Purpose: This section provides procedural guidance for collection staff on judicial sales.

Audience: This section is for collection employees dealing with judicial sales.

Policy Owner: Director, Collection Policy, SBSE.

Program Owner: Collection Policy, SBSE, Enforcement.

Primary Stakeholders: Advisors, Revenue Officers and Property Appraisal and Liquidation Specialists (PALS).

Program Goals: When the United States obtains a judgment related to taxes, employees of the IRS are authorized to sell property pursuant to a court order. These are referred to as "judicial sales." By following the procedures in this IRM, employees will be able to correctly work judicial sales and handle all required actions relating to those sales.

Employees of the IRS are authorized to sell property pursuant to a court order when the United States obtains a judgment related to taxes. The cases normally originate from a revenue officer's request for a tax lien foreclosure suit. The suit recommendation is then referred by IRS Area Counsel to the Department of Justice (DOJ). The DOJ trial attorney will then file suit and obtain the judgment. Once a judgment is obtained, the property may be sold. In the past, the U.S. Marshals Service has conducted these sales. The Order of Sale may now provide that a Service employee, usually the Property Appraisal and Liquidation Specialist (PALS), may conduct the sale.

Once a judgment is entered in favor of the government, a judicial sale is held in accordance with the court's order. The court supervises the judicial sale from judgment entry through sale confirmation.

The type of sale is discussed with and recommended by local counsel to the DOJ. There are two types of judicial sales:

The judge enters an Order of Sale in the judicial proceeding. This order directs:

The United States can request the establishment of a minimum bid for a public auction sale or a minimum sale price for a private sale.

The terms and conditions of the sale are at the discretion of the court and may either be specific or leave some items open for the employee to determine while arranging the sale.

The court may order that prior encumbrances be paid from the sale proceeds or that the property be sold subject to the prior encumbrances, but generally, the purchaser receives clear title to the property in a judicial sale after confirmation by the court.

There is no right of redemption in a judicial sale.

The PALS or other specified IRS employee can provide input to Counsel and the DOJ prior to the submission of the Order of Sale, and when the Order of Sale is entered, review the Order of Sale to determine how to proceed with the sale.

Unlike a seized property sale, an Order of Sale can contain specific provisions to facilitate the sale of the property. In some instances, a foreclosure action was recommended by the revenue officer because an administrative sale was attempted and failed, or the administrative sale was never attempted because it would not have been successful.

The Order of Sale may contain specific provisions that require the taxpayer or debtor to take certain actions which can help facilitate a sale of difficult property. These actions may include instructions to:

The Order of Sale may contain a Notice of Sale. If it does not, the employee will need to prepare one (IRM 5.10.8.6, Notice of Sale.)

Contacts made on cases in litigation are not subject to third party reporting requirements.

In certain situations, such as when the taxpayer may try to interfere with the sale, the court can authorize the Service to conduct a private sale. This sale is different from a public sale because the employee will attempt to independently locate a buyer for the subject property.

The sale is similar to a sale of seized property; however, there are some differences and other actions to take in order to conduct a judicial sale.

28 USC section 2001 requires that the public sale be held at one of the following:

The employee should provide Counsel with information as to the best location for the sale so the information can be included in the Order of Sale.

The employee will conduct a current title search or secure a current title search report, to include:

The employee will contact holders of all senior encumbrances, as recognized by the judgment, and secure a current payoff amount from them.

The Order of Sale will normally list the parties that should receive a copy of the Notice of Sale. Mail the Notice of Sale to all persons holding encumbrances of record and to the taxpayer or debtor in the judgment. The Order of Sale may specify the required method of delivery, and in some cases it may require the preparation of a Judicial Sale Process Receipt and Return document. See Exhibit 5.10.8-1, Judicial Sale Process Receipt and Return Document.

In most cases the court order will contain language ordering all persons occupying the property to vacate the property permanently. This is commonly referred to as an eviction notice. The Service will not conduct the eviction, but will coordinate the eviction with the U.S. Marshals office. In most cases, the Service will pay the eviction expenses as part of the sale expenses with the U.S. Marshals office conducting the eviction. Expenses can include, but are not limited to, locksmith, electrician, plumber, and trash removal; however, there is normally no charge by the U.S. Marshals Service. The Order of Sale should indicate the above coordination concerning the eviction. Refer to IRM 5.10.8.9, Evictions, for additional information.

If the Order of Sale contains an eviction notice, the PALS should prepare a letter directing the taxpayer/occupants to vacate the property by the required date stated in the Order. The date is usually 30 days from the date the Order was entered. See Exhibit 5.10.8-2, Eviction Letter Template. Personal service of the letter is preferable, but it can be mailed by both regular and certified mail along with a copy of the Order.

Contact the U.S. Marshal's office in the jurisdiction where the property is located to advise them of the Order containing the eviction notice. Provide a copy of the Order and the eviction letter so they can be prepared should an eviction be necessary.

If the taxpayer files bankruptcy before the sale, the employee should contact the appropriate Field Insolvency office immediately for guidance per IRM 5.9.1.4(8), Cessation of Collection Actions.

The Order of Sale may contain language regarding rent payment collection from tenants of the sale property. The PALS or other specified employee can provide input to counsel and DOJ regarding the rent payment collection method before the Order of Sale is issued. The facts and circumstances of each case are unique and ultimately the terms and conditions of the sale, including the rent payment collection method, are at the discretion of the court. After the Order of Sale is issued, the PALS may consult with the DOJ attorney or counsel regarding concerns with the Order of Sale, including the rent payment collection method.

A private sale may be preferred for difficult situations and properties. This type of sale is rare, but it can be ordered by the court, usually at the request of the DOJ.

If the court determines that the best interest of the parties are served through a private sale, the Service will attempt to locate a purchaser for the property.

The court will appoint three disinterested parties to appraise the property. The purchase price obtained by the employee may not be confirmed at less than two-thirds of the appraised value.

Before the court confirms a private sale, the employee must publish the terms of the private purchase agreement in a newspaper or newspapers of general circulation as directed by the court at least ten days before confirmation.

The private sale will not be confirmed if another potential purchaser tenders an offer, under the conditions of the court, which offers at least a ten percent increase over the published purchase price and original offer.

The employee must publish the Notice of Sale (Exhibit 5.10.8-3) for public auctions per the legal requirements. Section 2002 of 28 USC contains the legal requirements for advertising a judicial sale. The Notice of Sale must be published once a week for at least four weeks prior to the sale in at least one newspaper regularly issued and of general circulation in the county, state, or judicial district of the United States where the realty is situated. The first notice must appear at least 28 days before the sale.

In addition, the Notice of Sale should be posted and advertised in order to market the property and attract prospective bidders. The Notice of Sale may be posted at:

The Notice of Sale information should also be included on the internet. The employee should inform prospective bidders (and include on the internet advertisement) that it is a judicial sale and not a sale of seized property. The benefits of a judicial sale should be explained to the prospective purchasers.

A public auction judicial sale is similar to a seized property sale. The employee will make the opening statement regarding the type of sale, property being sold, and the conditions of the sale. This information should all be contained in the Notice of Sale. The sale of property still requires an assisting employee; however, the assistance need not be provided by a Service employee. If circumstances warrant, and with the concurrence of the PALS group manager, the assisting employee may be a law enforcement officer, including the U.S. Marshal or Deputy Marshal. The case history should clearly identify the assisting employee.

In addition, it is important for the employee to state that:

After making the opening statement, the employee will begin the public auction sale. At the conclusion of the bidding, the employee will make the following statement: "In accordance with the provisions of 28 USC sections 2001 and 2002, I hereby declare this property sold to the highest bidder for the sum of $ ____."

Immediately after the sale, provide the trial attorney with a declaration.

In some jurisdictions the DOJ trial attorney may provide a template for the declaration, if not, it will include the following information:

Provide a copy of the declaration to the advisor in Advisory who maintains the judicial sale cases.

If it is determined that the taxpayer/occupants have not vacated the property in accordance with the Order of Sale, the PALS should either contact the DOJ trial attorney to coordinate the contact with the U.S. Marshal’s office or contact the U.S. Marshal’s office directly. Verification that the property has been vacated can be completed by the PALS if the property is located within his/her collection territory. If not, the PALS should contact the local law enforcement office to verify whether or not the property has been vacated.

The PALS should coordinate with the U.S. Marshal's office for the date of eviction. The PALS will need to schedule a locksmith to secure the property after eviction.

Depending on the time of year, it may be necessary to take additional steps to preserve the property including, but not limited to:

The Order of Sale should state that personal property that has not been removed is deemed to be abandoned and forfeited. The PALS will dispose of the property in a reasonable and efficient manner. Proceeds from the sale of any abandoned or forfeited property will be applied to the tax debt.

Prepare a memorandum titled, "Proceeds from the Judicial Sale of Real Property," and include the following information:

Attach copies of the expense invoices, including copies of the publisher's affidavit and the information secured from the senior encumbrances representing the current payoff amounts.

Provide the DOJ trial attorney with the:

A copy of the memorandum should be retained in the sale file, and a copy should be sent to:

The proceeds from judicial sales should not be sent to Submission Processing in Ogden. The judge issues an Order of Sale included in the final judgment. Therefore a memo and the remittance are to be sent to DOJ. DOJ (and sometimes the court) transmits the money to the IRS and this transmission may occur by Intra-Governmental Payment & Collections (IPAC). The PALS may contact the DOJ trial attorney to determine the DOJ contact that facilitates the IPAC transfer of funds to the IRS. The PALS may also contact the Submission Processing Account Contact for the Redesign Revenue Accounting Control System (RRACS) in Kansas City listed in IRM 3.17.15.11(1), Points of Contact, to determine the DOJ contact for the DOJ transfer to IRS process. Contact Advisory to address questions regarding the transfer of the sale proceeds. Elevated questions regarding the proceeds from judicial sales should be referred through advisory management and/or the Advisory subject matter experts.

Upon confirmation of the sale by the Court, Advisory will prepare and issue a deed in accordance with the laws of the state in which the real property is situated. See Exhibit 5.10.8-5 for a sample of a deed issued for property sold under a judicial sale. The deed should be prepared within 30 days of confirmation, and sooner if possible.

The deed will be prepared in triplicate and will be forwarded through Area Counsel to the DOJ trial attorney for approval. After approval by the trial attorney, the CEASO Director, Area Director or delegated authority will sign the deed. The delegated authority to sign these deeds is the same as the delegated authority to sign deeds for seized property (Delegation Order 1-23-2 [formerly SB/SE Delegation Order 5.1 (Rev 2)]. See IRM 1.2.65.3.1 and IRM 1.2.65-2, SBSE 1-23-2 (Rev. 2), Authority to Sign and Issue Levy and Related Documents.). The deed will then be notarized and given to the purchaser of record. Ordinarily, the purchaser will record the deed, but in some limited circumstances the deed may be recorded before being given to the purchaser.

A record of the administrative judicial sale file is maintained by Advisory and will contain copies of the: