IRM 5.10.7 – LEVIED PROPERTY ACQUIRED IRS AND DISPOSLITION OF LEVIED PROPERTY

• 5.10.7.1   General
• 5.10.7.2   Income From Acquired Property
• 5.10.7.3   Preparations for Sale
• 5.10.7.4   Release or Redemption of Real Property to Debtor
• 5.10.7.5   Sale Procedures — Public Auction Sale
• 5.10.7.6   Post Sale Actions — Acquired Property
• 5.10.7.7   Report of Disposition — Sale of Redeemed Property
• 5.10.7.8   Report of Disposition — Other Than Sale of Redeemed Property
• 5.10.7.9   Disposition of Acquired Securities
• Exhibit 5.10.7-1   Pattern Letter P–338 (Agreement to Bid) Reference: 5.10.7.3.1
• Exhibit 5.10.7-2   Collateral Deposit Record Reference: 5.10.7.3.1(5)
• Exhibit 5.10.7-3   Pattern Letter P–637 (Notice of Public Auction Sale - Redeemed Property) Reference: 5.10.7.3.5
• Exhibit 5.10.7-4   Pattern Letter P-1627 (Notice of Sealed Bid Sale - Redeemed Property) Reference: 5.10.7.3.5
• Exhibit 5.10.7-5   Pattern Letter P–339 (Notice of Public Auction Sale - Other than Redeemed Property) Reference: 5.10.7.3.5
• Exhibit 5.10.7-6   Pattern Letter P–340 (Notice of Sealed Bid Sale - Other than Redeemed Property) Reference: 5.10.7.3.5
• Exhibit 5.10.7-7   Opening Statement for Auction - Sale of Acquired Property Reference: 5.10.7.5.2
• Exhibit 5.10.7-8   Pattern Letter P–341 (Certificate of Sale of Personal Property) Reference: 5.10.7.5.7
• Exhibit 5.10.7-9   Pattern Letter P–342 (Certificate of Sale of Seized Property - Securities) Reference: 5.10.7.9.1
• Exhibit 5.10.7-10   Pattern Letter P–343 (Transmittal of Securities to Bureau of Public Debt) Reference: 5.10.7.9.1

5.10.7.1  (10-01-2004)
General

1.       For personal property, acquired property means any property obtained by the United States in payment of, or as security for, debts arising under the internal revenue laws.

2.       For real property, acquired property means any property which is, or shall become property of the United States under the following conditions:

·         By judgment of forfeiture under the internal revenue laws

·         By redemption by the Government under IRC 7425

·         By assignment, set off, conveyance by purchase, or otherwise to the United States in payment of debts or penalties arising under the laws relating to internal revenue

·         Vested in the United States by mortgage or other security for the payment of such debts

·         Declared purchased for the United States under IRC 6335(e)

3.       Authority to sell acquired property is contained in IRC 7505 (personal property) and IRC 7506 (real property). Either a property appraisal and liquidation specialist (PALS) or a revenue officer may conduct a sale of acquired property; however, since the PALS is a specialist in the sale process, it is recommended that the PALS conduct these sales whenever possible. The administration and disposition of personal property is the responsibility of the area director of the area in which the property became the property of the United States . The administration and disposition of real property is the responsibility of the area director of the area in which the real property is situated. For real property, the Commissioner Small Business/Self-Employed (or his/her delegate) may, if deemed advisable, take charge of and assume responsibility for the administration and disposition of the property by giving written notice to the area director.

4.       If real property, consisting of a single parcel, is situated in more than one internal revenue area, the responsibility for the administration and disposition of the property will be that of the area director under whose direction the property was declared purchased or under whose direction the property otherwise became the property of the United States. If there is doubt as to which area director is to have charge of the property, the pertinent facts should be reported to the Director, Payment Compliance, Attn: SE:S:C:CP:PC, so that a designation may be made.

5.       In order that a current record of all acquired property will be available for reference and follow-up purposes, Technical Services will maintain a control of such property. This control will include real and personal property acquired through levy and sales under IRC 6335(e) and also property acquired through other circumstances stated in (1) and (2) above.

6.       Property acquired under IRC 6335(e) will be reported to Accounting Control/Services on Form 2433, Notice of Seizure and Form 2436, Seized Property Sale Report. However, if property is acquired through other circumstances, Technical Services will inform Accounting Control/Services by memorandum, in duplicate. To enable the compliance center to enter acquired property on the accounting records, the value of the property must be provided. When the exact value of the property cannot be determined, the memorandum should be noted with the estimated value and the basis for computing it.

Note:

Property acquired by the Service through the exercise of redemption rights under the Federal tax lien does not require a memorandum to Accounting Control/Services. Additional information about the administration of redeemed property can be found in IRM 5.12.5.5.

7.       The Technical Services Territory Manager will periodically request from the office involved the current status of acquired properties. In the case of real property, a status report should not be requested until six months after the right of redemption period has expired. A brief notation of the follow-up actions will be entered on the control. After the property is disposed of, the control will be closed.

8.       The PALS or the revenue officer will see that acquired property located within the jurisdiction of the office is maintained as determined necessary. Ordinary and necessary expenses may be incurred in the preservation of the property. These expenses may include rent for storage of personal property if rent-free facilities are not available, or the cost of minor repairs to real property, if deemed necessary for its preservation. The procedures in IRM 5.10.3.6, Protection of Property During a Seizure, are also applicable to acquired property.

9.       Estimated expenses expected to be incurred in connection with the preservation or sale of the property should be reported to the field budget officer per their instructions, or if applicable to the Chief, HQ Financial Management (Execution), so that necessary funds may be obligated. Identify the property and provide the estimated amount of expenses.

10.   The sale procedures in the sections that follow are applicable to both real and personal property unless otherwise indicated. For disposition of acquired securities, see IRM 5.10.7.9, Disposition of Acquired Securities.

11.   Unless the property was acquired as a result of a redemption, a case should not be opened on ICS under the original taxpayer's name and TIN , since they were credited for a related amount at the time the property became acquired property. An ICS file under an assigned identification number should be maintained.

12.   Since property acquired other than as a result of redemption is sold exclusively for the benefit of the government with no benefit to the original taxpayer, third party contact reporting requirements are not relevant for this type of sale.

13.   Where property has been acquired other than as a result of redemption, if it is determined that it is in the best interest of the Service to transfer ownership of the property for any reason to another federal government agency, such as the Department of the Interior, National Park Service, or U.S. Forestry Service, etc., this can be done with agreement by the other federal agency without offering the property for sale under sections 7505 or 7506. This cannot be done with a non-federal agency, such as a state or local government agency. Approval for this transfer is obtained from the Technical Services Territory Manager. The PALS will prepare a memo for routing through the PALS manager to the Technical Services Territory Manager requesting approval to transfer the asset to another agency. The memo should provide sufficient information regarding the acquisition and recommended transfer of the property.

5.10.7.2  (10-01-2004)
Income From Acquired Property

1.       For real property acquired under the provisions of IRC 6335, there is a 180 day right of redemption period during which the government cannot dispose of the property.

2.       The right to any income from real property during this period of redemption depends upon the state law where the property is located. Area counsel should be consulted to determine the disposition to be made of income during this period. If it is determined that the taxpayer is entitled to the income, levy procedures may be used and the proceeds applied to the outstanding accounts of the taxpayer.

3.       The taxpayer has no right to redeem, nor any right to any income derived from, personal property after it has been declared purchased for the United States .

4.       Income received from the acquired property will be forwarded through Submission Processing with a Form 2433, Part 8–A, Notice of Seizure, or a memorandum posting document in duplicate indicating the following:

·         Name of person from whom the income was received

·         Nature of income, such as rent, dividends, etc.

·         Brief description of property, such as " Real property — Building located at (address)," " Personal property — General Motors Stock," etc.

·         Period covered by the payment if applicable

·         Name of taxpayer from whom the property was seized and sold

·         Amount of remittance

·         A statement that the remittance should be deposited as a courtesy deposit for credit to Miscellaneous Receipts of the Treasury

5.       Cash remittances must be converted before transmittal to Submission Processing.

5.10.7.2.1  (10-01-2004)
Lease of Real Property

1.       Real property may be leased if it is determined that it will be in the possession of the area director over an extended period of time and that the government's interest will best be served by such action. Factors to be considered are:

·         Depreciation of the property

·         Whether the property can be immediately sold for a reasonable amount

·         Cost of maintenance, etc.

2.       The initial determination will be made by the Technical Services Group Manager, based upon the circumstances, including any recommendation of the area office involved. The final decision rests with the Technical Service Territory Manager whose approval must be secured before the property is offered since he/she must sign the lease.

3.       If acquired property will be leased and a prospective lessee has been secured, the Technical Services Group Manager should request area counsel to prepare a lease agreement in duplicate. The terms of the lease should generally not be more than a year and should not contain any provision which would prevent selling the property, subject to the lease, at any time a suitable purchaser is found. The lease agreement should specify that payments be made by check or money order made payable to the United States Treasury and sent directly to the Technical Services Group Manager.

4.       The following information should be furnished to area counsel:

·         Name and address of the lessee

·         Area involved

·         Description and location of property

·         How property was acquired by the United States

·         Period of the lease

·         Terms of payment (amount, manner, due date and place of payment)

·         Any special provisions to be contained in the lease, such as maintenance of property, authorized alterations, improvements, etc.

5.       Upon receipt of the proposed lease agreement from area counsel, the Technical Services Group Manager will review the lease to see that it conforms to the intent of the parties involved and will forward the original and duplicate to the Technical Service Territory Manager for his or her signature.

6.       After the Technical Service Territory Manager has signed the lease agreement, both copies will be returned to the Technical Services Group Manager who will:

A.      Prepare a control card showing the name and address of the lessee, payment due and amount of payment.

B.      Secure the signature of the lessee on the original lease agreement.

C.      Furnish duplicate lease agreement to the lessee which may be considered authority for the lessee to have possession of the property in accordance with terms of the agreement.

D.      File original lease agreement in the related Disposition of Seized Property case file.

E.      File control card chronologically by payment due date in a "lease control card file."

7.       Upon receipt of payments under the lease agreement, Technical Services will note the control card as to date payment is received and prepare and process a memorandum posting document in duplicate in accordance with IRM 5.10.7.2(4).

8.       If a payment is not received within a reasonable time after the due date, the Technical Services Group Manager should contact the lessee to secure payment. If payment is not received, area counsel should be consulted as to the legal action required.

5.10.7.3  (10-01-2004)
Preparations for Sale

1.       When it appears that offering the acquired property for sale will yield a reasonable price, a memorandum recommending sale should be submitted through Technical Services for further processing. This memorandum will ordinarily be prepared by the PALS or the revenue officer since he/she is more likely to secure potential purchasers. However, in some instances the memorandum may be originated by an advisor in Technical Services. The memorandum should be prepared in duplicate and include the following:

·         Brief description and location of property

·         Condition of property

·         Expected sale price

·         Government's cost, if any (bid-in price if the property was declared purchased under IRC 6335)

·         Reason it is believed that the property can be sold for a reasonable price (if an agreement to bid has been secured, furnish details)

·         Any other pertinent information

Note:

This memorandum is not required for redeemed property.

2.       Technical Services will send the original memorandum to the Technical Services Territory Manager for approval of the sale and retain the duplicate in a suspense file pending action by the approving official.

3.       The Technical Services Territory Manager will indicate his/her approval or disapproval by so stating on the memorandum and return it to Technical Services. The local office will then be notified of the action to be taken.

5.10.7.3.1  (10-01-2004)
Agreements to Bid

1.       Regulations provide that offers to bid at least a specified amount may be solicited from prospective bidders before giving a notice of sale of acquired property. Although this procedure is not a statutory requirement, it is desirable since it encourages more sincere bidding and practically ensures that the property will be sold when offered for sale. Ordinarily offers to bid will be the result of solicitation by the PALS or the revenue officer since they will be in the best position to contact prospective bidders. However, in some instances the agreement to bid may be secured by other Service personnel. The agreement to bid should be similar to the example in Exhibit 5.10.7–1.

2.       A deposit to secure performance of the agreement to bid may also be required and ordinarily is desirable. When a deposit is required, it should be the full amount of the offer to bid if the bid is $200 or less. If the amount of the offer to bid is more than $200, the deposit should be 20 percent of the bid or $200, whichever is greater.

3.       If a deposit is required with the agreement to bid, it should be made by a certified, cashier's, or treasurer's check drawn on any bank or trust company incorporated under the laws of the United States or under the laws of any state, territory, or possession of the United States , or by a postal, bank, express, or telegraph money order.

4.       Certificates of Deposit and irrevocable letters of credit are also acceptable if approved in advance by area counsel. However, care should be exercised in accepting and monitoring such instruments because the period of time in which they are negotiable is generally limited.

5.       Upon receipt of a bid deposit, prepare Form 2276, Collateral Deposit Record ( IRM Exhibit 5.10.7–2) identifying the remittance as an "agreement to bid deposit." The remittance and Form 2276 will be submitted to Technical Services for review and safekeeping.

5.10.7.3.2  (10-01-2004)
Time and Place of Sale

1.       Personal property may be sold any time after it is acquired and a notice of sale given ( IRM 5.10.7.3.5(2)). However, sufficient time should be allowed to permit adequate publicity of the sale so that the maximum amount may be obtained for the property at the sale. Ordinarily, the sale of personal property should be held in the area where the property was declared purchased for the United States . If the sale is to be held in another area, the area director should advise the director of the other area.

2.       Real property acquired under the provisions of IRC 6335(e) may be sold after the period of redemption expires and a public notice of sale has been given ( IRM 5.10.7.3.5(2)). The notice must have been given not less than 20 days before holding the sale. Ordinarily, when real property is involved, the taxpayer or other persons with an interest in the property, or a person on their behalf, have a right to redeem the property within the prescribed period. In some instances, such as in the case of real property acquired by forfeiture, the right to redeem may not exist. When real property is acquired by an action other than a sale under provisions of IRC 6335(e), consult area counsel to determine whether redemption rights exist.

3.       When real property is redeemed under 28 USC 2410 or IRC 7425, the PALS should arrange to sell it as soon as possible after proper notice of sale is given and the terms of agreements to bid permit. The property may not be sold less than 20 days after notice is given.

4.       Ordinarily, the place of sale of real property should be within the county where the property is situated. However, if it is believed that a substantially higher price may be obtained, the area director or Technical Services Territory Manager may authorize the sale to be held outside such county. If this move causes the sale to be held in another area office, the area director should be notified by the approving official in the area where the property is situated.

5.10.7.3.3  (10-01-2004)
Adjournment of Sale

1.       Regulations provide that the employee conducting the sale may adjourn the sale if an adjournment will best serve the interest of the United States . However, if the sale is adjourned for more than 30 days in the aggregate, a new notice of sale is required.

2.       When a sale is to be adjourned for any purpose, the employee conducting the sale should appear at the time and place originally established for the sale and make a public announcement of the adjournment and, if possible, inform those present of the new date and time of sale.

5.10.7.3.4  (10-01-2004)
Offering of Property

1.       Acquired property may be sold either by public auction or by sealed bids. The method used will depend upon the facts and circumstances surrounding the property, such as type of property, location, condition of property, etc. The method selected should be the one which is expected to produce the maximum amount for the property.

2.       Acquired property may be sold, if divisible, in parcels or piecemeal, or it may be combined with other acquired property and offered for sale. There are no restrictions relative to the grouping of the property for sale. It may be offered as separate items, as groups of items, in the aggregate, or both as separate items (or in groups) and in the aggregate. If the property is to be offered in groups, the groups should be segregated on the notice of sale.

5.10.7.3.5  (10-01-2004)
Notice of Sale

1.       Regulations require that a notice of sale be publicly given. The notice of sale should be prepared as appropriate:

·         Notice of Public Auction (for redeemed property), Exhibit 5.10.7–3, P–637

·         Notice of Sealed Bid Sale (for redeemed property), Exhibit 5.10.7–4, P–1627

·         Notice of Public Auction Sale, (other than redeemed property), Exhibit 5.10.7–5, P–339

·         Notice of Sealed Bid Sale, (other than redeemed property), Exhibit 5.10.7–6, P–340

2.       If residential real property is being sold, the notice of sale should also contain a statement that the property is being sold on an open occupancy basis or nondiscriminatory basis. The notice of sale should be reproduced in a manner that will provide sufficient copies to satisfy the needs of the particular sale. For real property, the notice of sale must be published in a newspaper published or generally circulated within the county where the property is situated. If there is no newspaper published or circulated within the county, the notice will be posted at the post office nearest the place of sale and in at least two other public places. For personal property, newspaper advertising may also be authorized but is not required. A copy of the notice of sale should also be retained by the PALS for submitting with the report of sale. A copy will be forwarded to Technical Services.

3.       Other methods of giving public notice of sale and of advertising, such as radio or television spot announcements, posting on the Treasury Web Site (Internet), and trade journal advertising, may be used, in addition to those required by regulations, when it is believed that wider or more specialized advertising coverage will enhance the possibility of obtaining a higher price for the property. If commercial advertising is used, the procedure prescribed in IRM 5.10.4.12.1 should be followed.

5.10.7.4  (10-01-2004)
Release or Redemption of Real Property to Debtor

1.       IRC 6337 provides that the owner of any real estate sold as provided in IRC 6335, or any person having interest therein, or a lien thereon, or any person in their behalf, shall be permitted to redeem the property sold, or any particular tract of the property at any time within 180 days after the sale. Under the provisions of IRC 6337 real property, or a tract thereof, may be redeemed from the government upon payment of the bid-in price plus interest at the rate of 20 percent per annum. IRC 6337 is only applicable to property acquired by the United States under IRC 6335.

2.       Under IRC 7506(d), if real property becomes the property of the United States as result of sale under IRC 6335, conveyance, or otherwise in payment of or as security for a debt arising under the laws relating to internal revenue, and the debt, together with interest at the rate of one percent per month, is paid within two years from the date of the acquisition, the property may be released by deed or otherwise conveyed to the debtor from whom it was taken, or to his/her heirs or other legal representatives. The term " debt" includes the entire tax liability including penalties and interest; this amount would also include any credit given to the taxpayer for the minimum bid since the credit would be reversed if the property was returned to the taxpayer.

Note:

This provision does not require the United States to hold the property for the two-year period, but merely provides that if the property is still held by the United States it may be released upon payment of the debt and interest, within two years from the date the property was acquired by the United States.

3.       Payments made within the 180 day redemption period will follow the provisions of IRM 5.10.7.4(1) above.

4.       IRM 5.10.6.8 contains the procedures to follow when the property is redeemed or released.

5.10.7.5  (10-01-2004)
Sale Procedures — Public Auction Sale

1.       The procedures for sale of acquired property are substantially the same as those used in the sale of seized property. The most notable difference is that regulations under IRC 7505 and 7506 provide that the employee conducting the sale has the right to reject any and all bids received and to withdraw the property from the sale. Thus, when it appears that the rejection of a bid, or all bids, will best serve the interest of the United States , the employee conducting the sale may do so. However, the necessity of rejecting bids can usually be avoided by securing an agreement to bid ( IRM 5.10.7.3.1) before offering the property for sale.

5.10.7.5.1  (10-01-2004)
Condition of Title and of Property

1.       The procedures prescribed in IRM 5.10.5.5, Condition of Title and of Property, are also applicable when acquired property is being sold.

2.       Because Form 2434–B , Notice of Encumbrances Against and Interests in Property Offered for Sale , is normally used for sales of seized assets, the following changes should be made when conducting a sale of acquired property:

A.      On the front of the form in the space below "Internal Revenue taxes due from: (Taxpayer)" , enter a statement to indicate how the Service acquired the property; for example — "The United States acquired the property from a distraint sale under the provisions of IRC section 6335 on 07/01/2000 . Deed was executed to the United States on 02/05/2001 ."

B.      On the reverse of the form, change the first paragraph from "will be sold" to either "was sold and acquired by the United States " or "was acquired by the United States ."

C.      On the reverse of the form, in the last paragraph, delete everything after the first sentence and add the following sentence: "Upon full payment of the accepted bid price, the United States will issue a Certificate of Sale for personal property or a deed for real property. "

5.10.7.5.2  (10-01-2004)
Auction Procedure

1.       At the time and place set for the sale, the employee conducting the sale should call the prospective bidders to order and read the authority for the sale and the conditions under which the property will be offered. The statement provided in Exhibit 5.10.7–7 should be used, but it may be altered as necessary to fit the conditions of a particular sale.

2.       After reading the statement as to the terms and conditions of the sale, the employee conducting the sale will open the bidding. If an agreement to bid has been secured and a deposit has been required, if a higher opening bid is not received, the property should be offered for sale at the amount of the offer. If a bid is not received equal to at least the amount of the offer, the sale should be adjourned and the property again offered for sale at a later date. At the conclusion of the bidding, the property will be declared sold to the highest acceptable bidder, unless it is determined that the best interest of the Government will be served by an adjournment of the sale ( IRM 5.10.7.3.3, Adjournment of Sale).

3.       If the property is offered for sale by more than one method, the employee assisting in the sale will prepare a tabulation of the high bids received. Form 4425, Public Sale Bid Tabulation, or similar form, may be used for this purpose. It is not necessary that a record be maintained of bids as they are tendered during the progression of the tentative high bids. The sale should be recessed at the conclusion of the bidding for a period long enough to tabulate the tentative high bids received. After completing a verification of this tabulation, the name of the successful bidder or bidders should be announced. The records pertaining to the tentative high bids received will be retained and submitted by the employee conducting the sale with the report of the proceedings as stated in IRM 5.10.7.8, Report of Disposition — Other Than Sale of Redeemed Property.

4.       When property is offered for sale by more than one method, it may be desirable to secure payment from the tentative high bidder(s) pending the outcome of the bidding by the other method of sale. In these cases, the procedures in IRM 5.10.5.10 should be followed.

5.10.7.5.3  (10-01-2004)
Sealed Bid Procedures

1.       Regulations under IRC 7505 and 7506 provide that acquired property may also be sold by sealed bids. If the property was not redeemed by the United States , the procedures prescribed in IRM 5.10.5.11, Sealed Bid Sale, will be followed except that:

A.      Form 2593, Sealed Bid for Purchase of Property Acquired by the United States , will be used in place of Form 2222.

B.      Any references to seized property should be considered to be "property acquired by the United States ."

C.      Any references to "minimum price" should be disregarded since such requirement is not applicable when selling property which has been acquired by the United States .

D.      Any or all bids may be rejected at any time before declaring the property sold (See IRM 5.10.7.5, Sale Procedures, Public Auction Sale).

E.      Form 2434–B will be prepared as described in IRM 5.10.7.5.1.

F.      The employee conducting the sale will prepare a report on the proceedings in accordance with IRM 5.10.7.8, Report of Disposition — Other Than Sale of Redeemed Property.

G.     The return of a remittance to an unsuccessful bidder who had executed an agreement to bid will be governed by IRM 5.10.7.5.6, Return of Unsuccessful Sealed Bids and Amounts Deposited with Agreements to Bid.

2.       For property that was redeemed by the United States , the procedures prescribed in IRM 5.10.5.11, Sealed Bid Sale, will be followed except that:

A.      Form 2593–A, Sealed Bid for Purchase of Property Redeemed by the United States , will be used in place of Form 2222.

B.      Any references to seized property should be considered to be "property redeemed by the United States ."

C.      Any references to "minimum price" should be disregarded since such requirement is not applicable when selling property which has been redeemed by the United States .

D.      Any or all bids may be rejected at any time before declaring the property sold. See IRM 5.10.7.5, Sale Procedures, Public Auction Sale .

E.      Form 2434–B will be prepared as described in IRM 5.10.7.5.1.

F.      The employee conducting the sale will prepare a report on the proceedings in accordance with IRM 5.10.7.7, Report of Disposition — Redeemed Property.

G.     The return of a remittance to an unsuccessful bidder who had executed an agreement to bid, will be governed by IRM 5.10.7.5.6, Return of Unsuccessful Sealed Bids and Amounts Deposited with Agreements to Bid.

5.10.7.5.4  (10-01-2004)
Payment of Bid Price

1.       Instructions in IRM 5.10.4.10.3, Terms of Payment, are applicable.

2.       A Form 809 receipt will not be issued to the purchaser upon full payment of the purchase price if personal property is sold. Instead, a Certificate of Sale will be issued. See IRM 5.10.7.5.7, Certificate of Sale — Personal Property.

3.       If deferment of the full purchase price is permitted or if real property is sold and the payments are made by cash, the employee will issue a Form 809 receipt for the cash payments. Parts 1, 2, and 3 of the Form 809 receipt should be marked in the upper right corner above the receipt number "Full (or partial, if applicable) Payment—Sale of Acquired Property. " The only entries that should be made are the taxpayer's name and the amount of the payment. Part 2 should be given to the purchaser and Parts 1 and 3, stapled together in reverse order, should be submitted via Form 3210, Document Transmittal, as provided in IRM 5.10.7.8, Report of Disposition — Other Than Sale of Redeemed Property.

5.10.7.5.5  (10-01-2004)
Failure to Bid Agreed Amount and Default in Payment

1.       If a deposit is required with the agreement to bid and the depositor fails to bid the amount specified in the agreement and the property is not sold for as much as the agreed amount, the amount of the deposit may be forfeited and retained by the Service as damages.

2.       If payment in full is required upon acceptance of the bid and is not paid, or if deferred payment is permitted and is not paid within the prescribed period, the sale may be declared to be null and void and the property may again be advertised and sold as provided in these instructions. In this event, the new purchaser will receive the property or rights to property free and clear of any claim or right of the former defaulting purchaser. The amount paid upon the bid price may be forfeited, i.e., retained by the United States pending determination of actual damages. Area counsel may be consulted, if necessary, to determine whether legal action is appropriate.

3.       In case of forfeitures under either (1) or (2) above not related to property redeemed under IRC 7425, the employee who conducted the sale will prepare a memorandum in triplicate entitled "Forfeiture of Deposit Funds" and state thereon the:

·         Name of the depositor

·         Amount forfeited

·         Reasons for the forfeiture

4.       The employee conducting the sale will forward all copies of the memorandum through their manager to the Technical Services Group Manager to submit to Accounting Control/Services.

5.       In case of forfeitures under (1) or (2) above related to property redeemed under IRC 7425, the employee will report any default situation described in (1) or (2) above by memorandum, in quadruplicate, entitled " Default in Agreement to Bid" or "Default in Payment of Bid Price," as applicable. The memorandum will identify the redemption sale and will include the following information:

·         Name of the bidder or depositor

·         Amount of the agreement to bid or sealed bid

·         Amount of the deposit, or of remittance accompanying the bid

·         Amount which must be returned to the revolving fund

·         Amount received from the sale of the property, or date for rescheduled sale

·         Actual cost of re-selling the property (if unknown, estimate)

·         Nature of and reason for default

6.       All copies of the memorandum will then be forwarded through the group manager and the Technical Services Territory Manager for distribution to the Technical Services Area Manager, Management & Finance Field Office, and area counsel. The fourth copy will be retained in Technical Services.

7.       In order to minimize the chance of loss being incurred by the Service, the Technical Services Territory Manager will, by memorandum, inform the Management and Support Field Office when any of the following situations occur:

·         A bidder defaults in payment or fails to bid the agreed amount — the memorandum will indicate what actions are planned for recovering the full amount advanced from the revolving fund

·         The full amount advanced from the revolving fund is recovered after a default situation arises, through subsequent sale of the property, legal action against the defaulting bidder, etc.

·         All efforts to recover the fund advance have been exhausted and it is determined that the fund has suffered a loss which must be recovered administratively

5.10.7.5.6  (10-01-2004)
Return of Unsuccessful Sealed Bids and Amounts Deposited With Agreements to Bid

1.       At the conclusion of the sale, remittances submitted in connection with unsuccessful sealed bids will be returned to the bidder unless the bidder defaulted in payment of the bid price.

2.       In no event will any remittance received with an unsuccessful bid be deposited as internal revenue collections or in the deposit fund account, nor will unsuccessful bidders be required to submit an application for a refund. Remittances will be returned to unsuccessful bidders if they are present at the sale. Otherwise, the remittances will be returned by certified mail. In either case, the applicable items of the "Return of Remittance to Unsuccessful Bidder" section of the related Form 2593 or Form 2593–A should be completed.

3.       Technical Services is responsible for returning deposits submitted with agreements to bid if, after the sale, the individual who submitted the deposit was not the successful bidder.

5.10.7.5.7  (10-01-2004)
Certificate of Sale — Personal Property

1.       As soon as possible after receipt of the full purchase price, the employee conducting the sale will:

A.      Issue in duplicate a Certificate of Sale of Personal Property in accordance with the specimen in Exhibit 5.10.7–8.

B.      Furnish original certificate of sale to the purchaser.

C.      Release the personal property to the purchaser.

D.      Retain duplicate certificate of sale for submission with report of sale as prescribed in IRM 5.10.7.8, Report of Disposition — Other Than Sale of Redeemed Property.

5.10.7.5.8  (10-01-2004)
Deed to Real Property

1.       Regulations under IRC 7506 provide that, upon payment in full of the purchase price, the delegated official will issue a deed to the purchaser. Authority to sign deeds is contained in SB/SE delegation order 5.1.

2.       The deed will be prepared in duplicate by Technical Services and forwarded to area counsel for approval. A standard format for such deeds can be pre-arranged with area counsel. Once the deed is ready, Technical Services will:

A.      Remove the original Report of Sale of Redeemed Property from the suspense file.

B.      Secure the appropriate signature on the deed.

C.      Furnish the original deed to the purchaser.

D.      Note on duplicate deed the date the original deed is executed and the date it is delivered to purchaser.

E.      File the duplicate deed and original report of disposition in the related Record of Disposition of Seized Property case file.

5.10.7.5.9  (10-01-2004)
Expenses of Sale

1.       For redeemed property, expenses of sale, including the cost of advertising, are to be deducted from the excess over the amount required to reimburse the revolving fund before application to the taxpayer's liability. However, if there is no sale, the taxpayer's account will not be debited (See IRM 5.12.5.5.6, Application of Funds From Sale).

5.10.7.6  (10-01-2004)
Post Sale Actions — Acquired Property

1.       Upon completion of the sale of acquired property, the employee who conducted the sale will forward a report to Technical Services. The report will be prepared under the appropriate guidelines in the following sections:

·         Report of Disposition — Sale of Redeemed Property, IRM 5.10.7.7

·         Report of Disposition — Other than Sale of Redeemed Property, IRM 5.10.7.8

2.       If the successful bidder submitted a deposit with the agreement to bid, the employee who conducted the sale will contact Technical Services and fax a copy of the "Sale of Acquired Property" memorandum ( IRM 5.10.7.8(1)) or the "Proceeds from Sale of Redeemed Property " memorandum ( IRM 5.10.7.7(1)) to Technical Services for disposition of the deposit. If the individual who made the deposit was not the successful bidder, contact Technical Services so the procedures in IRM 5.10.7.5.6(3) can be followed.

3.       Upon receipt of the appropriate report, Technical Services will:

A.      File a copy of the control in the case file.

B.      Forward vouchers not previously submitted to the Management & Finance Field Office for payment.

C.      File the report of disposition in a suspense file pending receipt of the quitclaim deed if real property is involved.

D.      File the report of disposition and attachments in the related Record of Disposition of Seized Property case file if personal property is involved.

E.      Forward to Accounting Control/Services a copy of the "Report of Sale of Acquired Property" along with a copy of the memorandum posting document, "Sale of Acquired Property. "

5.10.7.7  (10-01-2004)
Report of Disposition — Sale of Redeemed Property

1.       Upon completing the sale of redeemed property, the employee who conducted the sale will prepare three copies of a transmittal memorandum entitled "Proceeds from the Sale of Redeemed Property." The memorandum will contain the following:

·         Name and address of the taxpayer as shown on the Form 4376, Report of Investigation, submitted at the time redemption of the property was recommended

·         Name and address of the purchaser

·         Sale price

·         Amount previously deposited with agreement to bid, if applicable

·         Identification of remittances accompanying the transmittal, including the amount submitted with the winning bid, if applicable, and the amount remitted to pay the balance of the purchase price

2.       Two copies of the memorandum and any accompanying remittances will be forwarded directly to Technical Services. The employee who conducted the sale will retain the third copy of the memorandum for submission with the "Report of Sale of Redeemed Property" .

3.       After the sale has been completed and all related vouchers for expenses have been received, the employee who conducted the sale will prepare a memorandum report in duplicate. Any vouchers for sale expenses should be attached to the duplicate report. The report will be entitled "Report of Sale of Redeemed Property" and will include:

·         Name and address of purchaser

·         Sale price of property

·         Expenses of sale shown by amount, names and addresses of payees and the services rendered

·         Date of sale

·         Place of sale

·         Places and dates that notices of sale were published and/or posted

·         A statement signed by the employee conducting the sale and by the employee who assisted in the sale that certifies that the sale was conducted in accordance with IRC 7506 and regulations, and that the information reported is a true and correct record of the sale proceedings

4.       Attachments to the original of the report will include:

·         Copy of the notice of sale

·         Third copy of the memorandum "Proceeds from the Sale of Redeemed Property"

·         Forms 2593–A, Sealed Bid For Purchase of Property Redeemed by the United States , if applicable

·         Tabulation of bids

5.       The original and duplicate reports, together with all attachments, will be forwarded to Technical Services.

5.10.7.8  (10-01-2004)
Report of Disposition — Other Than Sale of Redeemed Property

1.       Upon completion of the sale of acquired property, other than redeemed property, the employee who conducted the sale will prepare a memorandum posting document in triplicate, identified as "Sale of Acquired Property. "

2.       If full payment is received, the memorandum will include the following:

·         Taxpayer's Name, Address, and Taxpayer Identification Number

·         Seizure serial number

·         Name of purchaser

·         Sale price

·         Amount already on deposit in the deposit fund account which is to be applied to the sale price

·         Amount of remittance and a statement as to how it should be applied — The following statement can be used for real property: "As the sale was conducted under IRC section 7506, deposit the remittance in the deposit fund account per IRC section 7809(b)(2)."

Note:

See IRC 7809 — the taxpayer does not receive credit for any of the proceeds regardless of the amount involved, since the taxpayer's account was credited at the time property was acquired by the government.

·         If not previously submitted, the name and address of any person who made a deposit in connection with the property and a statement as to the disposition to be made of the deposit

3.       If the posting document is for an initial payment or part payment of a deferred sale, it should include only the name of the purchaser and the last two items shown in (2) above.

4.       The employee who conducted the sale will enter on Form 3210, Document Transmittal, the name of the purchaser and "Proceeds from Sale of Acquired Property." The amount of the remittance will be entered and the number of any Form 809 receipt issued. The employee will submit the remittance, together with the original and duplicate memorandum posting document, on Form 3210 and retain the triplicate memorandum posting document for submission with "Report of Sale of Acquired Property" .

5.       After the sale has been completed and all vouchers for expenses in connection with the sale have been received, the employee who conducted the sale will prepare a memorandum report. The report will be identified as " Report of Sale of Acquired Property" with the taxpayer name, TIN , and seizure number, and will include:

·         Name and address of purchaser

·         Sale price of property

·         Expenses of sale shown by amount, names and addresses of payees and the services rendered

·         Net proceeds of sale after expenses

·         Date of sale

·         Manner of sale

·         Place of sale

·         Places and dates that the notice of sale was published and/or posted, and

·         A certification signed by the employee conducting the sale and also the employee assisting in the sale that the sale was conducted in accordance with IRC 7505 and 7506 (as applicable) and regulations, and that the information reported is a true and correct record of the sales proceedings.

6.       In addition, a copy of the notice of sale, the triplicate of any memorandum posting document, Forms 2593 (if applicable), and the duplicate of any certificates of sale issued should be attached to the memorandum report. Any vouchers not previously submitted should be attached to the report. The report, together with attachments, will be forwarded to Technical Services for appropriate review.

7.       Update the ICS seizure and sale application with any applicable information after disposition of property that was acquired by bidding in the property for the government.

5.10.7.9  (10-01-2004)
Disposition of Acquired Securities

1.       The method of disposing of acquired securities will depend upon the type of securities involved. Securities include stocks, bonds, notes or other similar interests. Securities are marketable (or negotiable) upon being properly assigned, or may even be marketable merely by delivery as in the case of the various coupon securities issued by the United States .

2.       Acquired securities should be kept in the area director's safe or other similar place which is suitable for safekeeping. When transfer between offices is required, securities of the coupon (or bearer) type should be personally delivered or forwarded by registered mail since they are freely transferable by the person in possession. Certified mail should be used on other types of marketable (negotiable) securities.

3.       For the purposes of these instructions, securities are classified in the following categories:

·         "Traded Securities" — stocks and debenture bonds which are listed on a stock exchange or are generally traded in the over-the-counter market, also unmatured United States securities (coupon type);

·         "Untraded Stocks" — those stocks which are not listed or generally traded, such as stock of closely held corporations; and

·         "Notes" — ordinary commercial or private notes executed as evidences of debt.

5.10.7.9.1  (10-01-2004)
Traded Stocks and Bonds

1.       If Form 2435 was not previously prepared, a certificate of sale to the United States should be prepared in duplicate in accordance with Exhibit 5.10.7–9, P–342. A certificate should be prepared even though it is not required by the Code or regulations. The Certificate of Sale and the securities will be forwarded to the Technical Services Group Manager, who will prepare four copies of a transmittal letter following the form in Exhibit 5.10.7–10.

2.       The Technical Services Group Manager will send the following information in one package, by registered mail or by special messenger, to the Bureau of Public Debt:

·         A transmittal letter (Exhibit 5.10.7–10) indicating the Service's contact, phone number, fax number, and appropriate Agency Location Code ( IRM 3.17.63.1.2)

·         The original and two copies of the transmittal letter

·         Two certified copies of the Notice of Seizure (Form 2433)

·         Two certified copies of the notice of sale (Form 2434 or 2434-A)

·         The original certificate of sale (Form 2435 or P–342)

·         The stock certificates and/or bonds

3.       The forms listed above must list the securities and have a visible seal.

A.      If registered mail send the package to:

B.      If special messenger, send to:

The Bureau of the Public Debt, Office of Public Debt Accounting
Debt Accounting Branch Manager
P.O. Box 1328
Hintgen Building Room 114
Parkersburg, VA 26106–1328

The Bureau of the Public Debt, Office of Public Debt Accounting
Debt Accounting Branch Manager
Hintgen Building Room 114
200 3^rd Street
Parkersburg , VA 26101–5312

4.       Technical Services will retain a copy of the transmittal letter and duplicate Certificate of Sale with the related case file, and will forward a copy of the transmittal letter to Accounting Control/Services.

5.       The Bureau of Public Debt, Debt Accounting Branch will liquidate the securities in accordance with established Department of the Treasury procedures. Inquiries can be made at (304)480–5161.

6.       Upon the sale, the Debt Accounting Branch will fax a copy of the liquidation letter to the IRS listing:

·         The issuing company

·         Number of shares sold

·         Settlement date

·         Net proceeds

·         Account credited

·         IRS seizure number

7.       The proceeds of sale will be deposited for credit of the Service Center director for the IRS Location Code using the Fedwire Deposit System.

 .        The message field ‘Orig. to Beneficiary’ (6000) will show: BPD (seizure number),PROC AS NMF CALL , and the IRS contact and phone number.

A.      A deposit ticket, SF215C, will be generated from the Fedwire System via CASHLINK and forwarded to the service center on file for the Agency Location Code.

B.      The Accounting Control/Services will make necessary accounting entries to close the related Form 2436, Seized Property Sale Report.

C.      The SF215C will be retained in the seizure case file.

5.10.7.9.2  (10-01-2004)
Untraded Stocks

1.       Efforts should be made to locate a prospective purchaser. The stock may be sold through regular sale procedures for acquired property.

Note:

For closely held corporations, the persons most likely to be interested purchasers are other stockholders. It may be worthwhile to summons for a list of registered shareholders if one cannot be obtained voluntarily.

2.       If the stock cannot be disposed of through sale, area counsel should be consulted to determine whether any legal action, by the United States , as owner of the stock interest of the taxpayer, would be appropriate under the law.

5.10.7.9.3  (10-01-2004)
Acquired Notes

1.       Acquired notes will be forwarded to Technical Services for determination of the action that is appropriate. The Technical Services Group Manager will determine whether a sale is necessary, or whether the provisions of the instrument are such that demand for payment can be made upon a person obligated thereunder within a reasonable time after acquisition. In making this determination, area counsel should be consulted if there is any question as to the legality of the instrument or of the proposed action.

2.       If it is determined that demand for payment will be made, the Technical Services Group Manager will prepare a letter to the person obligated to make payment on the note informing him/her that the note was acquired by the United States through a sale under IRC 6335 and that further payments on the note are to be made to the United States Treasury.

3.       If it is determined that the note should be offered for sale rather than demand for payment made from the person obligated, the Technical Services Group Manager will request the appropriate area office to attempt to dispose of the note by public sale.

Exhibit 5.10.7-1  (10-01-2004)
Pattern Letter P–338 (Agreement to Bid) Reference: 5.10.7.3.1

Exhibit 5.10.7-2  (10-01-2004)
Collateral Deposit Record Reference: 5.10.7.3.1(5)

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Exhibit 5.10.7-3  (10-01-2004)
Pattern Letter P–637 (Notice of Public Auction Sale - Redeemed Property) Reference: 5.10.7.3.5

Exhibit 5.10.7-4  (10-01-2004)
Pattern Letter P-1627 (Notice of Sealed Bid Sale - Redeemed Property) Reference: 5.10.7.3.5

Exhibit 5.10.7-5  (10-01-2004)
Pattern Letter P–339 (Notice of Public Auction Sale - Other than Redeemed Property) Reference: 5.10.7.3.5

Exhibit 5.10.7-6  (10-01-2004)
Pattern Letter P–340 (Notice of Sealed Bid Sale - Other than Redeemed Property) Reference: 5.10.7.3.5

Exhibit 5.10.7-7  (10-01-2004)
Opening Statement for Auction - Sale of Acquired Property Reference: 5.10.7.5.2

Exhibit 5.10.7-8  (10-01-2004)
Pattern Letter P–341 (Certificate of Sale of Personal Property) Reference: 5.10.7.5.7

Exhibit 5.10.7-9  (10-01-2004)
Pattern Letter P–342 (Certificate of Sale of Seized Property - Securities) Reference: 5.10.7.9.1

Exhibit 5.10.7-10  (10-01-2004)
Pattern Letter P–343 (Transmittal of Securities to Bureau of Public Debt) Reference: 5.10.7.9.1