Final Regs on Payment of Excess Expenses Incurred by Purchases of Property Redeemed by the United States

 [4830-01-u]

ACTION: Final regulations.

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 section 301.7425-4, paragraph (b)(3)(ii) is amended by revising the third sentence and adding a fourth sentence to read as follows:

SECTION 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. * * * * *