A taxpayer or third party may appeal a levy or seizure action that has been or will be taken under the Collection Appeals Program (CAP). See IRM 5.1.9.4, Collection Appeals Program. See also Publication 1660, Collection Appeal Rights.

CAP also may be available to taxpayers or third parties where the CDP or Equivalent Hearing right is not available (due to lapse of time or exercising of the right).

Once a seizure action is taken, the taxpayer has 10 business days to appeal under CAP from the date the Notice of Seizure is provided to the taxpayer, or left at his or her usual abode or place of business. Publication 1660, Collection Appeal Rights, must be included with the Notice of Seizure. See IRM 5.1.9.4(6).

By policy, collection action is suspended while the case is in Appeals for levy and seizure CAP appeals. The Collection function may continue enforcement action, however, if it believes withholding the action would put collection of the tax liability at risk or collection of the tax is in jeopardy. Refer to IRM 5.11.3. A taxpayer may have CAP appeal rights of a jeopardy levy under certain circumstances. See IRM 5.11.3.6, Appealing the Jeopardy Levy.

A number of conditions/events will suspend the statute of limitations provided under IRC § 6502. The most common are listed below.

The statute of limitations on collection after assessment is suspended during the period in which collection by levy is prohibited. See IRC § 6503(a)(1); Treas. Reg. § 301.7122-1(i). Collection by levy is prohibited during the period in which an offer in compromise is pending, for 30 days immediately following the rejection of the offer, and for any period in which a timely filed appeal from the rejection is being considered by Appeals. See IRC § 6331(k)(1); Treas. Reg. § 301.7122-1(g)(1).

Under IRC § 6503(b), the period of limitations on collection after assessment is suspended while all or substantially all of the taxpayer's assets are in control or custody of any court in any proceeding and for six months thereafter. See Treas. Reg. § 301.6503(b)-1. The rationale of the suspension is that during this time the assets are not subject to administrative collection procedures. The suspension applies to the outstanding amount due on the assessment. Treas. Reg. § 301.6503(b)-1.

The period of limitations on collection after assessment is suspended while the taxpayer is outside the United States if the absence is for a continuous period of at least six months. IRC § 6503(c). To make certain that the government has an opportunity to collect the tax after the taxpayers return, the period does not expire (if the taxpayer has been out of the country for six months or more) until six months after the taxpayer's return to the country.

A wrongful levy suspends the running of the period of limitations on collection. IRC § 6503(f)(1). The collection statute is suspended from the date that the property (including money) of a third person was wrongfully seized or received, to the date that the property is administratively returned pursuant to IRC § 6343(b), or to the date on which a wrongful levy judgment with respect to such property becomes final, and for 30 days thereafter. If the period of limitations is suspended under this provision, it is suspended only for the amount of money or value of specific property that initially has been wrongfully taken from a third party and subsequently has been returned. This amount or value is determined as of the date the property was returned.

A wrongful lien suspends the running of the period of limitations on collection. IRC § 6503(f)(2). The collection statute is suspended from the date any person becomes entitled to a certificate of discharge of lien under IRC § 6325(b)(4) until the earlier of the earliest date on which the Service no longer holds any amount as a deposit or bond under IRC § 6325(b)(4) or the date on which a judgment under IRC § 7426(b)(5), concerning the amount deposited or used as bond, becomes final. If the period of limitations is suspended under this provision, it is suspended only for the value of the interest of the United States in the property plus interest, penalties, additions to tax, and additional amounts attributable thereto.

The statute of limitations on collection is suspended when a taxpayer files for protection under the Bankruptcy Code for the period during which the automatic stay (11 USC § 362) prohibits the IRS from taking any action and for six months thereafter. IRC § 6503(h).

The period of limitations on collection is suspended in respect of any penalty under IRC §§ 6700, 6701, or 6702 for the period during which the Service is prohibited from collecting by levy or a proceeding in court. IRC § 6703(c)(3).

The period of limitations on collection is suspended for the period during which a CDP hearing, and any appeals therein, are pending. IRC § 6330(e)(1).

The collection period is generally suspended from the filing of an innocent spouse claim until a waiver is filed plus 60 days, or until the expiration of the 90 day period for petitioning the Tax Court, plus 60 days, or if a Tax Court petition is filed, until the Tax Court decision becomes final, plus 60 days. IRC § 6015(e)(2).

Just as state law (including state-defined exemptions) cannot prevent the attachment of the federal tax lien, no state law provision can exempt property or rights to property from levy for the collection of any federal tax. Treas. Reg. 301.6334-1(c).

Whether to levy, or to instead resort to another course of action, is within the discretion of the Area Director and his/her collection personnel subject to the limitations on levy and satisfaction of the requirements for levy.

The statute of limitations on collection is suspended during the period in which substantially all of the taxpayer's assets are in control or custody of any court in any proceeding and for six months thereafter. IRC § 6503(b). The statute of limitations is also suspended for the period in which collection is prohibited by reason of a bankruptcy case and for six months thereafter. IRC § 6503(h).

Although substantially all of the taxpayer's assets may be in custodia legis, property not in custodia legis, because exempt by law, may be levied upon or a suit may be instituted to foreclose a federal tax lien. The suspension provisions of IRC § 6503(b) are applicable with respect to the entire assessment and the taxes can be collected from all the taxpayer's property or rights to property which is not at the time of collection within the jurisdiction of the court.

The period of suspension is terminated six months after the date on which the assets of the bankrupt are no longer in custodia legis. Generally, in a judicial proceeding, when the court by some act of its own relinquishes its jurisdiction over the property, the property may no longer be considered in custodia legis, notwithstanding the necessity of others to perform certain functions with respect to the property in question.

Under the Bankruptcy Code, the statute of limitations on collection is suspended for the period during which the Secretary is prohibited by reason of the bankruptcy case from collecting the liability, plus six months thereafter. The Service may be prevented from collecting the liability for any one of several reasons, including the automatic stay imposed by section 362 of the Bankruptcy Code (11 USC), because it is bound by the terms of a repayment plan pursuant to Chapter 11, 12 or 13 of the Bankruptcy Code or because the court has issued an order prohibiting the Service from exercising its collection powers. Area Counsel’s opinion should be obtained in the event of a defaulted Chapter 11 plan to determine what remedies are available to the Service.

The Service is automatically stayed from taking any act to perfect or enforce a lien against property of the estate or to collect a claim against the debtor upon the filing of a bankruptcy petition. 11 USC § 362(a).

If levied-upon property has not been sold or credited to the taxpayers account before the taxpayer files for bankruptcy, the trustee can obtain an order directing the Service to turn over property to the trustee if it provides adequate protection for the Service's interest in the seized property. The revenue officer should endeavor to work with Area Counsel to determine whether the government will seek relief from the automatic stay or negotiate for an adequate protection agreement before the return of the property. In these cases time is of the essence, because inaction might subject the government to monetary sanctions.

For a more complete discussion of the effect of bankruptcy, see IRM 5.17.8, General Provisions of Bankruptcy; IRM 5.17.9, Chapter 7 Bankruptcy; IRM 5.17.10, Chapter 11 Bankruptcy; and IRM 5.17.11, Chapter 13 Bankruptcy.

The Service must seize tangible property to effect a levy upon the property. That is, the taxpayer’s property must be reduced to possession and control (actual or constructive). Freeman v. Mayer, 152 F. Supp. 383 (D.N.J. 1957), aff’d, 253 F.2d 295 (3rd Cir. 1958). The Service must take sufficient steps to evidence constructive possession of seized property whose size, bulk or quantity reasonably prevent its removal upon seizure. Property capable of removal, such as an automobile should be removed.

Force should never be used in seizing property of a taxpayer. Local or other law enforcement authorities may be contacted to assist the revenue officer in performing his/her duties. Also, the Service may seek a court order to restrain the taxpayer or third party from interfering with such removal or sale.

In seizing property to be sold, the Service uses the Levy (Form 668-B) and, post-seizure, the Notice of Seizure (Form 2433).

The IRS may levy upon and seize tangible personal property. Such property is generally capable of being viewed and physically seized and, if necessary, removed for safe keeping pending sale. (Real property is, of course, not susceptible of removal. Thus, posting of a notice of levy along with notification to the owner, tenant or occupant amounts to control.)

When the IRS levies upon intangible property, problems arise with respect to accounts receivable, contract rights, promissory notes, stock, and debts. The best approach to a levy and seizure of intangibles is to do everything possible to constructively reduce the intangible to possession. Thus, for example, seizure of everything in taxpayer’s place of business—padlocking the premises and posting notices of distraint for taxes–did not constitute a levy upon certain accounts receivable of the taxpayer, since no steps were taken to establish possessory dominion over any sums owed the taxpayer. Freeman v. Mayer, supra, (service of notice of levy upon the taxpayer's debtors would have been sufficient in this case). If intangible property is represented by a negotiable document, actual seizure of the document must be made. Service of notice of levy upon the maker of the note, the corporation or the bank is ineffective to reduce the property right to possession. Money on deposit in a bank represented by a nonnegotiable certificate of deposit in the hands of a delinquent taxpayer is subject to the levy. Rev. Rul. 73-12, 1973-1 C.B. 601. The holding in Rev. Rul. 73-12 is not applicable to negotiable certificates. Rev. Rul. 75-355, 1975-2 C.B. 478. A levy by the government on funds represented by a negotiable certificate of deposit must be made by presentation of the negotiable certificate and surrender of such certificate to the maker.

There are three essentials to bear in mind when contemplating levying upon intangibles. First, the revenue officer must investigate and determine the taxpayer’s property or rights to property. Second, the revenue officer must determine the steps necessary to seize the intangible and reduce it to constructive possession. Third, the revenue officer must resolve whether one levy is adequate, or whether successive levies must be made.

Where a taxpayer has instituted suit against a third party for damages in tort or contract, the right of the taxpayer to satisfaction of any judgment obtained may be levied upon. Service of notice of levy upon the defendant in most cases will amount to constructive seizure of the taxpayer’s property rights. However, it is advisable to serve a notice of levy at both the commencement and conclusion of the litigation upon the defendant’s attorney and the taxpayer-plaintiff’s attorney and upon any insurance company, whether named a party defendant or not, or other party who may be contractually obligated to satisfy, in whole or in part, any judgment obtained in the court proceedings.

A problem frequently encountered when serving a Notice of Levy upon a third party debtor of the taxpayer is the third party's claim that he has a right to set off against the taxpayer. The claim of setoff is most frequently asserted by banks and, to a lesser degree, by the taxpayer's employer. Generally, if the tax lien arises before a third party acquires the right of setoff, or a levy is made before a setoff is made, a notice of levy reaches all the taxpayer's property in the hands of the third party undiminished by any setoff. Bank of Nevada v. United States, 251 F.2d 820 (9th Cir. 1957), cert. denied, 356 U.S. 936 (1958); United States v. Sterling National Bank & Trust Co. of New York, 494 F.2d 919 (2d Cir. 1974); and United States v. First National Bank of Arizona, 348 F. Supp. 388 (D. Ariz. 1970), aff'd per curiam, 458 F.2d 513 (9th Cir. 1972).

If the federal tax lien attaches to a taxpayer’s property prior to setoff, then the bank takes funds encumbered with a federal tax lien. The government may levy on the bank to obtain the encumbered funds. United States v. Donahue Industries, Inc., 905 F.2d 1325 (9th Cir. 1990).

If the taxpayer assigns future wages to his employer to secure a debt owed to the employer, a notice of levy will reach only accrued wages due the taxpayer in excess of the amount to be setoff at the time of service of the levy. See Rev. Rul. 73 365, 1973 2 CB 407.

IRC § 6332(a) states that except as otherwise provided in subsection (b), (which contains a special rule for life insurance and endowment contracts) and subsection (c) (which contains a special rule for banks requiring a 21-day delay before payment for the levy is sent, with interest), a person in possession of property or rights to property upon which levy has been made must, upon demand, surrender such property.

The Supreme Court held in United States v. National Bank of Commerce 472 U.S. 713 (1985) that there were only two defenses to a levy: (1) the levied-upon person is not in possession of nor obligated with respect to property or rights to property of the taxpayer, or (2) the property or rights to property are subject to prior judicial attachment or execution.

It is important to ensure that the party having actual possession of the taxpayer’s property is served with a notice of levy particularly when dealing with entities rather than individuals. For example, a notice of levy addressed to the Chairman, Board of Supervisors of a particular county was held to not be a levy on the county because, under state law, only the county treasurer had possession and control of county money. United States v. Brechtel, 90 F.2d 516 (8th Cir. 1937).

Courts have rebuffed a number of defenses to levy offered by levy sources. For example, there is no statute of limitations on bringing a suit to enforce a levy. United States v. Weintraub, 613 F.2d 612 (6th cir. 1979), cert. denied, 447 U.S. 905.

A person levied upon who honors a levy (or who pays after being held personally liable under IRC § 6332(d)(1) for failure to honor a levy) is discharged from any obligation or liability to the taxpayer and any other person with respect to the property surrendered (or amount paid). IRC § 6332(e). However, any person who mistakenly surrenders property or rights to property in which the delinquent taxpayer has no apparent interest is not relieved of liability to a third party who has an interest in the property. Treas. Reg. § 301.6332-1(c)(2).

In addition to any claims against the levy source, the owners of mistakenly surrendered property may also obtain administrative relief for wrongful levy under IRC § 6343(b) or may bring suit to recover their property under IRC § 7426.

It is a criminal offense to forcibly assault, resist, oppose, impede, intimidate or interfere with any employee or officer of the United States in the performance of his/her official duties. 18 USC § 111. Commission of the act itself is a crime even though the doer of the act had no knowledge that the person assaulted, resisted, etc. was an officer of the Service. Bennett v. United States, 285 F.2d 567 (5th Cir. 1960), cert. denied, 366 U.S. 911 (1961), see also United States v. Alvarez, 755 F.2d 830 (11th Cir.), cert. denied, 474 U.S. 905 (1985) (federal officers generally).

Specifically, the Internal Revenue Code provides that it is a criminal offense to endeavor to intimidate or impede, by force or threats of force, any officer or employee of the United States acting in an official capacity under the Code. IRC § 7212.

Any person who removes, deposits, or conceals any property subject to levy or who abets in the removal, deposit, or concealment of such property, with intent to defeat the collection of any tax, is guilty of a felony. IRC § 7206(4). For example, the government may consider prosecution where an employer purposely pays a taxpayer in advance to preclude the government from levying upon the accrued salary of the employee. However, under IRC § 7206(4), the burden is upon the government to prove intent, a necessary element of the offense, and a very difficult burden to sustain.

Once property has been levied upon and seized, the owner or a third-party may attempt to regain possession improperly. Any person convicted of forcibly rescuing, or causing such rescue of seized property, or attempting or endeavoring to do so, shall be fined not more than $500.00, or not more than double the value of the property rescued, whichever is greater, or be imprisoned not more than two years. IRC § 7212(b). Also, a person may be subject to a fine or imprisonment or both if convicted of forcibly rescuing, dispossessing, or attempting to rescue or dispossess any property taken, detained or seized under the authority of any federal revenue law. 18 USC § 2233. The offense of rescuing property consists of the forcible retaking of the property out of the hands of an officer who has it in legal custody. It is not necessary that violence be committed against the person of the officer (conduct and language may be sufficient). Leaving property in possession of an individual after levy does not justify him/her in taking and disposing of it.

Taxpayers may also attempt to interfere with levy and seizure of property or rights to property by commencing a court action to enjoin or restrain the collection of a tax. Section 7421 prohibits a suit to restrain the collection of any tax except where levy is sought to be made:

The courts have further narrowed the parameters of the prohibition against enjoining the collection of the federal tax. For example, the prohibition has been construed not to apply if suit is brought against a purchaser in possession to set aside the government’s sale of seized property if conditions precedent to a levy sale have not been substantially complied with. Margiotta v. District Director of Internal Revenue, 214 F.2d 518 (2nd Cir. 1954), National Bank & Trust Co. v. United States, 78-1 USTC 9196 (N.D. lnd. 1977), aff’d 589 F.2d 1298 (7th Cir 1978). Further, where there are special and extraordinary circumstances combined with the illegality of the tax (failure to give notice of the tax and demand for payment), the collection of which is sought to be restrained, the courts, in the exercise of their equitable powers, will restrain collection of such tax by levy, notwithstanding IRC § 7421. L.O.C. Indus. Inc. v. United States, 423 F. Supp. 265 (M.D.Tenn, 1976). The illegality, however, must be clearly apparent and convincingly established. Bob Jones University v. Simon , 416 U.S. 725 (1974); Commissioner v. Americans United, Inc., 416 U.S. 752 (1974); Enochs v. Williams Packing & Navigation Co., 370 U.S. 1, reh’g denied 370 U.S. 965 (1962). The government may be required to furnish information as to how the liabilities were determined under certain circumstances. Commissioner v. Shapiro, 424 U.S. 614 (1976).

Generally defined, this is an action to recover possession of goods or chattels wrongfully taken or detained. The primary concern of the moving party is to obtain possession of personal property itself rather than sue for damages.

If a replevin action is commenced, the seized property is returned to the one alleging entitlement to possession (usually upon posting a bond) before the court action is litigated. Thus, if property of a party, other than the taxpayer, is levied upon to satisfy the taxpayer’s liability, the innocent party may contemplate maintaining an action in replevin against the United States to recover the seized property. However, the United States Code provides that all property taken or detained under any revenue law of the United States is not subject to replevin. 28 USC § 2463. Therefore, writs of replevin issued to take levied property out of the hands of revenue officers are null and void. New Hampshire Fire Ins. Co. v. Scanlon, 362 U.S. 404 (1960).

IRC § 6343(a) requires a release of levy for all or part of the seized property, if:

In addition, the IRS must, as soon as practicable, release a wage levy upon agreement with the taxpayer that the tax is not collectible. IRC § 6343(e).

Even if a levy is released, IRC § 6343(a) specifically permits a subsequent levy upon the same property. However, the right to levy again is limited by the statute of limitations on collection or any extensions of it. To prevent possible future litigation over the claims of the exempted categories listed in IRC § 6323(a), a release of levy should not be issued unless or until a notice of tax lien is filed to establish the validity of the federal tax lien against such parties.

If the Secretary or his delegate determines that property has been wrongfully levied upon, the Secretary or his delegate pursuant to IRC § 6343(b) may return:

With respect to an amount levied upon or an amount of money equal to the amount received by the government from the sale of such property, interest is allowed and paid at the rate established under IRC § 6621 for the periods described in IRC § 6343(c).

If the sale of the property in question has occurred and the property has been declared purchased by the United States, the minimum bid price is to be treated as the amount received from the sale.

The United States may return the property at any time it still has possession of it.

If money is levied upon or received at the sale of property, an amount of money equal to the amount levied upon or received at sale may be returned before expiration of nine months after the date of the levy.

While filing a formal claim for refund is not a prerequisite of a suit under IRC § 7426, any written request for the return of property under IRC § 6343 must comply with the conditions set forth in Treas. Reg. § 301.6343-1(b). Inadequacies in the request must be noted in writing by the Area Director and mailed within 30 days after receipt of the request or the request is deemed adequate. Treas. Reg. § 301.6343-1(b).

As soon as practicable after seizure, the revenue officer must give written notice to the owner of the property (or the possessor of personal property) which specifies the amount owed and contains an account of the personal property seized and a reasonably certain description of the real property seized.

The notice must be left at the usual place of abode or business of the person to be notified if within the area where the seizure is made, or mailed to his/her last known address if he/she has no abode or business in the area or cannot be readily located. IRC § 6335(a).

If the IRS does not comply with the notice requirements, the IRS can still argue that notice was effective because it "substantially complied" with the statute. Grable & Sons Metal Products, Inc. v. Darue, 377 F.3d 592 (6th Cir. 2004), aff'd on other grounds, 545 U.S. 308 (2005).

Preparation for the sale of seized property should be commenced as soon as practicable after seizure.

In the same manner as a notice of seizure, and as soon as practicable after the seizure, notice of sale must be given to the owner. A notice specifying the property to be sold and the time, place, manner and conditions of sale must be published in a newspaper published or generally circulated within the county in which the seizure was made. IRC § 6335(b). If a newspaper of general circulation in a county will reach more potential bidders for property to be sold than a newspaper published within the county, or if there is a newspaper of general circulation within the county but not published within the county, the government may publish notice of sale in the newspaper of general circulation. If no newspaper is published or generally circulated in the county, notice of sale shall be posted at the post office nearest the place of seizure and in not less than two other places.

The government, by regular mail, also sends a copy of the notice of sale 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.). See IRM 5.10.4.11(5) , Delivery of Notice of Sale. See alsoVerba v. Ohio Cas. Ins., 851 F.2d 811 (6th Cir. 1988) (constructive notice provided by publication and posting pursuant to IRC § 6335(b) held to be constitutionally inadequate).

A description of real property in a notice of sale is sufficient if the land can be identified, provided that the portion of the description which is left out would add nothing to the certainty of the description. In describing personal property to be sold, it is not necessary that each item be listed and be completely detailed. A general description is sufficient.

If notice of sale is posted at public places, the premises of the taxpayer does not constitute a public place, even though the real property was seized for delinquent taxes and the sale was conducted on the premises.

The sale must be held not less than 10 days, nor more than 40 days from the date public notice of sale is given, unless it is adjourned for a period not to exceed one month. Pursuant to Anderson v. United States , 44 F.3d 795 (9th Cir. 1995), a sale may be adjourned but not postponed. (Postponed refers to an action taken to delay the sale prior to the commencement of sale; adjourned refers to an action taken to delay the completion of the sale after the bidding has started). The sale may not be delayed beyond the statutory periods provided in IRC § 6335(d).

After the commencement of the sale, it may be adjourned if the interests of either the United States or the taxpayer will best be served by the adjournment. Notice of the adjourned sale should be given to the taxpayer in the same manner as the original notice of sale. It is important that the sale of seized property take place within the time period designated in the Code and regulations because failure to do so will affect the validity of the sale. Powelson v. United States, 963 F.2d 1156 (9th Cir. 1992); Reece v. Scoggins, 506 F.2d 967 (5th Cir. 1975).

A sale may be adjourned at any time after the bidding has started but before the property is declared sold or the preestablished minimum bid price has been reached. Adjournments may not be made, however, for the express purpose of adjusting the minimum bid price downward to avoid purchase of the property by the United States. See IRM 5.10.5.3, Adjournment Procedures.

If the Area Director believes that collection of an unassessed liability is in jeopardy, he/she may make an immediate assessment and pursue collection without need to follow normal assessment and collection procedures. As soon as a jeopardy or termination assessment is made, the tax, penalties, and interest become due and payable, and the Area Director issues a notice and demand for payment in full. If payment is not made, the IRS may immediately proceed to collect by levy without waiting for the usual 10-day period after notice and demand to expire. Collection may be stayed by filing a surety bond.

Whenever levy is made without regard to the 10-day period required by IRC § 6331(a)(4), public notice of sale of the property seized will not be made within the 10-day period unless IRC § 6336 (relating to the sale of perishable goods) applies. See IRM 5.17.15, Termination and Jeopardy Assessments and Jeopardy Collection, for further discussion.

The IRS cannot sell seized property for less than the minimum bid price. IRC § 6335(e). Such a sale would be an unauthorized collection action, which may lead to an action for civil damages pursuant to IRC § 7433.

Before the sale the PALS must establish a minimum bid price below which the property may not be sold. Under the Service’s procedures, the minimum bid price is generally computed at 80 percent or more of the forced sale value of the property, less encumbrances having priority over the federal tax lien. The taxpayer is given 10 days to contest the determination of the minimum bid price and may hire an outside appraiser or request a valuation by an IRS Valuation Engineer. The minimum bid price cannot exceed the government's lien interest in the property.

IRC § 6335 requires that before sale of seized property the Service must determine if purchase of the property at the minimum bid price is in the best interest of the government. If it is and the minimum bid is not offered at the sale, the IRS must buy the property. IRC § 6335(e)(1)(C). Otherwise, the property must be released back to the owner. IRC § 6335(e)(1)(C). After release, the property would still be subject to the lien and could be reseized. Any expenses of levy and sale are added to the amount of taxes due. If the property is "bid in" by the government at the minimum bid price, it becomes "acquired property" and may subsequently be sold under IRC § 7506.

If the property is listed securities, the minimum bid is fixed at no less than 95 percent of the preceding day’s closing market price. IRM 5.10.4.6 and Policy Statement P-5-35.

The PALS may or may not announce the minimum bid at the sale.

If the minimum bid price is not offered during the course of a sale, the PALS may do whichever of the following best promotes the interest of the government and the taxpayer:

The property must be declared sold to the highest bidder if the bids exceed the minimum bid price.

No minimum bid price is necessary in a sale of goods determined "perishable" under IRC § 6336.

The property will be sold under the method expected to produce the highest total proceeds. Seized property may be sold as separate items, in lots or as groups of items, or in the aggregate, or all three methods may be employed. If real and personal property are offered for sale, the real property must be offered first as separate items and the personal property as a group, groups, or separate items, before being offered in the aggregate. If several tracts of real estate are to be sold, the costs and expenses of levy and sale should be apportioned to each parcel for purposes of determining the amount to be paid for redemption of any one parcel. Failure to prorate costs and expenses incident to preparation of the sale, or failure to assign a value to each parcel of real property when sold in the aggregate may be held to prejudice the right of redemption before sale or after sale. McAndrews v. Belknap, 141 F.2d 111 (6th Cir. 1944), cert. denied, 323 U.S. 721 (1944).

It may be apparent that seized property, if sold, would return an amount far in excess of the tax and expenses of levy and sale. Under such circumstances, if the seized property is divisible and a sale of a part thereof would realize an amount sufficient to pay the entire tax and expenses, only so much of the divisible property should be sold as is necessary to satisfy the liability, including expenses. Johnson v. Gartlan, 470 F.2d 1104 (4th Cir. 1973), cert. denied, 414 U.S. 852 (1973).

If a purchaser at a cash sale defaults, the IRS must resell the property pursuant to IRC § 6335(e). However, in a deferred payment sale the Service may either sue for the balance or void the sale and resell the property, retaining, as forfeited, any payments made. Treas. Reg. § 301.6335(c)(8). Because the forfeiture provisions of IRC § 6335(e)(3) apply only to deferred payment sales, the PALS should consult Area Counsel regarding whether under state law the United States may sue for damages and retain the deposit. The government must observe all Code provisions governing the sale of seized property even though no time limitations per se are imposed on the resale of property where a purchaser has defaulted.

The partial payment of the bid price by the purchaser at a deferred payment sale is forfeited when the Area Director elects to declare the sale null and void. The amount forfeited is not applied to the liability of the taxpayer, but is paid into the Treasury as in the case of other forfeitures. IRC § 7406. The new purchaser will receive the property free of all claims of the defaulting purchaser.

The Code provisions relating to the sale of seized property are meant to protect the taxpayer. A sale is not void because of noncompliance with the provisions of IRC § 6335, but it is voidable by the owner of the property. Aqua Bar & Lounge, Inc. v. United States, 438 F. Supp. 655 (E.D. Pa. 1977), remanded from 539 F.2d 935 (3rd Cir. 1976). The government cannot of its own accord resell property because it failed to comply with the sale provisions of the Code. Koby v. United States, 47 Fed. Cl. 99 (2000); United States v. Conry, 74-1 USTC 9187 (N.D. Cal. 1973). The government has no statutory authority under section 6335 or under any other section of the Internal Revenue Code to administratively rescind a procedurally defective sale.

A taxpayer may institute suit against a purchaser to set aside a sale because the government failed to comply with the pre-sale requirements of the Code. The taxpayer may be able to restrain a sale if she can show the IRS failed to comply with the statutory sale requirements, coupled with a showing of special and extraordinary circumstances (irreparable harm and injury). Transport Mfr. & Equip. Co. of Delaware v. Trainor, 382 F.2d 793 (8th Cir. 1967); Aqua Bar & Lounge, Inc. v. United States, supra; Whalen v. Department of Treasury, 80-2 USTC 13375 (N.D. Ohio 1980). Such a suit does not contravene IRC § 7421, which prohibits suits to restrain the collection of a tax. Powelson v. United States, 963 F.2d 1156 (9th Cir. 1992); Kulawy v. United States, 917 F.2d 729 (2d Cir. 1990); Margiotta v. District Director of Internal Revenue , 214 F.2d 518 (2nd Cir. 1954); Reece v. Scoggins, 506 F.2d 967 (5th Cir. 1975).

However, the court may deny the taxpayer equitable relief if the taxpayer waits too long to attack a sale. McAndrews v. Belknap, 141 F.2d 111 (6th Cir. 1944), cert. denied, 323 U.S. 721 (1944); Howard v. Adle, 538 F. Supp. 504 (D. Mich. 1982); Van Skiver v. United States , 751 F. Supp. 1522 (D. Kan.1990), aff’d, 952 F.2d 1241 (10th Cir.), cert. denied , 506 U.S. 828 (1992).

Even if the sale is not deemed void, it is imperative to remember that failure to comply with the Code requirements may be deemed unauthorized collection actions subject to damages, if any, pursuant to IRC § 7433.