Payment of Excess Expenses Incurred by Purchaser in Connection With the Redemption of Real Property Under Internal Revenue Code Section 7425

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[TD 8596]

RIN 1545-AL20

Payment of Excess Expenses Incurred by Purchaser in Connection

With the Redemption of Real Property Under Internal Revenue Code

Section 7425

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations regarding the payment

of excess expenses incurred by a purchaser at a nonjudicial sale in

connection with redemptions of real property by the United States.

These regulations affect purchasers in connection with the redemption

of real property.

EFFECTIVE DATE: June 2, 1995.

FOR FURTHER INFORMATION CONTACT: Robert A. Walker, (202) 622-3640 (not

a toll-free call).

SUPPLEMENTARY INFORMATION:

Background

These final regulations amend the Income Tax Regulations (26 CFR

part 301) under section 7425 of the Internal Revenue Code (Code). The

regulations impose a time limit within which a purchaser of real

property at a nonjudicial sale may submit a claim for excess expenses

to the United States when it is redeeming such real property. The

United States will not consider any claim made after expiration of the

time limits.

The IRS published a notice of proposed rulemaking in the Federal

Register on May 23, 1994 (59 FR 26608) providing proposed rules under

section 7425 of the Code. No public comments were received and

accordingly, the final regulations adopt the proposed regulations with

only technical changes.

Explanation of Provisions

Section 301.7425-4(b)(3)(ii) does not provide a specific time

period within which the purchaser at a nonjudicial foreclosure sale may

submit a claim for excess expenses after the redemption. These

regulations clarify that claims for excess expenses must be submitted

within the time periods specified in the regulations in order for the

purchaser to be reimbursed.

The regulations establish a 15-day limit after a request is made by

the district director for the purchaser at a nonjudicial sale or his or

her successor in interest to furnish a written itemized statement of

expenses in excess of income. Since excess expenses could be incurred

after a district director's request, a purchaser who fails to submit a

claim at this time may submit a claim within 30 days after the date of

redemption. These limits will allow the purchaser a reasonable amount

of time within which to determine the amount of any excess expenses and

to submit a claim to the United States. After the expiration of the

relevant time periods, the United States may distribute all surplus

proceeds associated with the sale of the redeemed property unhindered

by any possibility of a claim for excess expenses made in the future

when the surplus proceeds of sale are no longer available to satisfy

such a claim. Adding time limits will also expedite the handling of

redemption sales by earlier disposition of surplus proceeds of sale.

Disputes concerning properly submitted claims will still be resolved by

the United States within a reasonable time after the redemption period.

Special Analyses

It has been determined that this Treasury decision is not a

significant regulatory action as defined in EO 12866. Therefore, a

regulatory assessment is not required. It has also been determined that

section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5)

and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to

these regulations, and, therefore, a Regulatory Flexibility Analysis is

not required. Pursuant to section 7805(f) of the Internal Revenue Code,

the notice of proposed rulemaking was submitted to the Chief Counsel

for Advocacy of the Small Business Administration for comment on its

impact on small business.

Drafting Information. The principal author of these final

regulations is Robert A. Walker, Office of Assistant Chief Counsel

(General Litigation). However, other personnel from the IRS and

Treasury Department participated in their development.

List of Subjects in 26 CFR Part 301

Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income

taxes, Penalties, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

Accordingly, 26 CFR part 301 is amended as follows:

PART 301--PROCEDURE AND ADMINISTRATION

Paragraph 1. The authority citation for part 301 continues to read,

in part, as follows:

Authority: 26 U.S.C. 7805 * * *

Par. 2. In Sec. 301.7425-4, paragraph (b)(3)(ii) is amended by

revising the third sentence and adding a fourth sentence to read as

follows:

Sec. 301.7425-4 Discharge of liens; redemption by United States.

* * * * *

(b) * * *

(3) * * *

(ii) * * * If a purchaser or his or her successor in interest has

failed to furnish the written itemized statement within 15 days after

the request therefor is made by the district director, or there is a

disagreement as to the amount properly payable under paragraph

(b)(1)(iii) of this section, or if there were additional excess

expenses that were not claimed in the original itemized statement, the

purchaser or his or her successor in interest may submit a written

itemized statement to the district director within 30 days after the

date of redemption. If the purchaser or his or her successor in

interest fails to timely submit such a written itemized statement, no

amount shall be payable for expenses in excess of income.

* * * * *

Approved: April 27, 1995.

Margaret Milner Richardson,

Commissioner of Internal Revenue.

Leslie Samuels,

Assistant Secretary of the Treasury.

[FR Doc. 95-13444 Filed 6-1-95; 8:45 am]

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