Defendant Georg Jensen owned real property that was subject to several IRS income tax liens. The IRS levied on Jensen’s property, and the sale for unpaid IRS taxes was held on Nov. 14, 2003.
Defendant Ross Lay was the successful highest bidder for $60,500 at the IRS public auction sale. The IRS issued a Certificate of Sale of Seized Property to Lay.
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On May 12, 2004, Georg Jensen signed a mortgage on the property to plaintiff Westland Holdings Inc. The mortgage was given specifically to provide Westland with an interest in the property to redeem it under federal law after the IRS sale.
Federal law (26 U.S.C. 6337(b)(1)) provides a redemption period “within 180 days of the sale.” Plaintiff Westland Holdings Inc. tendered to the IRS $60,500 on May 12, 2004, to redeem the property.
But the IRS rejected the plaintiff’s redemption, stating the redemption was not within the 180-day time period and that the date of the sale is included in calculating the 180-day period.
The IRS then issued its quitclaim deed transferring property title to defendant Lay. But Westland Holdings sued Lay, alleging its redemption was within the 180 days allowed by federal law.
The IRS and the other defendants argued the 180 days begins running on the date of the sale so Westland was one day late redeeming.
If you were the judge would you allow mortgage lender Westland to redeem the property?
The judge said yes!
The only issue in this case, the judge began, is whether the federal 180-day redemption period after an IRS tax-seizure sale begins to run on the day of the sale or the day after.
Several cases citied by the parties are not much help, the judge explained, because they are unclear on whether the courts began counting on the date of the sale or the day after.
Plaintiff Westland cites Federal Rule of Civil Procedure 6(a), which says in computing any period of time, the day of the act, event or default from which the time period runs shall not be included, the judge emphasized.
Because the federal 180-day redemption law does not state when that period begins to run, he continued, that statute alone does not supply the answer. However, ever since the earliest federal court decisions in 1869 and 1870 involving redemption of property seized for failure to pay taxes, “Leniency to the owner in the exercise of this right has always been the rule of thumb,” the judge noted.
Based on the language of the 180-day redemption statute and the cases interpreting that law, the date of sale should not be counted in determining the statutory redemption period, the judge ruled. Therefore, redemption by Westland for $60,500 was tendered within the 180-day statutory redemption period, which ended on May 12, 2004, so Westland shall be entitled to redeem the property, the judge concluded.
Based on the 2006 U.S. Court of Appeals decision in Westland Holdings Inc. v. Lay, 462 Fed.3d 1228.
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