IRS tax lien questions - Posted by Franklin

Posted by David Krulac on September 06, 2003 at 18:55:11:

JT,

Still tired, but here goes…

There have been some recent changes to this, there was a US Supreme Court ruling about June 2002 dealing with this issue.

The issue is “Tenants by the Entireity”, which is only used in 17 states, and not CA or any community property state, or most states west of the Mississippi.

In the particular case where we bought a property there was a $1.2 million IRS lein, HOWEVER the lien was only on the husband. The property was titled in husband and wife’s name as tenants by the entireity. The critical issue was whether they were still married and were both still living. If there was a divorce or one or both members of the marriage was deceased then the “Tenants by the Entireity” priviledge is destroyed. Disolving the marriage either through divorce or death disolves the “T by E” special privledge.

In the Court case the left coast justices, IMHO, did not understand the special circumstances of “T by E”. They essentially gutted the marriage privledge. The IRS argued to the court that the lein of one spouse should go against the assets that are owned as “T by E” and they prevailed. So the circumstances that permitted a property transfer without the transfer OR release of the IRS lein may not be able to be duplicated. Apparently it would take an act of Congress or another Supreme Court case that would overturn that decision. I’m not holding my breathe and don’t expect a law to be passed that only benefits people in 17 states. I don’t know if either OH or IN are “T by E” states.

I had another case where a seperated and divorcING couple had a house.
I was able to get a quit claim deed from the wife and recorded that deed. I knew though that that deed was worthless because a spouse cannot sell their “share” because by the definition of “T by E” they don’t own a divisable share.

David Krulac
Central Pennsylvania

IRS tax lien questions - Posted by Franklin

Posted by Franklin on September 03, 2003 at 21:16:01:

OK, don’t know what I’m doing here and won’t touch this deal but since it came up, I’d like to find out how smart/dumb I am.

A gentleman bought a house at foreclosure auction that had an IRS tax lien against it. He thinks the IRS will just drop the lien and go after the individual that owed the taxes and I say that he bought the lien with the property.

Property has equity above and beyond the tax lien and I believe it was foreclosed on by the bank.

Anyone?

Re: IRS tax lien questions - Posted by R Sedlik

Posted by R Sedlik on September 03, 2003 at 21:45:30:

IRS Liens automaticlly go away 180 days after foreclosure,you don`t get title until then and they can redeem it.this is the way I understand it

Slight correction… 120 day - Posted by JT-IN

Posted by JT-IN on September 03, 2003 at 21:57:04:

Right of Rdemption for IRS… unless the owner has redemption rights in your state that exceed the 120 days… and if so, in those states the IRS redemption right extends to that of the homeowner.

e.g. Michigan and Colorado have 180 day right of redemption for property owners… and in those states IRS redemption right is also 180 days.

Alabama has a 12 month right of redemption, and so does the IRS…

One more point… Liens don’t really go away automatically… they only go away when due process and proper notification is served… to the IRS and any other lien holder. When proper service is void, the lien will survive the sale…

So bottom line is, in a “properly conducted” foreclosrue process, the liens will be released from the property, subject to the IRS and the respective State’s redemption rights…

JT-IN

experience with IRS… - Posted by David Krulac

Posted by David Krulac on September 04, 2003 at 16:04:59:

I had occasion where there was something like a $500,000 IRS lein on a property. In a state with no owner redemption, the IRS argued that the 120 days had not started. The Forecloser had notified 2 IRS Regional Offices, the US attorney for that state and John Ashcroft. The IRS argued that they wanted another office of the IRS notified and that the 120 day clock didn’t start running until that “proper” office was notified.

On an earlier occasion I bought a property that had a $1.2 million IRS lien, which was a lot of fun.

David Krulac

One exception… - Posted by Ben (NJ)

Posted by Ben (NJ) on September 04, 2003 at 06:35:39:

“liens don’t go away automatically”- the IRS lien, unless re-filed, is set to expire on a certain date, usually ten years after it is filed. On that date the lien will automatically expire. On occasion I have chosen not to join the IRS in a foreclosure so as to avoid “waking them up”. I take the property subject to a big IRS lien, wait for it to expire, and then sell the property free and clear. Strategy can make all the difference in this area.

Re: Slighter correction… 75 day - Posted by Jim V

Posted by Jim V on September 03, 2003 at 22:58:31:

Off the top of my head, I think CO only has 75 day owner redemption.
Perhaps 120 days for agricultural property, which won’t include the majority of properties going to sale.

I do believe MI is 180 days.

soooo…in this scenario… - Posted by js-Indianapolis

Posted by js-Indianapolis on September 03, 2003 at 22:32:27:

I buy a property with IRS tax liens, and wait 120 days (IN is 90 days for homeowner), and the lien goes bye bye if the IRS was properly served during the FC?

Now, to make sure I’ve got this, this is only AFTER the sale, not during the FC process, right? If I were to buy before the sale, the liens would stay with the property until paid, or a release was worked out in some way?

Teaser? Tell of the IRS lien “fun” - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on September 05, 2003 at 01:14:09:

David Krulac–(PA)---------------------

You say “On an earlier occasion I bought a property that had a $1.2 million IRS lien, which was a lot of fun.”

Are you teasing us? Or just too tired to type?

What sort of “fun” did you have?

Good Investing and Good Posting***Ron Starr

Good info… - Posted by JT-IN

Posted by JT-IN on September 04, 2003 at 07:56:48:

Ben:

I understand why you may employ this technique, after acquiring the property from delinquint tax liens. However, if you were the Mortgagee, you wouldn’t consider foreclosing on a property that had a Jr. IRS lien, and not include them as a Defendent. In the words of Dana Carvey… “It woudln’t be prudent”.

Curiously, have you ever had the technique of quietly waiting for an IRS lien to expire… backfire on you. Where the IRS renewed the lien after the 10 years… or they got wind of some action on the property through another means, and accelerated any attempt for collection…?

Thanks for the input, as always.

JT-IN

As long as IRS doesn’t redeem - Posted by JT-IN

Posted by JT-IN on September 04, 2003 at 07:29:40:

the property, which of course they retain the right to do for 120 days. If they do redeem, of course they will pay you your purchase price, plus 6% interest on your money; and in rare cases certain reasonable expenses… after much justification and pulling teeth.

As long they fail to redeem the lien is released from the property, as you have indicated. When buying a property prior to a FC sale, the lien is still a factor that must be dealt with.

JT-IN

Tell of the IRS lien “fun” - Posted by David Krulac

Posted by David Krulac on September 06, 2003 at 18:56:56:

Ronald,

here it is:

http://www.creonline.com/wwwboard/messages/87893.html

Tell of the IRS lien - Posted by David Krulac

Posted by David Krulac on September 05, 2003 at 05:59:58:

it was fun because we were able to sell the property without paying the IRS OR the lien transferring with the property. This process is due to a particular law that only applies in 17 states, but sadly not CA.

David Krulac

PS I am very tired with long days for the next 3 weeks.

If the mortgagee… - Posted by Ben (NJ)

Posted by Ben (NJ) on September 04, 2003 at 09:27:03:

wanted to own the property rather than just get paid (which is rare) then it would be prudent. I have only employed this tactic two or three times since by definition, the expiration date has to be close enough for me to want to wait it out. (I’m not going to wait eight years for it to expire.) Of those few,none of them got re-filed.

Thanks. NT - Posted by js-Indianapolis

Posted by js-Indianapolis on September 04, 2003 at 14:03:14:

.

17 States… doesn’t ring a bell - Posted by JT-IN

Posted by JT-IN on September 05, 2003 at 08:34:19:

David:

When you are not tired or busy, please inform me of this law that you refer to, wherby the IRS Lien did not transfer with the property. All ears…

JT-IN