authority to
make such determinations has been re-delegated). The original of
the report will be retained in a permanent file maintained by
Technical Services.
6.
If a
petition is filed with the Tax Court, then the Tax Court can
review the Service's decision to sell the property under the
exceptions above. This review can be commenced upon motion by
either the taxpayer or the Service. Therefore, prior to initiating
a sale under IRC 6863(b)(3), consult with area counsel. Except in
emergency situations where an immediate sale is necessary, the
Service should initiate the review process and file a motion with
the Tax Court for pre-approval of a sale before the sale is
scheduled.
7.
The
restrictions in IRC 6863 apply only to the sale of property and do
not prohibit seizure of any type of property or rights to property
of the taxpayer. However, before property is seized, a
determination should be made as to whether the mere filing of a
notice of lien would be adequate protection during the suspended
period. If the notice of lien will not fully protect the
Government's interest, the property may be seized and maintained
under seizure until it can be lawfully sold or returned to the
taxpayer.
8.
The intent
of IRC 6863 is to prevent irreparable damage to taxpayers by
forced sale of their property before a determination is made as to
their actual tax liabilities. The Code does not prohibit levies at
any time during the suspended period on such assets as accounts
receivable, bank accounts, salaries, fees, etc. The application of
the proceeds of such levies to the taxpayers' accounts will not
cause irreparable damage to them since the full value of the
assets are normally reducible to their cash equivalent by the
taxpayers without financial loss to them (see
IRM
5.17.3.1.2.3).
9.
Property
seized pursuant to assessments made under IRC 6851 or 6852
(Termination Assessments) are subject to the stay of sale
provisions stipulated in Code section 6863(b)(3) for property
seized pursuant to a jeopardy assessment. Property seized for
terminated periods should be held until either the 90 day period
for appeal has passed without a petition being filed with the Tax
Court, or the Tax Court renders a final decision on the appeal.
The procedures described above dealing with exceptions to the
restrictions on sale for jeopardy seizures are also applicable to
termination assessments.
5.10.4.1.2 (10-01-2004)
Refiling Notices of Federal Tax Lien - Collection After Statute
Has Expired
1.
Per IRC
6502(a), tax may be collected by levy as long as the levy was made
prior to expiration of the collection statute. For cases where
property has been seized, the date the levy is considered made is
the date the Notice of Seizure is given as provided by IRC 6335(a)
(see
IRM
5.10.3.18).
2.
In
situations where the collection statute will expire after the
Notice of Seizure is given but before the property can be sold, it
may be necessary for the revenue officer to refile the Notice of
Federal Tax Lien (see
IRM
5.12.1.17) in order to protect the government's claim over the
seized asset(s) and to allow the government to collect the tax
relative to the particular asset(s) after expiration of the
collection statute. Both the revenue officer and PALS need to be
aware of any imminent statute cases. Consult with local counsel
for specific guidance when this situation arises. If the
collection statute is imminent and the assets were seized before
the collection statute expired, the revenue officer should request
input of transaction code (TC) 520, closing code 80 to allow for
application of the proceeds from the seizure. Once the proceeds
are posted, the revenue officer should request input of TC 520,
closing code 81.
3.
In these
cases, the Service must use Form 668-F to refile the Notice of
Federal Tax Lien with specific language that limits the effect of
the refiling to specifically described assets. A statement similar
to the following should be entered on Form 668-F: "This
refiling of Notice of Federal Tax Lien is limited to the following
specific asset(s) and is not intended to affect any other assets
of the taxpayer: Asset Description - ."
4.
The lien
should be filed within the last thirty days of the refile period (
IRM
5.12.1.17.2) in order to prevent any potential confusion over the
effect of the original lien on all other assets of the taxpayer.
5.
If periods
other than those for which the refiling is necessary are contained
on the original Notice of Federal Tax Lien, the refiled notice
should only contain the periods for which the refiling is
necessary.
6.
Form 668-F
which is used to refile the Notice of Federal Tax Lien is not
self-releasing. Technical Services will prepare and file Form
668(Z), Certificate of Release of Federal Tax Lien (
IRM
5.12.1.17.6), once the asset has been disposed of and any
applicable redemption period has expired.
5.10.4.2 (10-01-2004)
Redemption of Property Prior to
Sale
1.
Any person
whose property has been seized can redeem the property at any time
before the PALS actually makes final acceptance of the highest bid
at the sale.
2.
In order to
redeem property prior to sale, the taxpayer must pay both of the
following amounts:
·
The full
amount of taxes, penalties, and interest
·
Any
expenses or costs of seizure and preparation for sale
3.
Payments
made to redeem property prior to sale must be by cash, certified
or cashier's check or money order made payable to the United
States Treasury.
4.
The
taxpayer may redeem the property from either the revenue officer
or the PALS. Expenses incurred by both the revenue officer and
PALS must be included in the amount required to redeem the
property. See
IRM
5.10.1.1.3.3.1 for expenses that must be paid. The revenue officer
and PALS must coordinate the release of the property in the most
efficient manner possible. If custody of the property has already
been transferred to the PALS and because of logistical issues the
PALS is not able to release the property, part 5 of Form 2433
should be faxed back to the revenue officer, who will initial and
date the custody block of Form 2433 indicating they are taking
back custody of the property.
5.
IRM
5.10.4.5 contains the
instructions for documenting the release of levy, returning the
property to the taxpayer, and payment of expenses when property is
released or redeemed prior to sale.
5.10.4.3 (10-01-2004)
Conditions for Release of Seized Property
1.
Release and
return of seized property is authorized under a number of
conditions. The revenue officer and PALS must know when release of
levy or return of seized property is appropriate. If custody of
the property has already been transferred to the PALS, the revenue
officer and PALS must coordinate the release so that it occurs as
efficiently as possible. If custody of the property has already
been transferred to the PALS and because of logistical issues the
PALS is not able to release the property, part 5 of Form 2433
should be faxed back to the revenue officer, who will initial and
date the custody block of Form 2433 indicating they are taking
back custody of the property.
2.
If the
revenue officer or PALS becomes aware of the need for release and
return of the property, release and return of the property should
be made immediately. Questionable issues should be referred to
Technical Services.
3.
IRC 6343(a)
provides for release of levy upon all, or part of, seized property
or rights to property under any of the following circumstances:
·
The
liability for which such levy was made is satisfied or becomes
unenforceable by reason of lapse of time
·
Release of
such levy will facilitate the collection of such liability
·
The
taxpayer has entered into an agreement under IRC Section 6159 to
satisfy such liability by means of installment payments, unless
such agreement provides otherwise
·
The
Secretary has determined that such levy is creating an economic
hardship due to the financial condition of the taxpayer
·
The fair
market value of the property exceeds such liability and release of
the levy on a part of such property could be made without
hindering the collection of such liability
4.
Immediate
release and return of property is needed if it is learned that the
seizure was prohibited by any of the following situations:
·
An
automatic stay in bankruptcy
·
A pending
installment agreement, offer in compromise, or request for relief
from joint and several liability (innocent spouse)
·
The lack of
taxpayer equity in the seized property
·
Other
prohibited seizures as listed in
IRM
5.10.1.2
5.
Release and
return of property must also be made if so directed by:
·
Appeals
after a review under the Collection Appeal Process (
CAP
)
·
A Taxpayer
Assistance Order (unless it is being appealed)
·
The group
manager after review
6.
Release and
return of property should also be made if new information is
discovered about the status of real property being used as a
residence that would render the seizure improper, or if the
seizure is determined to be wrongful or improper, or if other
justification is discovered or instructions received.
7.
The
property may also be released if:
·
The
taxpayer files bankruptcy after seizure (after consulting with
Insolvency Support for an Adequate Protection Agreement)
·
The
government receives its interest in the property
·
Future
collection potential is enhanced by release of the property
5.10.4.4 (10-01-2004)
Release of Wrongful Seizures for Property Not Yet Sold
1.
Any person
or other entity claiming an interest in or a lien on seized
property, other than the person against whom is assessed the tax
on which the levy arose, may submit a claim for return of
wrongfully seized property (see
IRM
5.17.3.3.6.3). A seizure is considered wrongful if any of the
following circumstances exist:
·
The seizure
is of property in which the taxpayer had no interest at the time
the Federal Tax Lien arose
·
The seized
property is owned by a person who is a purchaser against whom the
tax lien is invalid under IRC 6323
·
The sale
will effectively destroy, or otherwise irreparably injure a third
party's interest in the property which is senior to the Federal
tax lien
2.
IRC 6343(b)
provides for return of property not belonging to the taxpayer that
has been wrongfully seized. When a person alleges that there has
been a wrongful seizure, and the property has not yet been sold,
it may be returned to the rightful owner at any time prior to sale
to a third party. If property was declared purchased for the
United States
and has not been resold, it may be returned to its rightful owner.
3.
If there is
a question over ownership, the third party should be advised to
submit a written request, signed under the penalties of perjury,
addressed to the area director and directed to the attention of
the Technical Services Territory Manager for the Internal Revenue
area office in which the seizure was made.
4.
The written
request must contain all of the following items:
·
The name
and address of the person submitting the request
·
A detailed
description of the property levied upon
·
A
description of the claimant's basis for claiming an interest in
the property levied upon
·
The name
and address of the taxpayer
·
The
originating
IRS
area
·
Date of the
lien or levy, as shown on the NFTL, Form 668–A, or Form 668–B,
or in lieu thereof, a statement of the reasons why such
information cannot be furnished
5.
The revenue
officer or PALS must:
·
Be able to
explain the process to potential claimants as necessary
·
Immediately
forward any claims received to Technical Services along with a
memorandum outlining the pertinent details
·
Halt any
further action on the seizure and sale until the claim is resolved
6.
The third
party may also choose to file a suit under IRC 7426(a) without
first filing a claim. However, if they are also seeking damages
under IRC 7426(h), they must have exhausted all administrative
remedies prior to filing suit.
7.
If the
property to be returned involves cash (or cash equivalent) of
$10,000 or more, the matter will be referred to Compliance
Examination and the Criminal Investigation function.
8.
If it is
determined that the property should be released to the third party
making the claim for wrongful levy, the property should be
released following the procedures outlined in
IRM
5.10.4.5. If Form 668–E is used to release the property, the
second printed line on the form should be modified by deleting
"belonging to the above named taxpayer " .
9.
IRM
5.10.6.15 contains the
procedures to follow when a wrongful levy claim is received after
the property has been sold.
5.10.4.5 (10-01-2004)
Actions to Release and Return Property
1.
Two forms
may be used to release seized property:
·
Form 2433,
Notice of Seizure, Parts 3 and 4
·
Form
668–E, Release of Levy.
2.
Release and
return of seized property may only be made to:
·
The person
from whom it was seized
·
A person
holding a properly designated power of attorney for the person
from whom the property was seized
·
The
rightful owner in wrongful seizure situations
3.
The
property description of the released property should be taken from
Form 2433, while all of the other information required to complete
the release should be taken from Form 668–B. If Form 2433 was
not prepared prior to the release of the property, the description
of the seized property should be complete enough to provide
reasonable certainty as to its identity.
4.
Form
668–E or Part 4 of Form 2433 should be given and seized property
should be released at the place where the property was stored. At
the time of release, two Service employees should be present to
witness the return of the property. A witness is not required when
unimproved real estate is being released.
5.
When
necessary, the revenue officer or PALS may release the property
accompanied by a local, state or federal law enforcement officer
who should sign Form 2433, Parts 3 and 4 or Form 668–E. The
revenue officer or PALS must document the case history describing
the circumstances leading to the use of the non-Service witness
and include a complete identification of the witnessing law
enforcement officer, e.g., name, organization, location, badge
number, etc.
6.
The revenue
officer or PALS should remove all seizure warning notices from the
property at the time the release of levy is given and should
assist as needed to facilitate return of the property.
7.
When a
decision is reached to release and return seized property that has
been put in storage pending sale, the storage facility operator or
landlord should be notified immediately. The notification should
then be put in writing and should indicate that the Service has no
further obligation for storage or rental fees subsequent to the
date of such release.
8.
As a
general rule when property is released or redeemed prior to sale,
arrangement should be made for direct payment of any seizure
expenses by the taxpayer. This procedure will avoid unnecessary
bookkeeping. If the taxpayer is to pay any storage or rental fees
due for the time prior to release and return of the property to
them, the revenue officer or PALS should indicate the terms in
writing. The revenue officer or PALS should secure a copy of the
receipt for payment to forward to the field budget officer to
avoid double payment to the vendor and to confirm that the expense
was paid.
9.
If expenses
are incurred and not paid directly to the vendor, the cost should
be debited to the taxpayer's account via input of TC 360. If no
proceeds were received for the release the expenses will be
collected through normal means. If proceeds were received for the
release or redemption, the expenses will be debited with a TC 360
and paid simultaneously with the application of the proceeds by
inputting the related cost through a TC 694 on the posting
voucher.
10.
Part 4 of
Form 2433 or Part 2 of Form 668–E will be furnished to the
taxpayer or to the person from whom the property was seized. If
the taxpayer or the person from whom the property was seized
cannot be located, the appropriate part will be mailed to the last
known address by certified mail, return receipt requested. Part 3
of Form 2433 or Part 1 of Form 668–E will be forwarded to
Technical Services for inclusion in the seizure case file.
11.
Normally,
seized property should not be released and returned until the
recipient signs the "Receipt for Property Returned" on
the reverse of Form 668–E or parts 3 and 4 of Form 2433. If the
taxpayer or the person from whom the property was seized cannot be
located or refuses to sign the release, the property may
nevertheless be released and the revenue officer or PALS should
note the reason for failure to secure the acknowledged receipt in
the "Si | 
