If you missed Wayne Vinson’s earlier articles on this subject you can find them here and here. The IRS does have great power when it comes to collecting money due. On the bright side, rarely does a tax situation disintegrate into the need to take such drastic actions as to seize assets. However it does happen. Land and houses are fixtures, time is on the IRS’s hand to dispose of them. That is not true when other types of assets are involved.
I will let Wayne Vinson explain:
Federal law allows IRS to seize almost anything belonging to a delinquent taxpayer, and normally to sell it after certain things are done. A notice of seizure must be given, minimum bid must be established, notice of sale published, and other forms of advertisement used to get bidders to the sale. These things take time. I think the usual time needed to sell personal property or land after seizure, is at least 30 days.
But what if IRS seizes perishable property that will spoil very soon after seizure, say in a day or two? Or what if it is property that will spoil unless it is protected in ways that will probably cost more than it will bring at public auction? Remember IRS is responsible for protecting property after it is seized.
Well, by golly, in those instances a revenue officer can hold a perishable goods sale, which means he can seize goods and sell it on the same day. Perishable goods sales are extremely rare—I had one as a revenue officer and another as a group manager. I’ll tell you about them.
There was a sleaze ball taxpayer in a city who ran a small grocery store, in a rundown part of town. Most of his customers had to buy from him because there weren’t any other stores close—so his prices were high. This guy was a longtime customer of IRS and almost impossible to collect from. He didn’t own his store building or anything else that we could find, except his store inventory of groceries. He had a couple of employees and he owed withholding taxes—the worst kind. He was totally uncooperative, and the word was that he sold more than groceries..
Eventually, my manager assigned this case to me. I went to the store accompanied by 6 other revenue officers. We got there about 10:00am with the paperwork, and I told the taxpayer we were seizing his inventory and were gonna sell it that same day. Five revenue officers went out in different directions, on foot, with sale notices. They gave everyone they saw a sale notice and explained that we were gonna sell everything that afternoon. I don’t remember the time, but the sale probably started about noon.
It was one of the best sales I ever had. We public auctioned his entire inventory to maybe a hundred enthusiastic bidders. Job satisfaction!!
The other perishable goods sale was at a service station. The revenue officer had checked the public records and had found no equity for IRS, in any asset except for several thousand gallons of gasoline in an underground tank. There were other assets, plenty of them—all the assets you’d expect in a modern service station. But every thing except the gasoline was covered by a financing statement, recorded at the county recorder’s office before the IRS had filed its tax lien. A financing statement is a mortgage on personal property.
Which meant IRS could not sell those assets, because IRS had no equity in them—some one else did.
So we seized the gasoline and put a lock on the pump to protect the gasoline until we could sell it. We thought it was a perishable asset because gasoline is supposed to get stale over time. So the revenue officer gave sale notices to several gasoline distributors and had a perishable goods sale.
Wayne makes a great point. I wonder just how far this could be taken? If the prime asset was an orchard of peach trees, and the peaches were ready for picking. Would the IRS fund that activity? Spoiled peaches would be worth nothing, but picked and ready for market, well that is a different thing.
Wayne Vinson was an IRS agent for 33 years and the author of a real thriller, Tax Collectors and Other Sinners, the story of a psycho killing tax collectors. It is available at amazon.com as an E-book or soft cover.