IRS Redemption of Real Estate and Personal Property

A property levied by the IRS and seized must be disposed of by sale. After that, the IRS will apply the sale proceeds to the taxpayer’s liabilities in the manner prescribed by the Internal Revenue Code. If you are a taxpayer experiencing a tax levy, just because your property has been sized doesn’t mean that you’re out of options; you may still redeem your seized property.   

Redemption Rights

If your real estate or personal property was seized and sold, you or any person interested in the property have redemption rights. Redemption rights (or right of redemption) give the taxpayer-owner of the property seized and sold the ability to avoid auctioning off the property, and in other cases, even after its auction or sale.   

Before the Sale 

Before the sale of the seized real or personal property, you may redeem your property. Under IRC Section 6337(a), any person whose real or personal property was levied has the right to pay the amount due, together with any expenses of the proceeding, to the district director any time before the sale. Once paid, the district director shall restore the property to him, and consequently, all levy proceedings on such property shall cease (Reg. § 301.6337-1(a). Note that the amount to be paid is the amount of the tax. It is not merely the amount equivalent to the value of the property seized or the government’s interest in the property. 

After the Sale 

Once the sale of personal property has taken place, you will be permanently barred from redeeming your personal property. On the other hand, where real property has been sold, you or any person with interest in real property may redeem it within 180 days from the date of sale. The 180-day period is strictly applied. 

Any person with interest may either be:  

  • Heirs, executors, administrators of a taxpayer 
  • Any person having an interest in the property 
  • Any person having a lien interest in the property 
  • Any person on behalf of those previously listed 

To redeem your property after the sale, you must pay the successful bidder the redemption price, which is the purchase price plus interest at the rate of twenty percent (20%) per year, compounded daily. Redemption is made by actual delivery of payment to the purchaser or the successful bidder. Suppose that the purchaser cannot be located in the country where the real property to be redeemed is situated. You may make payments to the IRS Secretary or his delegate.   

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