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Redemptions |
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| serial number. |
| amount required to redeem. |
| date of sale. |
| date redemption right expires. |
| forced sale value. |
| date funds required. |
| amount prospective purchaser will pay for property. |
| approximate repayment date. |
| name and address of taxpayer. |
| person/organization to whom check is payable. |
| IRS office and person to whom check should be sent. |
5.12.5.2.1 (02-22-2000)
Revolving Fund for Property Redemption
- A revolving fund was created for the redemption of real property by the United States, based on the Government's federal tax lien. (See IRC 7810 and IRC 7425(d).)
- By exercising its power of redemption, the Government can purchase property sold at distress prices and resell the property at a profit. In some instances this procedure is the only means by which Federal tax liabilities can be collected.
- When redeemed property is sold, the proceeds of the sale, to the extent of the costs of redemption, are to be redeposited in the revolving fund. The remaining proceeds are applied in satisfaction of the taxpayer's liability. Any surplus is returned to the parties legally entitled to them.
- If Technical Support cannot determine who is entitled to the surplus funds, the case will be referred to area counsel for an advisory legal opinion prior to making disposition of the proceeds.
5.12.5.2.2 (02-22-2000)
Advances from the Revolving Fund
- When the Revenue
Officer secures a bidder, a report will be forwarded to
Manager, Technical Support. The following information is
required in the revenue officer's report:
- serial number
- amount required to redeem
- estimated forced sale value of property
- amount of agreed bid
- date check needed
- date of sale
- date redemption right expires
- approximate repayment date and
- person or organization to whom check is payable
- IRS office and person to whom check should be sent.
- Advances will be returned immediately when a redemption is canceled.
- Forward a copy of the cancellation notice to the redemption coordinator.
- Prepare and provide a
quarterly report to the Office of Program/Process
Analysis on the status of cases open over 60 days.
Include the:
- redemption serial number,
- expected repayment date,
- status of the redemption, and
- an explanation when there is a need to extend the repayment date.
5.12.5.3
(02-22-2000)
Tender of Amount to Redeem
- Tender is defined as a proffer of money. There must be an actual proffer of money as distinguished from mere proposal or proposition to proffer it.
5.12.5.3.1 (02-22-2000)
Proffer of Money
- The employee who has been designated to tender the amount required to redeem should be accompanied by at least one witness, preferably by a Technical Support advisor or technician or an attorney from Area Counsel.
- In the event that the tender to redeem is refused, a joint report of the transaction should be prepared and forwarded through Technical Support to Area Counsel for an advisory opinion and guidance as to the next action to be taken in contemplation of local law procedures.
- The report should include a request for instructions as to the immediate disposition of the check that had been tendered; i.e., deposit in Director's account, pay into Registry of a Court, etc.
- See IRM 5.12.5.4 for preparation and disposition of the certificate.
5.12.5.3.2 (02-22-2000)
Proper Person
- It is essential that a timely tender of the amount required to redeem be made to the proper person. Even if the person who purchased the property at the foreclosure sale conveys it to another, the Service may still redeem the property from the subsequent purchaser. The advice of Area Counsel should be solicited to ascertain the proper party and amount to be tendered.
5.12.5.3.3 (02-22-2000)
Amount To Be Paid
- In any case in which
the United States redeems real property under 28 USC
2410 or IRC 7425, the amount to be paid for the property
will be the sum of:
- the actual amount paid by the purchaser at such sale (which, in the case of a purchaser who is the holder of the lien being foreclosed, shall include the amount of the obligation secured by such lien to the extent satisfied by reason of such sale),
- interest on the amount paid (as determined under (a) above) at 6 percent per annum from the date of such sale,
- the amount (if any) equal to the excess of the expenses necessarily incurred in connection with such property after the sale but before redemption, over the income from such property plus (to the extent such property is used or allowed to be used by the purchaser) a reasonable rental value of such property, and
- the amount, if any, of a payment made by the purchaser (or successor in interest) after the foreclosure sale to a holder of a lien senior to that foreclosed.
5.12.5.4
(02-22-2000)
Redemption Certificate
- Certificates of redemption will be issued when investigations are complete and all statutory requirements are met.
5.12.5.4.1 (02-22-2000)
Certificate of Redemption
- If an area director exercises the right of redemption he or she will apply to the officer designated by local law for the documents necessary to evidence the fact of redemption and to record title to the redeemed property in the name of the United States.
- If no such officer has been designated by local law, or if the office so designated fails to issue the necessary documents, the area director is authorized to issue the certificate of redemption. Preparation and disposition of the certificate of redemption will be accomplished by Technical Support.
- There is no authority to redelegate the authority to sign the certificate of redemption below the area director's level.
5.12.5.4.2 (02-22-2000)
Preparation and Disposition of Certificate
- Area Counsel will provide the Manager, Technical Support or other designated employee in charge of the function, instructions as to the form and control of the certificate to be used in each jurisdiction.
- The Certificate of Redemption may be prepared either before the check is delivered to the payee or immediately afterwards provided sufficient time exists to permit filing the certificate before the redemption period expires.
- The certificate will be
prepared in duplicate by Technical Support and disposed
of as follows:
- Original to be filed with recording official.
- Duplicate to be retained by Technical Support.
- Technical Support will be responsible for periodic follow-up action until the redeemed property is disposed of.
5.12.5.4.3 (02-22-2000)
Filing Certificate
- The area should promptly cause the certificate to be recorded in the proper registry of deeds.
- If the State in which the real property is redeemed has not designated an office in which the certificate may be recorded, the certificate shall be filed in the office of the clerk of the United States District Court, for the judicial district in which the redeemed property is situated.
- Area Counsel should be requested to indicate the proper place for recording the certificate in each jurisdiction.
5.12.5.5
(02-22-2000)
Administration of Redeemed Property
- The Manager, Technical Support, will periodically request from the Area office involved the current status of redeemed properties.
- The group manager will see that redeemed property located within the jurisdiction of the Area office is maintained as determined necessary. Ordinary and necessary expenses may be incurred in the preservation of the property. These expenses may include the cost of minor repairs to the property if deemed necessary for its preservation. The procedures relating to the protection of property the during period of seizure, are also applicable to redeemed property.
- Estimated expenses expected to be incurred in connection with the preservation or sale of the property should be reported by memorandum to Area Procurement so that necessary funds may be obligated. The memorandum should identify the property and provide the amount of expenses.
5.12.5.5.1 (02-22-2000)
Lease and Sale of Redeemed Property
- Authority to sell redeemed property is contained in IRC 7506 (real property). The administration and disposition of real property is the responsibility of the Area Director of the area in which the real property is situated. In the case of real property, the Commissioner 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.
- 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 redeemed. If there is doubt as to which area director is to have charge of the property, the pertinent facts should be reported to the Headquarters Office (Attention: S:C:CP:FP:T1) so that a designation may be made.
5.12.5.5.2 (02-22-2000)
Lease of Redeemed Property
- 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. The initial determination will be made by the Manager, Technical Support, based upon the circumstances, including any recommendation of the Area office involved. However, the final decision rests with the area director and his or her approval must be secured before the property is offered since the director must sign the lease.
- If it is determined
that redeemed property will be leased and a prospective
leasee has been secured, the Manager, Technical Support,
should request that Area Counsel 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 certified or cashier's check or
money order and sent directly to the Manager, Technical
Support. Area Counsel should be furnished the following
information:
- 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 property maintenance, authorized alterations, improvements, etc.
- any other pertinent information.
- Upon receipt of the
proposed lease agreement from Area Counsel, the Manager,
Technical Support, will:
- review the lease to see that it conforms to the intent of the parties involved.
- forward original and duplicate to the area director for his or her signature.
- After the area director
has signed the lease agreement, both copies will be
returned to the Manager, Technical Support, who will:
- secure the signature of the lessee on the original lease agreement.
- 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.
- file original lease agreement in the related Disposition of Redeemed Property case file.
- If a payment is not received within a reasonable time after the due date, the Manager, Technical Support, should contact the lessee to secure payment. If payment is not received, Area Counsel should be consulted as to the legal action required.
5.12.5.5.3 (02-22-2000)
Transmittal of Proceeds
- A transmittal
memorandum entitled "Proceeds from the Sale of Redeemed
Property" and any accompanying remittances will be
forwarded to Technical Support. The memorandum will
contain the following:
- name and
address of the taxpayer as shown on the Form
4376 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.
- name and
address of the taxpayer as shown on the Form
4376 submitted at the time redemption of the
property was
- Technical Support will transmit the memorandum, remittances, and the purchaser's deposit (if any) held by the cashier to Financial Services. Technical Support will be responsible for returning any other deposits submitted with unsuccessful agreements to bid unless the depositor defaulted on the agreement.
- Where payment of the full purchase price is deferred, the purchaser's deposit will be promptly forwarded to Financial Services for deposit to the revolving fund. This also applies to any deposit the purchaser may have made with an agreement to bid prior to the sale. The deposit should be forwarded in the same manner as directed in (1) above except that the memorandum will be entitled "Deposit from Sale of Redeemed Property." The purchaser's payment of the balance of the purchase price should be processed following instructions in (1) above with a copy of the memorandum which transmitted the deposit attached to that transmitting the balance of the proceeds.
5.12.5.5.4 (02-22-2000)
Report of Sale
- Technical Support will
receive the original and duplicate, with all
attachments, of the report entitled "Report of Sale of
Redeemed Property." The report 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 revenue officer conducting the sale and by the employee who assisted in the sale. The statement will certify 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.
- Vouchers for sale
expenses should be attached to the duplicate report.
Attachments to the original of the report will include:
- copy of the notice of sale.
- triplicate of the memorandum transmitting the sale proceeds.
- Forms 2593–A, Sealed Bid For Purchase of Property Redeemed by the United States, if applicable.
- tabulation of bids.
- Upon receipt of the
reports, Technical Support will:
- note the ICS history screen.
- forward the duplicate report, with any vouchers not previously submitted, to Financial Services.
- file the original of the report and attachments in a suspense file pending receipt of the deed from Area Counsel. When the net proceeds of sale are received, they will be applied in accordance with IRM 5.12.5.5.6.
- Forward a closing report with the information outlined in Exhibit 5–2 to the Director, Technical & Insolvency (S:C:CP:FP:T1).
5.12.5.5.5 (02-22-2000)
Deed to Real Property
- Regulations under IRC 7506 provide that, upon payment in full of the purchase price, the area director will issue a deed to the purchaser.
- The deed will be
prepared in duplicate by Technical Support and forwarded
to Area Counsel for approval. When the approved deed is
received in the area director's office, the Manager,
Technical Support, will:
- remove the original report of sale from the suspense file.
- secure the signature of the area director on the original deed.
- furnish the original deed to the purchaser.
- note on the duplicate deed the date the original deed is executed and the date it is delivered to purchaser.
- file duplicate deed and original report of disposition in the related Record of Disposition of Redeemed Property case file.
5.12.5.5.6 (02-22-2000)
Application of Funds From Sale
- Immediately after the sale, the entire gross proceeds should be forwarded to the Beckley Administrative Service Center for processing distribution.
- The area memorandum
transmitting the remittance should:
- identify the transaction for which the funds were advanced so that no difficulty will be encountered in restoring the amount of the advance,
- identify taxpayer's account to which the excess over the amount advanced is to be applied, and
- request that a
copy of the transmittal be returned to the area
office with the excess funds so that the area
will have no difficulty properly applying the
excess funds.
- When partial proceeds from the sale are received, the following information must be provided the serial number of the case, the total advanced from the fund, the amount realized from the sale, the amount of any partial proceeds previously submitted, the amount being submitted, the amount to be recorded as a replenishment of the fund, the amount of loss to the FTLRF estimated, and the amount of administrative costs incurred above proceeds estimated for loss incurred.
- When full or final proceeds are received, the following additional information must be provided: the amount of administrative costs, the amount of tax liability satisfied, the amount of any surplus, the amount of loss to the FTLRF, and the amount of administrative costs incurred above proceeds.
- The area office will forward a copy of the supporting documentation to the Area Director.
- The Manager, Technical Support will notify the SB/SE Field Budget Officer immediately by FAX. The FAX will include all of the information listed in (1)a. and b., as applicable.
- Upon its receipt, the fiscal management disbursing officer will deposit the check, credit the appropriation with the amount originally disbursed to the area, and forward the remainder by check to the area director for credit to the taxpayer's account. Any legitimate expenses incurred in the sale will first be deducted from this amount and the net amount will actually be credited to the taxpayer's account by the area office.
- If the revolving fund is not reimbursed within 60 days of the approximate date set for repayment, the Manager, Technical Support will initiate a memorandum to the Beckley Administrative Service Center to explain why the redemption or sale was postponed, the serial number of the case, amount to redeem, and to indicate the new proposed repayment date. If the proposed redemption has been canceled, the check advanced for the redemption of property will be returned without delay to the Beckley Administrative Service Center.
- If the revolving fund is not reimbursed by the new repayment date because of default, litigation, etc., the Manager, Technical Support will submit a status report monthly, until such time as the fund is reimbursed.
- Funds realized by the Government from the sale of redeemed property are to be applied in the same manner as in the case of funds realized from levy proceedings. A record of the distribution of all redemption proceeds will be maintained in the redemption file that is kept by Technical Support.
- If there are surplus
proceeds, Technical Support will deposit those funds in
the Deposit Fund Account located at the Service Center.
A memorandum will be completed in triplicate. The
memorandum will be titled "Surplus Proceeds—Redemption
Sale" and will contain the following:
- taxpayer's name and address;
- the Redemption Serial Number;
- amount of proceeds; and,
- date of the sale.
- The original of the memorandum will be used as a posting document to submit the funds to the Collection function teller. A copy of the memorandum will be placed in the Redemption file and in the "Surplus Proceeds—Redemption Sale" File to be established.
- Record of the excess proceeds will be referenced in the history section of ICS. Indicate the amount as "Surplus Proceeds—Redemption Sale."
- Junior lienholders are generally not entitled to the excess proceeds from sale of redeemed property, and they should not be notified.
- Excess proceeds will be refunded to the taxpayer. Interest should be paid on excess proceeds from sale of redeemed property refunded to the taxpayer. (IRC 6611).
5.12.5.6
(02-22-2000)
Release of Right of Redemption—Judicial Sales
- Whenever a judicial sale of real estate is made to satisfy a lien that is prior to that of the United States, the United States shall have not less than 120 days from the date of that sale within which to redeem the property. (See Section 2410(c) of Title 28 U.S.C.)
- Authority to release any right of redemption is delegated to the Department of Justice by section 0.70 of Title 28 of the Code of Federal Regulations. In any case involving a private request, a consideration equal to the value of the right of redemption or $50, whichever is greater, is required by the Department of Justice and must be paid for the release. However, no consideration will be required for releases of right of redemption issued to Federal agencies when it has been determined that the redemption right has no value.
- Any person desiring a release of right of redemption in respect of a Federal tax lien arising from a judicial proceeding shall submit to the United States Attorney for the area in which property subject to the right is located an application in quadruplicate, executed under penalties of perjury, in form and content as set forth in the Department of Justice Form No. OLD–225, requesting that the right be released. Form No. OLD–225 may be secured by applicants from the office of the United States Attorney.
- The approval of the release of the right of redemption rests with the area director. If desired, this authority may be redelegated to the Manager, Technical Support.
5.12.5.6.1 (02-22-2000)
Applications for Release of Right of
Redemption—Judicial Sale
- Whenever a judicial sale of real estate is made to satisfy a lien that is prior to that of the United States, the United States will have not less than 120 days from the date of that sale within which to redeem the property. (See Section 2410(c) of Title 28 U.S.C.)
5.12.5.6.2 (02-22-2000)
Investigation of Applications
- Applications in which field work is required shall be investigated promptly by a revenue officer in order that final disposition may be made by Technical Support within 20 days. The revenue officer assigned to investigate the application shall verify each item contained in the application or which, in accordance with the requirements prescribed, should have been contained in the application.
- The revenue officer shall gather sufficient facts in order that a determination may be made as to whether the United States should release its right of redemption.
5.12.5.6.3 (02-22-2000)
Referral of Applications
- Applications for release of right of redemption, together with remittance and all necessary evidence, will be sent by applicants directly to the United States Attorney. Any applications received in the area office will be referred to Technical Support for immediate transmittal to the United States Attorney.
- The United States Attorney will forward the original and two copies of the application, together with one set of the appraisals, to Technical Support for verification and recommendation. Applications received in the area office from any Federal agency may be processed by Technical Support without first being referred to the United States Attorney.
- If an application is complete and proper, a field investigation will not be required unless there is information in Technical Support that indicates such investigation is warranted. A field investigation will not be required on any application made by the Veterans Administration or any other Federal Agency regardless of value or use. An exception to the general rule may be determined by the Manager, Technical Support. In those rare cases requiring a field investigation, a copy of the application and any attachments should be promptly forwarded with Form 2209, Courtesy Investigation, to the Area office having jurisdiction in the area where the property is located. The original and one copy of the application and attachments should be retained for reference and follow-up purposes.
- Technical Support will complete Part B of any application that does not require a field investigation. Before a recommendation is made, Technical Support must be satisfied that the appraisals were made by disinterested persons and that they were qualified to make appraisals. A memorandum report specifically stating that the appraisers involved are disinterested and qualified will be prepared and accompany the application. In those cases in which the applicant is a Federal agency, the appraised value furnished in the application will be accepted as correct and no statement will be necessary.
5.12.5.6.4 (02-22-2000)
Report of Investigation
- The revenue officer's report of investigation will be prepared when the investigation is completed. Area management will determine whether the report will be on Form 4376, Report of Investigation or in memorandum form. The report will specifically state whether the appraisers involved are disinterested and qualified.
- Revenue officers will refer their report, together with the copy of the application and all exhibits, to the Group Manager, who will upon approval, forward the entire file to Technical Support for review and approval.
5.12.5.6.5 (02-22-2000)
Disposition of Application
- Upon receipt of the revenue officer's report, Technical Support will review it to ensure that there is sufficient information to determine whether the right of redemption should be released. The Manager, Technical Support, will complete the application by indicating the Service's recommendation, over the Director's signature.
- Upon completion of the recommendation, the original and one copy of the application, with copies of the revenue officer's report attached, will be forwarded to Area Counsel. A copy of the application, the set of appraisals and a copy of the revenue officer's report will be filed by Technical Support.
- Upon verification (usually by a copy of a letter sent to the applicant, and receipt of the payment of the amount required for the release of the right of redemption), such payment shall be applied to the taxpayer's outstanding liability.
5.12.5.7
(02-22-2000)
Release of Right of Redemption—Nonjudicial Sales
- IRC 7425(d) provides for redemption, by the Government, of real property sold in a nonjudicial proceeding when the sale is made to satisfy a lien that is prior to that of the United States. The 120-day (or longer, if State law so provides) period for redemption is applicable.
- Authority to release any such right of redemption is delegated to the area director for the area in which the property is located. In any case involving a private request, a consideration equal to the value of the right of redemption is required and must be paid for the release.
- In nonjudicial proceedings, if it is determined that the right of redemption is valueless, no consideration shall be required to waive the Government's redemption right from either a private individual or Federal agency.
- Any questions arising as to the value of the right of redemption shall be referred to Area Counsel for an advisory opinion.
5.12.5.7.1 (02-22-2000)
Application for Release of Right of Redemption—Nonjudicial
Sales
- IRC 7425(d) provides for redemption, by the Government, of real property sold in a nonjudicial proceeding when the sale is made to satisfy a lien that is prior to that of the United Sates. The 120-day (or longer, if State law so provides) period for redemption is applicable.
5.12.5.7.2 (02-22-2000)
Investigation of Applications
- Applications in which field work is required will be investigated promptly by a revenue officer in order that final disposition may be made by Technical Support within 20 days of receipt. The revenue officer will verify every item contained in the application, or which should have been in the application.
- The revenue officer shall gather sufficient facts to determine whether the United States should release its right of redemption. The investigation may be terminated when it is found that there is an encumbrance(s) prior to the foreclosing lien holder in excess of the value of the property.
- Except in unusual cases, it will not be necessary for the revenue officer to secure outside appraisals to establish the value of the property prior to making a recommendation.
5.12.5.7.3 (02-22-2000)
Report of Investigation
- The revenue officer's report of investigation shall be prepared upon completion of the investigation. Area management will determine whether the report will be on Form 4376, Report of Investigation or in memorandum form. The report will be forwarded with the copy of the application and all exhibits to the group manager. He or she will review the report and, upon approval, return the file to the revenue officer to be forwarded with the daily report.
5.12.5.7.4 (02-22-2000)
Referral of Applications—Nonjudicial
- Applications for release of right of redemption, and all necessary evidence, will be sent by applicants to the area director, attention: Manager, Technical Support, for the area in which property subject to the right is located. Applicants should be furnished a copy of Publication 487, How to Prepare Application Requesting the United States to Release Its Right to Redeem Property Secured by a Federal Tax Lien.
- If an application is complete and proper, a field investigation will not be required unless there is information in Technical Support that indicates such investigation is warranted. A field investigation will not be required on any application made by the Veterans Administration or any other Federal Agency regardless of value or use. An exception to the general rule may be determined by the Manager, Technical Support. In those rare cases requiring a field investigation, a copy of the application and any attachments should be promptly forwarded with Form 2209, Courtesy Investigation, to the Area office having jurisdiction in the area where the property is located. The original and one copy of the application and attachments should be retained for reference and follow-up purposes.
- Applications arising out of nonjudicial proceedings will be processed promptly. Cases should be forwarded to area counsel when an advisory opinion is needed on a specific issue.
- The Manager, Technical Support, will prepare a release of the right of redemption for the signature of the area director. If desired, authority to issue such releases may be redelegated to the Manager, Technical Support. The release shall be prepared in duplicate, the original to be given the applicant, upon receipt of the amount determined to be the Government's interest, and the duplicate to be retained by Technical Support.
- Any payment secured for the release of the right of redemption shall be applied to the taxpayer's outstanding liability.
- Because of limited use, the Headquarters Office will not print and furnish a form for the release of the right of redemption. Area counsel should provide the Manager, Technical Support, instructions as to the form to be used in each jurisdiction.
5.12.5.7.5 (02-22-2000)
Disposition of Applications
- Upon receipt of the revenue officer's report by Technical Support, the report will be reviewed to ensure that there is enough information to determine whether the United States should exercise or release its right of redemption. The Manager, Technical Support, under proper authorization, will complete the application indicating the Service's recommendation.