1. 6325(b)(1) – a discharge may be issued under this pro-
vision if the value of the taxpayer’s remaining property
encumbered by the federal tax lien is equal to at least twice
the amount of the federal tax liability secured by the lien
and any encumbrance entered into before the IRS led its
public notice of the lien. If there are mortgages, state and/
or local taxes, mechanics liens, etc., the amount of these
debts would be added to the amount of the tax liability and
multiplied by 2.
Example
Tax liability $15,500
Other Debts + 23,334
38,834
X 2
$77,668
The property remaining subject to the lien must be at least
$77,668.
2.
6325(b)(2)(A)
– a discharge may be issued under this
provision when the tax liability is partially satised with an
amount paid that is not less than the value of the United
States’ interest in the property being discharged. For exam-
ple, the IRS has a lien totaling $203,000 and with the ...
• Property selling for: $215,000
• Minus encumbrances senior to IRS lien: $135,000
• Minus proposed settlement costs: $
15,000
• The IRS lien interest equals: $ 65,000
After the IRS receives and applies the $65,000 in partial
satisfaction of the tax liability, there remains an outstanding
tax debt of $138,000.
In the case of Tenancy by Entireties property
, the United
States is generally paid one-half of the proceeds in partial
satisfaction of the liability secured by the tax lien.
3.
6325(b)(2)(B)
- a discharge may be issued under this
provision when it is determined that the government’s
interest in the property has no value. The debts senior to
the federal tax lien are greater than the fair market value of
the property or greater than the sale value of the property.
Submit a copy of the proposed escrow agreement as part
of the application.
4.
6325(b)(3)
– a discharge may be issued under this provi-
sion if an agreement is reached with the IRS allowing the
property to be sold. Per an escrow agreement the sale
proceeds must be held in a fund subject to the claims of the
United States in the same manner and priority the claims
had prior to the property being discharged. For example,
there are two mortgages senior to the IRS tax lien total-
ing $32,000 and $5,000. The government’s interest in the
property is $40,000 and there are liens on the property
junior to the IRS lien in the amount of $3,000, $12,000 and
$2,990.
The proceeds from the sale would be dispensed by
paying the debts in the following sequence.
a.
$32,000
b. $5,000
c. $40,000
d. $3,000
e. 12,000
f. $2,990
Submit a copy of the proposed escrow agreement.
5.
6325(b)(4) – a discharge will be issued under this provision
to a third party who owns the property if a deposit is made
or an acceptable bond provided equal to the government’s
interest in the property. In the case of Tenancy by
Entireties property, a deposit or an acceptable bond
totaling one-half the government’s interest in the property
must be made. If you are the property owner (but not the
taxpayer, i.e., you are not responsible for the tax liability)
and you make a deposit or post an acceptable bond to
obtain a discharge under this section, you have 120 days
to le an action in federal district court, under section
7426(a)(4), challenging the IRS’ determination of the
government’s lien interest. This is the exclusive remedy
available to the third party for the return of the deposit
or accepted bond or a portion thereof. An administrative
request for refund and a refund suit in district court is not
available. The Circular 570, available at http://fms.treas.
gov/c570/index.html contains a list of companies certied
by the Secretary of the Treasury as providers of acceptable
securities.
6.
6325(c)
– a discharge of property subject to an Estate Tax
Lien is not covered in this publication. Please refer to Form
4422.
Section 8 - Description of Property
1.
Enter a detailed description of the property to be discharged
from the federal tax lien.
2.
When the property is real estate include the type of prop-
erty, for example, 3-bedroom house; etc. When the property
is personal property include serial or vehicle numbers, as
appropriate, for example, 2002 Cessna twin engine air-
plane, serial number AT919000000000X00; etc.
3.
Provide the physical address if real estate or physical loca-
tion address if personal property.
4.
Check the appropriate box to indicate whether you attached
a copy of the title or deed to the property.
5.
If you are applying under 6325(b)(1) check the “Attached”
box and attach copies of the titles or deeds for property
remaining subject to the lien. If you are not applying under
6325(b)(1) check the “NA” box.
Section 9 - Appraisal and Valuations
1.
Check the “Attached” box after “Required Appraisal” indi-
cate whether you have attached the required appraisal by
a disinterested third party. This is typically a professional
appraisal providing neighborhood analysis; description of
the site; description of the improvements; cost approach;
comparable sales; denition of market value; certication;
contingent and limiting conditions; interior and exterior
photos of the property; exterior photos of comparable sales
used; comparable sales location map; sketch of subject
property showing room layout; ood map and qualications
of the appraiser.
2.
Check the appropriate box under the “
Plus One of the Fol-
lowing Additional Valuations” section to indicate which other
type of property value verication is attached with your
application.
Note: For applications under IRC 6325(b)(1), valuation
information described above must also be provided for
property remaining subject to lien.
Note: For property being sold at public auction, provide
the date and place of the sale, the proposed amount for
which the property will be sold, and a statement that the
United States will be paid in the proper priority from the
proceeds.
Publication 783 (Rev. 6-2010) Catalog Number 46755I Department of the Treasury Internal Revenue Services www.irs.gov