Part 5. Collecting Process

Chapter 10. Seizure and Sale

Section 4. Actions Prior to Sale

5.10.4  Actions Prior to Sale

5.10.4.1  (01-01-2006)
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 develop a written sale plan using the standardized format for all cases. 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 5.10.4.2, Redemption of Property Prior to Sale, provides the procedures for redemption of the property prior to sale and IRM 5.10.4.3, Conditions for Release of Seized Property, provides the procedures for release of property prior to sale.

  3. The ICS seizure application must 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  (07-03-2009)
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 a jeopardy levy or assessment. The Service must then determine whether under the circumstances:

    • Making the assessment was reasonable

    • The amount of the assessment is appropriate

    • The 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 from a notice of deficiency 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

    • During the period for administrative and judicial review of the jeopardy assessment

  4. IRC 6863(b)(3)(B) 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 5.10.4.15.1, 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 Advisory.

  6. A petition can be filed with the Tax Court for review of 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 Federal Tax Lien would be adequate protection during the suspended period. If the Notice of Federal Tax 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 5.17.3.3.6, Jeopardy and Termination Cases).

  9. Property seized pursuant to assessments made under IRC 6851 or 6852 (Termination Assessments) are subject to the same stay of sale provisions stipulated in Code section 6863(b)(3) for property seized pursuant to a jeopardy assessment. 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  (07-03-2009)
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 described in IRC 6335(a) is given. See IRM 5.10.3.19, Notice of Seizure Form 2433 Delivery.

  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 5.12.2.20, Refiling the NFTL) 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 area 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 with an effective date prior to the pre-seizure CSED to allow for application of the proceeds from the seizure. Once the proceeds are posted, the revenue officer should request input of TC 521.

  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 Notice of Federal Tax Lien should be filed within the last thirty days of the refile period (IRM 5.12.2.20.2, Required Refiling Period) 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. Advisory will prepare and file Form 668-Z, Certificate of Release of Federal Tax Lien (IRM 5.12.2.20.6, Release of Refiled NFTL), once the asset has been disposed of and any applicable redemption period has expired.

5.10.4.2  (01-01-2006)
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 5.10.1.3.3.3.1, Equity Determination - Expenses of Sale, 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 he or she is taking back custody of the property.

  5. IRM 5.10.4.5, Actions to Release and Return Property, contains the instructions for documenting the release of levy, returning the property to the taxpayer, payment of expenses, and application of proceeds when property is released or redeemed prior to sale.

    Note:

    Expenses and proceeds for property redeemed prior to sale must be properly applied to the taxpayer's account to comply with IRC 6342.

5.10.4.3  (07-03-2009)
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 Advisory.

  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 required 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

    • A CDP notice was not given, or a CDP hearing is pending

    • Other prohibited seizures as listed in IRM 5.10.1.2, List of Prohibited Seizures

  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  (07-03-2009)
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 5.17.3.5.6.3, Wrongful Levy). 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, or thereafter

    • 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 Advisory 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 Advisory 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 Examination and the Criminal Investigation function.

  8. If it is determined that the property should be released to the third party making the wrongful levy claim, the property should be released following the procedures in IRM 5.10.4.5, Actions to Release and Return Property. 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. If the claim is disallowed, Advisory should notify the claimant in writing as soon as possible of the reason for disallowing the claim and of the right to bring suit against the government. (See IRM 5.17.5.17.1 Wrongful Levy, and IRM 5.17.5.17.3, Recovery of Property). If the claim is disallowed because it was not made within nine months from the date of the levy, send the claimant Letter 3973 via certified mail. If the claim is disallowed because it does not meet one of the requirements detailed in IRM 5.10.4.4(1), Release of Wrongful Seizures for Property Not Yet Sold, send the claimant Letter 3974, signed by the appropriate delegated official, via certified mail. Disallowance of the claim may be appealed through the Collection Appeals Program (CAP).

  10. IRM 5.10.6.15, Wrongful Seizure - Payment of Claims After Sale, contains the procedures to follow when a wrongful levy claim is received after the property has been sold.

5.10.4.5  (07-03-2009)
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, other than fees for which the Service is already obligated.

  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 must 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 payments were received for the release or redemption, the expenses will be debited with a TC 360 and paid simultaneously with the application of the payments by inputting the related credit through a TC 694. The RO or PALS will prepare Form 2436R (See IRM 5.10.4.6, Seized Property Release/Redemption Report) to request input of TC 360 and/or a TC 694.

    Note:

    All payments received for the release or redemption of seized property must be submitted with Form 2433, Part 8A- Remittance Processor to the Ogden Submission Processing Center and should not be submitted on Form 795. Do not post release/redemption payments to the balance due accounts on ICS. The module balances will be automatically updated after the Form 2436R (See IRM 5.10.4.6, Seized Property Release/Redemption Report) is processed. The documents should be submitted on Form 3210 (with the seizure number included) to the following address:
    IRS - Ogden Submission Processing Center
    Attn: Payment Perfection
    1973 N. Rulon White Blvd.
    Mail Stop 2003 (for remittances over $100,000)
    Mail Stop 1999 (for remittances $100,000 or less)
    Ogden, UT 84404

  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 Advisory 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 "Signature of Recipient" space.

  12. If the taxpayer or person from whom the property was seized cannot be located to take possession of the released or redeemed property, area counsel and the field budget officer should be contacted, through Advisory, for advice on the disposition of the property.

  13. The revenue officer or PALS will indicate disposition of the property by checking the appropriate blocks on the pertinent parts of Form 2433 and entering the dollar amount received (if any) on Parts 5 and 7B. Advisory will enter the corresponding information on the related Part 6 in its files. When property is released or redeemed, after properly posting the expenses and credits using Form 2436R, the only required actions are:

    • Completion of Form 2433

    • Documenting the case history with the release/redemption information

    • Forwarding the closing documents (Parts 7B and 8A of Form 2433, Part 3 of Form 2433 or Form 668-E, and any expense related information) to Advisory

  14. When individual items are released back to the taxpayer after the original Form 4585 has been delivered to the taxpayer (IRM 5.10.4.8.2, Delivery of Form 4585, Minimum Bid Worksheet), the minimum bid will need to be revised to reflect the loss of the value of the assets released. The taxpayer will not be allowed additional appeal rights if the FMV of the remaining assets is not being changed (IRM 5.10.4.8.7, Revised Minimum Bid Form - No Opportunity to Protest). Document the case history with the fair market value of the assets released and the total fair market value of the remaining assets. Use the new fair market value in the preparation of the revised Form 4585. The same percentage reductions that were used in determining the original minimum bid should normally be used in determining the new minimum bid. Enter an explanation in item 8 of Form 4585, and cross off the information that explains the appeal rights on the reverse of the form. The revised form can be hand delivered to the taxpayer or mailed by regular mail. It may also be delivered to the taxpayer at the same time the release documents are provided to the taxpayer so the reasons for the revised minimum bid can be explained to him/her at that time.

  15. When another government agency (e.g., FBI, etc.) becomes involved after a seizure, a release of levy will be prepared before any seized property is released or turned over to that agency. In any event, advice of area counsel, through Advisory, will be obtained before any action is taken to turn over the property.

  16. The employee who took the action to release the property, generally the revenue officer or the PALS, must update the ICS seizure and sale application when the property is released or redeemed.

5.10.4.6  (07-03-2009)
Form 2436R, Seized Property Release/Redemption Report

  1. Whoever releases the seizure, revenue officer or the PALS, will prepare Form 2436R, Seized Property Release/Redemption Report (Exhibit 5.10.4-9) when either of the following conditions exist when releasing a seizure:

    1. Expenses are incurred but not paid directly by the taxpayer and the property is released or redeemed prior to sale.

    2. Payments are received from the taxpayer and the property is released or redeemed prior to sale.

  2. The Form 2436R must be completed and forwarded to Advisory within 10 calendar days of the payments being received from the taxpayer.

  3. The form should be completed after all receipts and vouchers for expenses have been reviewed. Whoever releases the seizure, revenue officer or PALS, must ensure all expenses are debited against the balance due accounts through a TC 360 as they will be the first items paid from the release/redemption proceeds.

  4. Expense information should be included as follows:

    1. The expense will be entered in item 5d. A schedule of the expenses incurred will be entered in item 7.

    2. All expenses will be charged to the first tax period listed on Form 2436R.

    3. Expenses that were paid directly by the taxpayer should not be included.

  5. The revenue officer or PALS should verify the balance due on IDRS to ensure the proper posting of release/redemption payments prior to completing item 5, Application of Payments.

  6. The seizure number of the related Form 2433, Notice of Seizure, should be entered in the upper right portion of Form 2436R.

  7. The revenue officer or PALS should then sign the Form 2436R. Part 4 will be retained with the ICS paper file, and parts 1,2, and 3 will be forwarded to Advisory. In addition to Form 2436R, the revenue officer or PALS must also send copies of all receipts, vouchers, and other related documentation for expenses of the seizure.

  8. Advisory will review Form 2436R upon receipt, and will enter the appropriate information onto Form 6670, Seizure Disposition Report. If no corrections are needed, Parts 2 and 3 will be transmitted immediately to Accounting Control/Services for application of the payments. Part 1 will be maintained in the seizure file. Advisory will be responsible for following up on the application of the payments from the Form 2436R and should contact the RACS unit to resolve any misapplied funds. It is extremely important that all expenses be debited with a TC 360 and the applicable TC 694 credit be posted to the account so that all payments from the seizure are applied according to IRC 6342(a).

5.10.4.7  (07-03-2009)
PALS Sale Expenses

  1. The PALS must determine a minimum price below which the property cannot be sold taking into account the expense of the levy and conducting the sale, and whether it might be in the best interest of the United States to bid the property in at that minimum bid price for property sold under IRC Section 6335. IRC Section 6341 requires that the Service determine expenses to be allowed in all cases of levy and sale. Treasury Regulation 301.6341-1 states that "Such expenses shall include the expenses of protection and preservation of the property during the period subsequent to the levy, as well as actual expenses incurred in connection with the sale thereof."

  2. PALS may incur as expenses of sale, goods or services needed to determine the value of the property to be sold as well as to protect and preserve the value of the property. These types of actions permit the PALS to determine the value of the property in order to set the minimum bid and to determine whether the United States should purchase the property. In most, if not all cases, the inherent value of the property will be preserved and such expenses will also physically preserve and protect the seized property by preventing it from wasting. Such expenses may include, but are not limited to:

    • Installing a battery in a vehicle to determine its value as a working automobile,

    • Hiring a vendor to mow a lot to determine desirable (or undesirable) topography, and

    • Engaging a mechanic to diagnose a problem and in conjunction with the diagnosis possibly make a minor repair that restores a piece of valuable construction or farm equipment to working order

  3. Other repairs and maintenance may also be necessary to protect and preserve the property, examples include:

    • Cleaning a swimming pool (even if seized in a dirty condition) to prevent further damage to the pool interior and equipment,

    • Repairs to a leaking roof or broken window to prevent water damage to the interior of the building, and

    • Regular mowing to ensure compliance with local codes and ordinances and to discourage rodent and snake infestations.

  4. PALS should exercise sound judgment to determine, on a case by case basis, what expenditures to make and whether those expenditures can be charged as expenses of sale. To make this determination, consider the following:

    • Expenses made solely to improve or enhance the value of property or the price brought at sale should not be incurred,

    • Expenses made to preserve the value of the property and prevent wasting may be incurred as an expense of sale, and

    • Expenses to determine the value of the property to calculate the minimum bid and to make a bid in decision may be incurred as an expense of sale.

  5. Purchases of tables, chairs, signs or equipment that is used for multiple sales is not an expense of sale for a particular piece of seized property. Such expenditures should be taken as an administrative expense.

5.10.4.8  (07-03-2009)
Establishment of the Minimum Bid

  1. IRC 6335 requires that a minimum bid price be established for seized property offered for sale. The minimum bid price will be fixed by the PALS in charge of the sale. The primary purpose of establishing a minimum bid price is to avoid selling the property at substantially less than the forced sale value of the taxpayer's interest in the property.

    Note:

    Establishment of a minimum bid is not required for perishable goods sales (IRM 5.10.4.15, Pre-Sale Procedures for Perishable Goods).

  2. The minimum bid price must be correctly determined to provide for the equitable preservation of both the taxpayer's interest and the government's interest in the property; however, Policy Statement P-5-35 limits the minimum bid to the government's lien interest in the property plus costs. (IRM 1.2.14.1.9, Establishment of minimum bid in distraint sales).

  3. Form 4585, Minimum Bid Worksheet, is used in determining the minimum bid price (Exhibit 5.10.4–1). The fair market value on Form 2433 is the starting point for the calculation. This value should have been previously determined in the draft minimum bid and in the preparation of Form 2433. The basis for how the fair market value was determined must be documented in Item 5 of Form 4585. Use Item 13 on Form 4585 if additional space is needed to document how the fair market value was determined.

  4. If facts not known at the time of the seizure justify a change to the property value, it is not necessary to adjust the amounts on Form 2433 for accounting control purposes; however, the reason an adjusted figure is used as a basis for computing the minimum bid price should be fully explained in the history. Differences between the draft minimum bid and the actual minimum bid should also be documented in the case history by the PALS and communicated to the revenue officer.

  5. A property value reduction, not to exceed 25%, should then be taken in order to determine the forced sale value. This reduction is taken in order to reflect the fact that the sale is a forced sale of the property - it is not taking place between a willing seller and a willing buyer. The difficulties associated specifically with a forced government sale, such as no guarantee of clear title, property sold "as is, where is" , and no warranty on the property, should also be considered when determining this percentage. The reason(s) for the percentage reduction are listed in Item 6 of Form 4585.

  6. The forced sale value may then be reduced by a maximum of 20% in order to determine the reduced forced sale value. The PALS should check the appropriate reason(s) for the percentage reduction in Item 8 on Form 4585. Reasons listed on Form 4585 include:

    • Past experience at sales for the type of property seized

    • The possibility that senior lienholders may foreclose on the seized property

    • How the property is titled and if there are other owners of record

    • Whether the purchaser will have to re-negotiate prior encumbrances

    • The effect the redemption period has on finding willing buyers

    • Whether conditional financing is available

    • Whether the property is subject to conditional sale procedures

      Note:

      If there are any other factors that might depress the value of the property at the sale (possible attempts by the taxpayer to disrupt sale, etc.), they should be documented in Item 8 on Form 4585.

  7. The percentage reductions selected should be based on the facts of the case and should not always reflect the maximum allowable reductions. The reasons for the percentage reductions must be documented on Form 4585.

  8. All encumbrances from Form 2434–B that are senior to the first NFTL should then be listed in Item 10. The total of all prior claims should then be subtracted from the reduced forced sale value to arrive at the minimum bid price.

  9. The minimum bid price, in all instances, will be limited to an amount not to exceed the total tax, penalty, interest, lien fees, expenses of levy and sale, and other charges, which represent the Government's lien interest in the seized property (See IRM 1.2.1.14.1.9, Policy Statement P-5–35). If this is the basis for the minimum bid, it must be documented in Item 12 on Form 4585 by checking the box Limited to the Government's Lien Interest .

    Note:

    The Government's lien interest can generally be determined by adding line 3 (Liability) and line 4 (Estimated expenses of sale) from Form 4585. Do not add intervening liens to this amount when calculating the Government's lien interest in the property.

  10. The minimum price for securities traded on the New York Stock Exchange, the American Stock Exchange, regional exchanges, or the National Association of Securities Dealers Automated Quotation System (NASDAQ) will be fixed at not less than 95% of the closing market price as of the day preceding the sale (See IRM 1.2.1, Policies of the IRS, P-5–35(2)). When stocks are involved, enter 0% reduction in Item 6 and enter 5% reduction in Item 8 of Form 4585, and write an explanation that the minimum bid will be 95% of the closing price of the stock on the day before the sale. Form 4585 must still be delivered to the taxpayer, but the taxpayer may not dispute the minimum bid under these circumstances.

    Note:

    If this price is greater than the taxpayer's interest in the property, the minimum bid will still be limited to the taxpayer's interest in the property (IRM 5.10.4.8(9), Establishment of the Minimum Bid).

  11. The minimum bid price for precious metals that are traded by weight on the New York Mercantile Exchange should be set at 80% of the spot price per troy ounce as of the day preceding the sale. For coins that are identifiable, the appropriate percentage should be 95%. When these types of assets are involved, enter 0% in Item 6 and the appropriate (20% or 5%) reduction in Item 8 of Form 4585, and write the appropriate explanation that the minimum bid will be 80% or 95% of the spot price per troy ounce as of the day preceding the sale. Form 4585 must still be delivered to the taxpayer, but the taxpayer may not dispute the minimum bid under these circumstances.

    Note:

    The Service will not guarantee the weight or purity of the gold or silver.

5.10.4.8.1  (07-03-2009)
Decision to Bid In the Property for the Government

  1. Under IRC 6335(e), if the minimum bid price is not reached by bidders at the sale, the Service may purchase the property for the minimum price if it is in the best interest of the government to do so. It is important that the minimum bid price be correctly determined since the taxpayer receives credit on the account for the amount of the minimum bid price, less expenses of levy and sale, when the property is declared purchased for the United States.

  2. Due to the nature of auctions and the fluctuations in the economy, the decision whether or not to bid in the property for the government can be made up until the time the property is declared sold, the sale is adjourned or cancelled. The decision must be documented as part of the sale day case history. In determining when it is in the best interest of the government to bid in property, the PALS should consider the following factors:

    • The threat of foreclosure or repossession by senior encumbrance holders

    • Marketability of the property

    • Cost of maintaining the property

    • Cost of repairing or restoring the property

    • Cost of transporting the property

    • Cost of safeguarding the property

    • Cost of potential toxic waste cleanup

    • Other factors pertinent to the type of property

    • Additional information discovered during the auction and not known prior to the auction itself

    • Risks to the Government

    • Whether to bid in all or part of the property, and if so, based on the contribution to the over-all minimum bid as a factor, what the bid-in price will be when only a portion of the property is bid in for the Government.

  3. The PALS will discuss and secure concurrence from the PALS group manager before bidding in property for the government. If only bidding in a portion of the property, the amount will also be discussed and concurrence needed.

  4. If the decision is made not to bid in the property for the government, the property will be released to the taxpayer if the minimum bid is not offered by a potential buyer at the original sale or, if applicable, at a subsequent sale if the original sale is adjourned (IRM 5.10.5.4, Adjournment Procedures).

5.10.4.8.2  (07-03-2009)
Delivery of Form 4585, Minimum Bid Worksheet

  1. The completed Form 4585 will be submitted to the manager of the PALS for concurrence prior to giving public notice of sale.

  2. After approval of the minimum bid is secured, the PALS will complete the reverse of Part 3 of Form 4585 and will deliver the form to the taxpayer in order to advise the taxpayer of the minimum bid price and the basis for computation. To ensure proper delivery of Form 4585, the PALS must attempt to deliver this form to the taxpayer's place of abode or business if the PALS post of duty is within the collection territory of where the seizure was made. If the taxpayer's residence or business cannot be readily located or the PALS post of duty is not within the collection territory where the seizure was made, Form 4585 must be sent to the taxpayer's last known address by certified mail, return receipt requested, and by regular mail. Document the case history as to the date and method of delivery.

    Exception:

    When a third party, rather than the taxpayer, is the owner of the property, then Form 4585 must be delivered under the above guidelines to the owner of the property. The taxpayer should receive a copy of the Form 4585, but any references to the 10-day appeal timeframes should be deleted. The owner of the property is entitled to appeal the minimum bid, not the taxpayer. Contact Counsel if there are any questions as to whom should receive Form 4585, especially in nominee or alter-ego situations.

  3. A copy of Form 4585 must be forwarded to Advisory within 10 workdays after the copy is provided to the taxpayer.

5.10.4.8.3  (07-03-2009)
Challenges to the Minimum Bid

  1. The taxpayer/owner has 10 days to respond to the minimum bid. Delivery should normally be prior to giving the public notice of sale to permit ample time to finalize the minimum bid price before the sale date. If the taxpayer/owner does not respond within the 10 day waiting period, no further action is required.

  2. The minimum bid price cannot be more than the tax liability plus expenses of sale (See IRM 1.2.1, Policies of the IRS, P-5–35), and the minimum price for securities traded on the New York Stock Exchange, the American Stock Exchange, regional exchanges, or the National Association of Securities Dealers Automated Quotation System (NASDAQ) will be fixed at not less than 95% of the closing market price as of the day preceding the sale (See IRM 1.2.1, Policies of the IRS, P-5–35(2)). Therefore, when the minimum bid price is established by following these provisions, agreement is not required and a request for reevaluation will not be considered.

5.10.4.8.4  (07-03-2009)
PALS Agrees Fully With Challenge to Minimum Bid

  1. If the taxpayer/owner responds with information regarding the property value and the PALS agrees totally with the information, the PALS should revise the minimum bid. The reasons for revision should be indicated under Item 13 of the revised Form 4585.

  2. The revised minimum bid should be delivered under the same provisions as the original minimum bid (IRM 5.10.4.8.2(2), Delivery of Form 4585, Minimum Bid Worksheet) or it may be faxed to the taxpayer/owner if there has been personal contact with the taxpayer or Power of Attorney to discuss the revised minimum bid. The reference to the 10 days in which to protest the minimum bid should be deleted from the reverse of Form 4585. A copy should be forwarded to Advisory within 10 workdays of delivery to the taxpayer/owner.

    Note:

    If, after reviewing the additional information, the PALS determines the sale is no longer expected to result in any net proceeds, the property must be released.

  3. Under these circumstances, the taxpayer/owner does not have an additional opportunity to dispute the revised minimum bid, and there is no requirement to wait an additional 10 days.

5.10.4.8.5  (07-03-2009)
PALS Agrees Partially With Challenge to Minimum Bid

  1. If the taxpayer/owner responds with information regarding the property value and the PALS only partially agrees with the information, the PALS should revise the minimum bid based on his or her analysis of the information submitted. The reasons for revision should be indicated under Item 13 of the revised Form 4585.

  2. The revised minimum bid should be delivered under the same provisions as the original minimum bid (IRM 5.10.4.8.2(2), Delivery of Form 4585, Minimum Bid Worksheet). A copy should be forwarded to Advisory within 10 workdays of delivery to the taxpayer.

  3. If the taxpayer/owner agrees with the revised minimum bid and is willing to waive the 10 day waiting period, a written statement and the taxpayer/owner's signature should be secured on the revised form and the case should be documented. If the signature is not secured, document the case history accordingly and allow the 10 day waiting period to expire. Concurrence with the minimum bid is only required when the minimum bid will be used before the 10 day period the taxpayer/owner would normally have to respond to the minimum bid determination expires.

  4. A copy of the taxpayer/owner's concurrence with the minimum bid, when required, will be forwarded to Advisory to be included in the seizure file. The taxpayer/owner's written signature and statement that they are waiving the 10 day waiting period on Form 4585 should suffice as concurrence when revising the minimum bid.

  5. If the taxpayer/owner does not respond to the revised minimum bid within the 10 day waiting period, no further action is required.

5.10.4.8.6  (07-03-2009)
PALS Disagrees With Challenge to Minimum Bid

  1. If the taxpayer/owner challenges the minimum bid and the PALS does not change the minimum bid based on the taxpayer's challenge, the taxpayer/owner should be advised to secure the services of an independent appraiser, acceptable to the Service and the taxpayer. If the taxpayer/owner does not secure an acceptable appraiser within a reasonable time period (usually 10 days) the PALS may choose an outside appraiser. An Internal Revenue Service Valuation Engineer or Appraiser may be used when feasible and available (as determined by the PALS).

  2. If the professional appraiser or valuation engineer recommends a forced sale value unacceptable to the taxpayer/owner (the value may be provided to the taxpayer either verbally or through a revised Form 4585), the services of another appraiser may be secured with an average of both appraisals being used to re-compute the value of the property.

  3. If the revised minimum bid is based on an average of the two appraisals, the taxpayer/owner does not have an additional opportunity to dispute the minimum bid and there is no requirement to wait an additional 10 days. The revised minimum bid should be delivered under the same provisions as the original minimum bid or it may be faxed to the taxpayer/owner if there has been personal contact with the taxpayer/owner or Power of Attorney to discuss the revised minimum bid. The reference to the ten days in which to protest the minimum bid should be deleted from the reverse of Form 4585. A copy should be forwarded to Advisory within 10 workdays of delivery to the taxpayer/owner.

    Note:

    If, after reviewing the additional information, the PALS determines the sale is no longer expected to result in any net proceeds, the property must be released.

  4. The cost of obtaining the services of private appraisers may be paid directly by the taxpayer or may be made a part of the expenses of levy and sale to be charged to the account via TC 360.

5.10.4.8.7  (07-03-2009)
Revised Minimum Bid Forms — No Opportunity to Protest

  1. If the minimum bid form is being revised for any of the following reasons, the taxpayer/owner does not have an additional opportunity to protest the minimum bid and the reference to the 10 days within which to submit a protest should be deleted from the reverse of Form 4585:

    • Additional encumbrances were located

    • Balances due on encumbrances are being adjusted or updated

    • Some of the seized property was released and reductions are being made to the fair market value based on the released assets (see IRM 5.10.4.5(14), Actions to Release and Return Property)

      Note:

      If any changes are being made to the FMV of the remaining assets in addition to the changes above, then the taxpayer/owner must be allowed the opportunity to protest the revised minimum bid.

5.10.4.9  (07-03-2009)
Determination of Type of Sale

  1. The PALS must then determine under which method the seized property will be sold. Seized property may be sold either by:

    • Public auction, at which open competitive bids are received and mail-in bids may be accepted (IRM 5.10.5.5, Public Auction - General, and IRM 5.10.4.9.1, Mail-In Bids for Public Auction Sales)

    • Public sale under sealed bids (IRM 5.10.5.12, Sealed Bid Sale - General)

  2. The following factors should be considered when selecting the method of sale:

    • The type of property

    • The location of the property

    • The condition of property

    • How the property is titled

    • Other facts and circumstances surrounding the seized property

  3. The use of the sealed bid sale provisions may lessen the opportunity for disruption in situations where it has been determined that the potential exists for taxpayer or third party resistance to the sale. The method selected should be the one which is believed will maximize the net proceeds from the sale.

5.10.4.9.1  (07-03-2009)
Mail-in Bids for Public Auction Sales

  1. The Service may accept mail-in bids for public auction sales. An example of a mail-in bid form is provided in Exhibit 5.10.4–7; this may be adapted to fit a specific sale. The PALS should complete the sections on the appropriate mailing addresses as well as the due dates of the payments, sale date, and date by which the merchandise must be picked up prior to sending the mail-in bid form to a prospective bidder or before including it in the internet advertisement. The use of mail-in bids allows bidders who cannot physically attend the sale to still submit a bid in a sale where a public auction has been determined to be the most appropriate method of sale.

  2. The form of payment and the amount of the bid must comply with the Terms of Payment as stated on the Notice of Public Auction Sale. The mail-in bid form should indicate that the bidder:

    • Understands that he/she must comply with all other conditions as stated in the Notice of Public Sale

    • Understands that the bid is a mail-in bid on a public auction and is not a sealed bid

    • Is aware that there are advantages that they are forgoing by not being present at the actual sale (inspecting the property; hearing any statement by the taxpayer, PALS, or lienholders; engaging in open, competitive bidding)

    • Is responsible for pick-up and delivery of the asset by a specified date and for all costs associated with the storage and delivery of the asset after the sale is completed if he/she is the successful bidder

  3. If a potential bidder requests information concerning encumbrances against the property, Form 2434–B, Notice of Encumbrances Against or Interests in Property Offered for Sale (Exhibit 5.10.1–1), should be provided.

  4. The mail-in bid form specifies the address where the bid must be submitted and the date by which it must be submitted. The bids should be submitted in a securely sealed envelope, and the bidder should include his name and address, date of sale, and lot numbers for which bids are being submitted on the upper left corner of the envelope. All envelopes should be annotated with the name and identification number of the appropriate PALS and the statement "MAIL-IN BID - TO BE OPENED BY ADDRESSEE ONLY" .

  5. The PALS should advise potential bidders that they must submit separate bids with separate payments for each lot if they are bidding on multiple lots. This will facilitate the application of payments and the return of payments if they are not the successful bidder for all of the lots for which they submitted bids.

  6. The PALS will document the bidders' name, address, and the date the bid was received for all mail-in bids as they are received. If the bids are to be mailed to a local office and not directly to the PALS, the PALS should coordinate with the local office to have an employee, preferably not a revenue officer, document and control the mail-in bids as they are received. Section C of Form 4425, Public Sale Bid Tabulation, or a similar form, may be used for this purpose; the title should be changed to "Receipt for Mail-in Bids" . All mail-in bids received will be retained for safekeeping in a government facility providing protection commensurate with the standards in IRM 1.16.15, Minimum Protection Standards.

  7. A bid should not be considered unless it is received at the address specified on the mail-in bid form by the date specified. Bids may be withdrawn upon written request from the bidder, provided the request is received by the PALS conducting the sale prior to the time fixed for conducting the sale. If a request for withdrawal is received, the mail-in bid will be returned to the bidder. The date of withdrawal should be noted on Form 4425 or similar form and the written request should be attached to the form.

  8. Procedures for integrating the mail-in bids into the public auction and returning bids to unsuccessful bidders are contained in IRM 5.10.5.10, Property Offered Under Only One Method.

5.10.4.10  (07-03-2009)
Grouping of Property

  1. The seized property may be offered for sale:

    • As separate items

    • As groups of items

    • In the aggregate

    • Both as separate items/groups of items and in the aggregate

  2. Consideration should be given to offering general use property as separate items/groups of items or both as separate items/groups of items and in the aggregate. This may attract a wider range of bidders to the sale and increase the bid amounts. For example, when office furniture is being sold, an individual will bid on one file cabinet for home use but not on a group of ten.

  3. The PALS will select the method(s) of offering the property for sale which he/she believes will bring the highest price based on the type of property that was seized. The nature of any property being offered for sale should be considered in light of its use in connection with any other property being offered for sale. The decision to offer property as separate items, groups of items, or in the aggregate is often made by the PALS at the sale based on the interest in the property. The items should be lotted in order to facilitate how they will be offered.

  4. If the property is offered as both separate items/groups of items and in the aggregate, the property will be sold under the method that produces the highest aggregate amount.

  5. If the property to be sold includes both real and personal property, the real property and the personal property should be grouped separately for the purpose of offering the property for sale.

  6. If separate items or groups of items would destroy the identity of a senior lienholder's interest in the property, the property should be offered for sale in the aggregate only.

5.10.4.11  (07-03-2009)
Outsourcing

  1. The PALS should consider the use of an outside auctioneer when:

    • It would produce more revenue relative to the additional costs involved

    • The items to be sold are of a specialized nature, such as works of art, jewelry, antiques, etc.

    • Any other circumstances exist where it would be beneficial

  2. The request for the service of an auctioneer will be made by written memorandum and requires the approval of the Advisory Area Manager, Advisory Territory Manager, or PALS Group Manager. The cost thereof will be charged as an expense of the sale. See IRM 5.10.2.21, Contracting for Services, for procurement authority.

  3. In order to reduce potential conflict of interest situations, the auctioneer must agree that neither he/she, his/her family members, nor employees or owners of his/her auctioneer company, nor agents of such company will bid on or purchase items at IRS sales conducted by the auctioneer. The above-stated restrictions will be reflected in auctioneer contract solicitations and in written statements to be signed by auctioneers selected under such solicitations (See Exhibit 5.10.4–2).

  4. The PALS will forward the signed statement to Advisory for inclusion in the seizure file. If the PALS wishes the services of a specific auctioneer, in lieu of one already under contract with the Service, a memorandum documenting the reason must be submitted to the Chief Procurement Officer.

  5. The PALS should work with the contracting engineer, who will work with counsel in approving the terms and conditions of the auctioneer's proposed contract, including issues related to any buyer's premium, payment terms, internet bidding, etc.

  6. Although the outside auctioneer will conduct the sale, the presence of the PALS is required in order to begin the auction by reading the legal statement described in IRM 5.10.5.9, Conducting a Public Auction, about the sale, condition of the title, and condition of the property and, if necessary, to adjourn the sale.

5.10.4.12  (07-03-2009)
Preparation of Notice of Sale

  1. Ordinarily, a notice of sale should be issued within 60 days from the date of the Notice of Seizure. Circumstances preventing the issuance of the notice of sale within 60 days must be documented in a memorandum that will be forwarded to Advisory to become part of the seizure file. The notice of sale should be issued as soon as possible thereafter.

  2. IRC 6335(f) permits the owner of any property seized by levy to request that the seized property be sold within sixty (60) days after such request, or within any longer period specified by the owner. The Service will comply with such requests unless such compliance would not be in the best interest of the United States.

  3. Taxpayers are required to submit IRC 6335(f) requests in writing to the manager of the PALS responsible for the sale. The manager will send to the taxpayer, by mail, a written response to their request within thirty (30) days after receipt of the request.

  4. The notice of sale must contain the following items:

    • The legal description of the property (see IRM 5.17.3.6.1.2(4), Notice of Sale, for additional information)

    • Date, time, and place of sale

    • Payment terms

    • Information on grouping of property

  5. If the seized property is to be sold at public auction, Form 2434, Notice of Public Auction Sale, will be prepared as indicated in Exhibit 5.10.4–3.

  6. If the seized property is to be sold at public sale under sealed bids, Form 2434–A, Notice of Sealed Bid Sale, will be prepared as indicated in Exhibit 5.10.4–4.

5.10.4.12.1  (07-03-2009)
Notice of Sale — Date and Place of Sale

  1. The date of sale must be set at least 10 days but not more than 40 days from the date the notice is published in the newspaper, or if there is no newspaper, from the date the notice is posted in public places (IRM 5.10.4.14, Methods of Advertising and Posting the Notice of Sale). In determining this time period, the day of notice should be excluded and the day of the sale counted as part of the period. Providing the notice of sale to the taxpayer does not start these timeframes. Multiple sales on the same date at the same location may be published in the newspaper in a combined advertisement listing each taxpayer and the items offered for sale.

  2. If the last public records search, or commercial title search, was conducted 90 days or more prior to the sale date, the PALS should complete an updated records check or request that the seizing revenue officer complete an updated records check to identify any subsequently recorded encumbrances interests and document them on Form 2434–B. The PALS should ensure that liens are filed in all appropriate jurisdictions prior to the sale.

    Note:

    Simply checking only a computer based record service, such as Choice Point, is not sufficient since it may not be complete or reflect the most recent data available.

  3. The place of sale should normally be within the county in which the property was seized. The place of sale should be selected in order to secure the highest possible bid for the property. Some of the factors that should be considered when determining whether to change the sale site include:

    • Substantially higher bids may be obtained if the sale is moved

    • There may be taxpayer or third party resistance at the sale which may depress the amounts of the bids

    • Expenses could be substantially reduced

    • A larger number of bidders would be expected to attend

  4. For sealed bid sales, the place of sale will be the location where the bids will be opened. IRM 5.10.5.12, Sealed Bid - General, contains additional information on the proper address to use when the bids will be opened in a location other than the office where the PALS is located.

  5. If the sale, including a sealed bid sale, is to be held outside the county in which the property was seized, the notice of sale shall be signed by the area director, territory manager, Advisory Territory Manager, or the PALS Territory Manager. This signature will be considered to be the order that the sale be held in such place.

5.10.4.12.2  (07-03-2009)
Notice of Sale — Grouping of Property

  1. If any part of the property may be offered in groups, these items should be segregated in the notice of sale so that they are easily identifiable.

  2. For property offered under sealed bids, each item or group of items should be assigned a different number in the notice of sale. These numbers should be used by bidders in submitting their bids on Form 2222, Sealed Bid for Purchase of Seized Property.

  3. Form 2222 is designed so it can be distributed blank to prospective bidders. Bidders may obtain the description of property from the notice of sale. In most instances, Form 2222 should be distributed blank. However, it may be desirable in connection with certain sealed bid sales to provide a description of the property offered for sale by reproducing the Notice of Sealed Bid Sale which may then be distributed with the sealed bid forms. When practicable, Form 2222 may be overprinted with a description of the property. Instructions for completion and submission of sealed bids, as well as the condition of title and other cautionary statements, are on the reverse of Form 2222.

5.10.4.12.3  (07-03-2009)
Notice of Sale — Terms of Payment

  1. The PALS must also determine what the terms of payment will be. Terms of payment will be one of the following:

    • Payment in full upon acceptance of the highest bid, regardless of the amount of the bid

    • If the aggregate of all property purchased by a successful bidder is more than $200, an initial payment of $200 or 20% of the purchase price, whichever is greater, and the balance (including costs to protect and preserve the property from the date of sale through the date of final payment) within a specified period, not to exceed one month from the date of the sale

  2. If a sealed bid sale is to be held, the full amount of the bid price should be submitted if the bid price is $200 or less. If the total bid is more than $200, 20% of the bid or $200, whichever is greater, should be submitted.

  3. In the case of alternative bids submitted by the same bidder for items of property offered separately, in groups, or in the aggregate, the bidder should remit the full amount of the highest alternative bid submitted, if the bid is $200 or less. If the highest alternative bid is greater than $200, the bidder shall remit 20% of the highest alternative bid or $200, whichever is greater.

  4. If payment in full is required upon acceptance of the highest bid, the payment should be made at that time, or at a reasonable period thereafter, to be established by the PALS.

  5. If deferred payment is allowed, the initial payment will be made upon acceptance of the bid and the balance must be paid on or before the date specified. For sealed bids, the initial payment will be the remittance which is required to be submitted with the sealed bid.

  6. All payments for property sold must be made by:

    • Cash

    • Certified, cashier's or treasurer's check drawn on any bank or trust incorporated under the laws of the United States or under the laws of any state or possession of the United States

    • United States postal, bank, express, or telegraph money order

  7. All checks and money orders should be made payable to the United States Treasury.

5.10.4.12.4  (07-03-2009)
Conditional Sale Proceeds

  1. If the sale of the seized property involves the transfer of a right or license that will require approval of a Federal, state, or local agency, the transfer process may take several months and will involve "conditional sale proceeds" . Since the sale is conditional because the buyer must be approved by another agency, an interest bearing escrow fund may be used to deposit the payment amount.

  2. The option to use this escrow fund should be included on the Notice of Sale and Advertising Order.

  3. The PALS should consult with area counsel prior to completion of the notice of sale in order to receive assistance in the preparation of the escrow agreement. The agreement should include stipulations that the interest earned from such a fund is the property of the successful bidder, regardless of the eventual disposition of the transfer. The successful bidder will be responsible for and must pay all charges or fees for the escrow.

  4. Any other pertinent terms and conditions should be reduced to writing to limit the possibility of any ambiguities which may arise at a later date.

  5. The successful bidder will be responsible for all costs associated with the actual approval process.

  6. If an escrow fund is not used, payment should be restricted to a certified check so it can be held in safe-keeping rather than deposited. If the sale is not approved, the payment can then be immediately returned to the bidder.

5.10.4.12.5  (07-03-2009)
Joint Tenants and Tenants in Common Property

  1. Occasionally seizure action is required against real property held by joint tenants or tenants in common when separate unrelated tax liabilities exist on the owners. When this occurs, separate Forms 668–B, 2433, and 4585 must be completed. Although denominated as one sale in the sense that the realty may be sold to one purchaser for one price, in effect each tenant's interest in the real property will be simultaneously sold. One notice of sale, Form 2434 or 2434–A and one Form 2434–B, Notice of Encumbrances Against or Interests in Property Offered for Sale, will be prepared with the names of all taxpayers listed. Since the taxpayer's right of redemption cannot be abridged, individual certificates of sale and deeds are prepared and delivered to the purchaser. If only one tenant redeems, a deed would be issued to the purchaser for only the remaining interest. The price paid by a purchaser should be apportioned to the liabilities according to the tenant's interest in the property. Expenses of the sale should also be apportioned.

5.10.4.13  (07-03-2009)
Delivery of Notice of Sale

  1. If the owner has his/her usual place of abode or place of business within the territory where the seizure was made, the original Notice of Sale is required to be personally delivered to the owner of the property (or the possessor of the property for personal property) or left at his/her usual place of abode or place of business by affixing the notice, enclosed in an envelope, on the door if the owner is not available.

    Note:

    Because of the large geographic areas that a PALS may cover, in certain cases, he or she may request that the revenue officer deliver the Notice of Sale. This will generally occur when the sole purpose of the PALS trip would be to deliver the Notice of Sale to the taxpayer's place of abode or business, and no other sale related actions are needed. The revenue officer should deliver the documents according to IRM procedures and should advise the PALS of the delivery. The revenue officer may not be involved in the preparation of the Notice of Sale, and while delivering the Notice of Sale, the revenue officer may not discuss any aspects of the sale with the taxpayer and should advise the taxpayer to contact the PALS if there are any questions. The revenue officer can still discuss alternative methods of resolution with the taxpayer during this contact. Counsel has determined that delivery of the Notice of Sale by the revenue officer does not constitute a violation of Section 3443 of the Restructuring and Reform Act of 1998 (RRA 98).

    Caution:

    Delivery to the POA alone does not constitute proper service since attempted personal delivery to the owner is required under IRC 6335(b).

  2. The notice will be sent by both certified mail, return receipt requested, and regular mail to the owner's last known address if either of the following situations exist:

    • The owner has no usual place of abode or business within the territory where the seizure was conducted

    • The owner cannot be readily located

      Reminder:

      If the address is known and can be located and is within the territory where the seizure was conducted, personal contact must be attempted and the documents left on the door if the owner is not available. The documents may also be mailed in addition to being left at the place of abode or business, but they may not be delivered solely by mail in these situations. See IRM 5.10.2.19.3, Armed Escorts, for situations when an armed escort may be necessary.

  3. If real property is being offered for sale, a reasonable effort should be made to deliver the notice personally in order to inform the taxpayer of the right to redeem the property at any time prior to sale or within 180 days of the sale. See IRM 5.10.4.2, Redemption of Property Prior to Sale and IRM 5.10.6.8, Redemption of Real Property After Sale.

  4. If real property was seized and the taxpayer is not the owner of record (i.e. real property subject to a recorded Notice of Federal Tax Lien was sold by the taxpayer), the original Notice of Sale should be furnished to the owner of record and a copy delivered to the taxpayer.

  5. A copy of the notice of sale must be provided by regular mail to all interests of record (joint owners, senior and junior lien-holders, nominees, transferees, judgment creditors regardless of whether they have perfected a lien interest, etc.) to the address reflected on Form 2434–B and also to a more current address if known; this includes any encumbrances identified in an updated records check completed after the seizure (see IRM 5.17.3.6.1.2, , Notice of Sale). Form 2434-B must be updated to reflect the date this action was taken.

  6. A copy of the Notice ofSsale should be retained in the PALS case file, a copy should be forwarded to the seizing revenue officer, and a copy should be forwarded to Advisory within 10 workdays after the notice was issued.

  7. In cases in which collection is in jeopardy and a levy is made without regard to the 10-day period provided in IRC 6331(a), a public Notice of Sale of the property seized should not be given within the 10-day period unless IRC 6336 (relating to perishable goods) is applicable.

5.10.4.14  (07-03-2009)
Methods of Advertising and Posting the Notice of Sale

  1. The notice will be published in a newspaper published or generally circulated within the county in which the seizure was made. A single newspaper insertion appearing not less than 10 days prior to the date of sale meets the legal requirement. The date of sale may not be counted when calculating this period. Insertions of the advertisement for additional days may be desirable and, when feasible, should run for several days leading up to the date of sale.

  2. If the notice is published in a county paper specializing in legal notices, a notice in the appropriate classified section of a metropolitan or regional paper readily available in or near the area of the sale should also be considered to attract additional bidders.

  3. Instructions to the publisher (Exhibit 5.10.4-5) can be used to provide advertising instructions to the publisher. To meet the statutory requirement for advertising, refer to Exhibit 5.10.4-6 which outlines the information to provide to the publisher. The instructions to publisher, regardless of the format used, must be provided to Advisory within 5 days of requesting the advertisement as part of the interim sale documents. The advertisement will generally be set solid, without paragraphing, and without any display in the heading. Display advertising may be ordered, with the concurrence of the manager, when it is determined to be necessary.

  4. In addition to the newspaper advertisement, the notice of the sale may also be:

    • Posted at public places, such as libraries, public notice boards at city and township halls and county public buildings, etc.

    • Posted outside the premises where the seized property is located if such posting would facilitate the sale; in cases where it would not facilitate the sale (e.g., personal residence or assets stored in an area not accessible to the public), posting the notice outside the premises is not required

    • Mailed to interested parties

    • Posted to the IRS seized property web site

  5. The statute provides that if there is no newspaper published or generally circulated in the county, the notice will be posted at the post office nearest the place where the seizure is made and in not less than two other public places, such as libraries, public notice boards at city and township halls and county public buildings.

  6. Any expenses incurred during the mailing process may be charged to the taxpayer's account as an expense of sale (TC 360). Such expenses may include:

    • The cost of postage (based on rates in effect at the time of mailing)

    • Material costs incurred by Service personnel attributable to the mailing of Notices of Sale (e.g., peel-off labels, reproduction of Notice of Sale forms)

    • The cost incurred if a commercial firm is used for a mailing, including the U.S. Postal Service Electronic Computer Originated Mail (E-COM)

  7. A supplemental insertion of notice of sale may be placed in a newspaper to publicly advertise property omitted from the original notice of sale. However, the property included in the supplemental notice of sale is subject to the time limitations described in IRM 5.10.4.12.1, Notice of Sale - Date and Place of Sale. Therefore, the sale must be adjourned for all of the property to be sold at the same time, if the original date of sale is less than 10 days from the date of the supplemental notice. See IRM 5.10.5.4, Adjournment Procedures, concerning the procedures for adjourning a sale.

5.10.4.14.1  (07-03-2009)
Commercial Advertising of Sale

  1. When contracting for newspaper or other similar types of commercial advertising, the PALS should follow the procedures outlined in IRM 5.10.2.21, Contracting for Services.

  2. Other methods of giving notice of sale and of advertising, such as radio or television spot announcements and trade journal advertising, may be used in addition to those required by law. These methods may be used when it is believed that the nature of the property to be sold is such that a wider or more specialized advertising coverage will enhance the possibility of obtaining a higher price for the property. The PALS should also ensure that the sale information is posted on the IRS seized property website.

  3. Advertising by radio and television requires the approval of the area director or Advisory Territory Manager. A memorandum, citing the reason for the request and including information on the advertisement to be ordered, should be submitted through channels to the appropriate official. Upon approval of the appropriate official, contracting procedures outlined in IRM 5.10.2.21, Contracting for Services, should be followed.

  4. To verify services rendered, the advertiser should be requested to provide the full page of each issue of the publication in which the advertising appeared. These pages are known as "tear sheets." The location of the advertisement should be marked on the tear sheet. If the publisher is unable to furnish these sheets, or if the advertisement is by other methods, affidavits of publications or broadcast should be furnished by the advertiser. If the tear sheet or affidavit cannot be secured from the vendor, the PALS must make and document a diligent effort to secure such, and include an explanation in ICS as to the verification of the publication and why it is not part of the file. If verification cannot be made, the PALS will take appropriate actions, such as disputing the billing charge and arrange for additional advertising for the sale if time permits or it is needed. The PALS should forward the tear sheet or affidavit attached to the vendor bill to Advisory with the Form 2436, Seized Property Sale Report, for inclusion in the seizure file when the closing documents are submitted.

5.10.4.15  (07-03-2009)
Pre-Sale Procedures for Perishable Goods

  1. See IRM 5.10.1.4 and IRM 5.10.1.5 for criteria and pre-seizure development procedures for perishable goods. When perishable goods are seized, the revenue officer must document specifically why IRC 6336 is applicable in the case history. A copy of the report submitted with the approval request (IRM 5.10.2.16, Perishable Goods) will become a part of the file forwarded with Form 2436, Seized Property Sale Report, with the closing documents.

  2. Before selling property under IRC section 6336 that was seized based on a jeopardy assessment or termination assessment, area counsel needs to be consulted and approval obtained.

  3. On rare occasions, circumstances may arise where a non-perishable asset seizure needs to be reclassified as a perishable goods seizure. For these circumstances, the revenue officer or PALS must prepare a memorandum stating the facts why reclassification of the asset(s) to perishable goods is necessary. The memorandum must also request that the area director approve both the:

    • Determination of perishable goods

    • Sale of the perishable goods

  4. In order to preserve equity and maximize sale proceeds in these expedited sales, it is important for PALS to consider marketing before the seizure has been conducted. It is equally important that no identifying information be disclosed during this marketing, for example:

    • Taxpayer's name or exact location

    • Business name or tradename

    • Signs or logos

  5. Pre-sale marketing efforts should be generic and give potential bidders a broad idea of the type of assets that will be available for sale as well as the general area.

  6. If the taxpayer can be readily located, a written notice of the appraised value of the property will be given to him/her. The asset valuation notice (See Exhibit 5.10.4-8, Perishable Goods Asset Valuation Notice) must state that if the appraised value of the property is not paid within the time specified in the notice, or if an acceptable bond for such amount is not furnished within that time, the property will be sold. The PALS group manager must concur with and sign the asset valuation notice. A diligent effort will be made to personally deliver the notice of the appraised value to the taxpayer. However, the fact that the taxpayer cannot be located does not prohibit sale of the property under IRC 6336. See Treas. Reg. Section 301.6336-1(b) and (c). At the time of delivery, the terms of the perishable goods sale will be explained to the taxpayer, and he/she will be allowed the opportunity to redeem the property at the appraised value. If it is determined that circumstances require immediate action, the taxpayer may be orally notified of the appraised value. This will be confirmed in writing prior to the sale.

5.10.4.15.1  (07-03-2009)
Sale of Perishable Goods

  1. If the amount of the appraised value of the seized property is not paid or if a bond is not furnished within the time specified in the notice, the property should be sold, as soon as practicable, in accordance with the following terms and conditions:

    • Authority to Conduct Sales of Perishable Goods — The PALS is responsible for all sale actions with assistance from revenue officers, to include the post seizure inventory and valuation, preparation and delivery of the sale notices and Asset Valuation Notice, documentation of all sale actions, and completion of the post-sale paperwork.

    • Notice of Sale — If the owner can readily be found, a notice of sale will be given to him or her. The notice of sale will also be posted in two public places in the county in which the property is to be sold. Form 2434, Notice of Public Auction Sale (Exhibit 5.10.4–3) may be adapted for the sale of perishable goods by changing the authority quoted from IRC 6335 to IRC 6336. The timeframes for conducting a sale under IRC 6335(d) do not apply to sales of perishable goods.

    • Sale — The property will be sold at public auction to the highest bidder, and if only perishable goods are being sold, the procedures pertaining to establishing a minimum bid price may be waived. The rules stated in IRM 5.10.5.5, Public Auction - General, through 5.10.5.9, Conducting a Public Auction, are equally applicable to sales under IRC 6336, except that any reference to IRC 6335 should be interpreted to mean a reference to IRC 6336 and any prohibitions against revenue officers being able to conduct the sale do not apply to perishable goods sales.

    • Terms — Full payment at time of acceptance of highest bid will be required in sales of this type. The payment shall be made in cash or 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 or possession of the United States, or by postal, bank, express, or telegraph money order

5.10.4.16  (07-03-2009)
Arrangements to Convert or Deposit Cash

  1. Prior to conducting a sale, the employee conducting the sale should make arrangements to either deposit or convert any cash that they may receive at the sale. Whenever possible PALS should deposit proceeds into a Treasury General Account (TGA) instead of sending direct to Submission Processing. The manner in which sale proceeds are handled must always be fully documented in the case file history.

  2. These arrangements will usually consist of either:

    • Contacting the Treasury's General Account Management Team, Federal Reserve Bank - St. Louis (1-866-771-1842) at least 10 days prior to sale to request the name and location of the nearest bank in which to deposit funds (IRM 5.10.5.18), or

    • Completing Agency Profile Sheet and faxing to the Treasury's General Account Management Team, Federal Reserve Bank--St. Louis (314) 444-7347 at least 10 days prior to sale to request the name and location of the nearest bank in which to deposit funds. PALS should also prepare cover memorandum summarizing the request which also contains PALS contact information.

    Note:

    Other appropriate methods may be used based on the specific circumstances of the sale. Any unusual arrangements, such as using an armed escort from Criminal Investigation to transport significant amounts of cash, should be discussed with the PALS manager prior to the sale.

Exhibit 5.10.4-1  (07-03-2009)
Minimum Bid Worksheet Reference: 5.10.4.8(3)

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Exhibit 5.10.4-2  (07-03-2009)
Letter P-2530, Auctioneer Agreement to IRS Restrictions Reference: 5.10.4.11(3)

(Reference IRM 5.10.4.9(3))
(Because of the limited need, a form will not be provided by Headquarters)
STATEMENT OF AGREEMENT WITH THE RESTRICTIONS TO
THE IRS CONTRACT FOR AUCTIONEERING SERVICES
     
By signing this statement, I hereby acknowledge and agree that I shall not, nor shall any of my family members, nor any of the employees or owners of any auctioneering company to which I am affiliated, nor any agents thereof, purchase any property at the IRS sale I have been contracted to conduct.
     
(signature)   (date)
     
(name, print or type)    
     
(address)    

Exhibit 5.10.4-3  (07-03-2009)
Form 2434 — Notice of Public Auction Sale Reference: 5.10.4.12(5)

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Form 2434 Instructions
1. Taxpayer's name (taxpayer's address may also be included if it will help identify the delinquent taxpayer).
2. Date of sale — this date must be at least 10 but not more than 40 days from the date notice is to be published in newspaper or if no newspaper, from the date notice is posted in public places (IRM 5.10.4.12.1).
3. Time of sale, including AM or PM.
4. Sale location
5. Taxpayer's name.
6. Itemized description of property to be offered for sale. Enter odometer reading if property sold is a motor vehicle. If offering is to be in groups of items, groupings should be readily identified. If it is known at the time of preparation how the property will be offered, the following statement should be added: "The property will be offered for sale (show method as selected from IRM 5.10.4.12.2 and IRM 5.10.4.10)" . If not known, the following statement should be added: "The property may be offered for sale in the aggregate and/or as individual groups or lots" .
7. Rule out any unused space.
8. Address and times at which the property may be inspected.
9. Select full payment or enter applicable payment terms (IRM 5.10.4.12.3).
10. Name of employee conducting sale.
11. Title of employee conducting sale.
12. Address and phone number where prospective bidders can request additional information about the sale.
 

Exhibit 5.10.4-4  (07-03-2009)
Form 2434–A — Notice of Sealed Bid Sale Reference: 5.10.4.12(6)

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Form 2434–A Instructions
1. Taxpayer's name (taxpayer's address may also be included if it will help identify the delinquent taxpayer).
2. Date bids will be opened (date of sale) — this date must be at least 10 but not more than 40 days from the date notice is to be published in newspaper or if no newspaper, from the date notice is posted in public places (IRM 5.10.4.12.1).
3. Time bids will be opened (include AM or PM).
4. Location where bids will be opened.
5. Name of taxpayer.
6. Itemized description of property offered for sale. Enter odometer reading if property sold is a motor vehicle. If offering is to be in groups of items, groupings should be readily identified. If it is known at the time of preparation how the property will be offered, the following statement should be added: "The property will be offered for sale (show method as selected from IRM 5.10.4.12.2 and IRM 5.10.4.10)" . If not known, the following statement should be added: "The property may be offered for sale in the aggregate and/or as individual groups or lots"
7. Rule out any unused space.
8. Address and times at which the property may be inspected.
9. Select full payment or enter applicable payment terms (IRM 5.10.4.12.3).
10. Name of employee conducting sale.
11. Title of employee conducting sale.
12. Address and phone number where prospective bidders can request additional information about the sale.
13. Address where sealed bids should be submitted (IRM 5.10.5.12).

Exhibit 5.10.4-5  (07-03-2009)
Letter P–2529, Instructions to Publishers Reference: 5.10.4.14(3)

INSTRUCTIONS TO PUBLISHERS
 
 
FROM:
Internal Revenue Service         Date: _____
Address:____________________________________
______________________________________
Telephone: ___________________________________
Person to Contact: ____________________________________
______________________________________
TO:
Name of Publication: ______________________________
Address: ____________________________________
______________________________________
Name of Publisher or Representative: ________________________
______________________________________
INSTRUCTIONS:
Subject of Advertisement: ____________________________
Edition of Paper Advertisement to Appear In: _____________________
Number of Times Advertisement to Appear: _____________________
Dates Advertisement to Appear: _________________________
 
SPECIFICATIONS FOR ADVERTISEMENT (check one):
 
_____ Advertisement is to be set solid, without paragraphing, and without any display in the heading.
 
_____ Advertisement should be set as follows:
 
 
COPY FOR ADVERTISEMENT:
 
 
Forward two copies of the advertisement (including upper and lower rules) to the IRS address listed above. If the copies are not available, sign the following affidavit.
 
AFFIDAVIT
 
I affirm that the advertisement described above appeared in the named publication on the dates indicated.
 
Signature of Publisher or Representative: ____________________
Title: _______________    Date: _____

Exhibit 5.10.4-6  (07-03-2009)
Template to Provide Publisher to Meet Statutory Requirements of Advertising

IRS PUBLIC AUCTION SALE

Date of Sale: (Enter Date and Time of Sale)

Location: (Enter location of sale)

Property Offered: (short description for personal property and identifying short description for real estate with address)

Under the authority in IRC Section 6331, the property described below has been seized for non payment of taxes due from (TP Name). Property will be sold at public auction as provided in IRC Section 6335 and related regulations. Only the right, title and interest of (TP Name) in and to the property will be offered for sale. (Enter terms of payment i.e. Full/ partial payment will be due (enter dates) of the conclusion of the sale and must be made by cash, cashier’s check or money order made payable to the US Treasury.

For more information go to www.irsauctions.gov or contact (PALS or Service Employee contact information).

Exhibit 5.10.4-7  (07-03-2009)
Mail-in Bid for Public Auction Reference: 5.10.4.9.1

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Exhibit 5.10.4-8  (07-03-2009)
Perishable Goods Asset Valuation Notice

  Date: (MM-DD-YYYY)  
Taxpayer Name    
Address    
City, ST and Zip Code    
     
Reference: Seizure and Sale of (Taxpayer)  
Dear (Taxpayer):    
The assets of (taxpayer or owner) located at (current location) have been seized for non-payment of Internal Revenue Service taxes. This letter is to advise you that as the Property Appraisal and Liquidation Specialist (PALS), I have inspected the assets and determined the Fair Market Value (FMV) to be $XXXX. The attachment provides a detailed list of the assets.
     
I have set a date and time of sale at the above location as follows:
Date of Sale:    
Time of Sale:    
     
In order to avoid the sale of the seized property you must deliver a cashier’s or certified check, cash or acceptable bond in the amount of the FMV shown above to Revenue Officer XXXX or myself prior to the sale. Revenue Officer XXXX may be contacted at (XXX) XXX-XXX and you may contact me at (XXX) XXX-XXXX. Please feel free to call me if you have any questions. You will receive a report of the sale as soon as possible.
     
     
______________________  
Name: (Enter name of PALS)  
Employee Number: xx-xxxxx  
     
______________________  
Name: (Enter name of PALS group manager)  
Title: PALS Group Manager  
Employee Number: xx-xxxxx  
     
Attachment(s)    

Exhibit 5.10.4-9  (07-03-2009)
Form 2436R, Seized Property Release/Redemption Report

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