Federal Tax Liens, Levy and Distraint Sale
The IRS sometimes uses an administrative procedure to dispose of real property seized for non-payment of taxes. The Company prefers a judicial proceeding, but may be willing to insure on the basis of an administrative sale where all the statutory requirements have been strictly met, and the former owner is out of possession, subject to mortgages, liens and adverse interests of record.
Preliminary statement - where sale pending
Company has been advised that title to the real property is to be made through an IRS administrative levy and distraint sale (See 26 USC § 6331 ff.). The following requirements and exceptions are raised, and policy issuance is subject to approval of Company counsel:
Preliminary statement - where sale in chain of
Company has been advised that title to the real property has passed through an IRS administrative levy and distraint sale (See 26 USC § 6331 ff.). The following requirements and exceptions are raised, and policy issuance is subject to approval of Company counsel:
Proof property not exempt
Proof is required that the real property to be insured was not the principal residence of the affected taxpayer. See 26 USC § 6334.(a)(13).
Service of Notice and Demand
A copy of the Notice and Demand required under 26 USC § 6331.(a) is required to be produced, together with proof of delivery of same. Additional exceptions may be raised if the method and manner of delivery is not acceptable to the Company.
The notice must contain the following information, in “simple and non-technical terms:”:
(a) a brief statement of the statute and applicable procedure relating to levy & distraint sale;
(b) the administrative appeals available to the taxpayer;
(c) alternatives available to the taxpayer; and
(d) the provisions and procedures relating to redemption and release of liens.
If proper notice was given by personal delivery to the taxpayer, no further exception need be raised.
If the notice was not delivered in person, or by certified or registered mail with receipt requested (and a copy of the receipt signed by the taxpayer is produced), the following exception will be raised:
Notice and Demand by other than personal delive
The Notice and Demand required under 26 USC § 6331 was not given by personal delivery. Policy excepts all loss, cost or damage, including attorney’s fees, arising from a challenge made to the sale on the basis of inadequacy of such notice.
Appeal, bankruptcy, receivership, assignment fo
Proof is required that there has been no appeal or stay in connection with the levy and seizure of the property, or any action or proceeding affecting the taxpayer in bankruptcy, or for receivership, or involving an assignment for the benefit of creditors, pending in any federal court (either in a bankruptcy or district court in the county where the property is located, or where a notice has been filed in the county under Bankruptcy Code §549(c)), or in any state court having jurisdiction. Further, proof is required from both the IRS and the purchaser that neither the IRS nor the purchaser has had any notice or knowledge with regard to any such proceeding, action or appeal.
Proof of Notice of Seizure
Proof is required that the Notice of Seizure and Sale was given by the Secretary of the Treasury, in accordance with 26 USC § 6335.(a) and (b). A copy of the Notice must be produced, together with proof of delivery.
Proof of Publication, and procedure regarding c
Proof is required as to due publication of Notice of sale, and any notice of adjourned sale, and proof that the sale has been held in strict accordance with the procedures set forth in 26 USC § 6335, and the applicable regulations, including but not limited to:
(a) the time and place of publication;
(b) a copy of the published notice, with an affidavit of publication from the newspaper publisher;
(c) an affidavit of regularity from the official conducting the sale, setting forth the details and particulars of the sale, including the date, time and place the sale took place, identification of persons who attended, the manner of bidding used, the amount of the successful bid and the identity of the bidder.
Notice of Seizure and Sale by other than person
The Notice of Seizure and Sale required under 26 USC § 6335 was not given by personal delivery. Policy excepts all loss, cost or damage, including attorney’s fees, arising from a challenge made to the sale on the basis of inadequacy of such notice.
Exception for judgments, liens and mortgages of
Notwithstanding the administrative levy and distraint sale by the IRS, policy will except all mortgages, judgments and liens of record.