Under 26 U.S.C. Section 7425(b), if a federal tax lien is filed more than 30 days before the date of a foreclosure sale, the United States must be given notice of the sale in writing by registered mail, certified mail or personal service at least 25 days before the date of the sale. If the United States is not given notice, the foreclosure will be subject to the federal tax lien, which would have been inferior otherwise. Therefore, when there is a subordinate tax lien that affects property which is the subject of a foreclosure, notice of the foreclosure must be given to the IRS. For the notice to be adequate, it must be given at least 25 days before the date of the foreclosure sale and must contain the following information:

1. The name and address of the person submitting the notice of sale;
2. A copy of each Notice of Federal Tax Lien (Form 668) affecting the property to be sold, or the following information as shown on each such Notice of Federal Tax Lien --

1. 1. The internal revenue district named thereon,
   2. The name and address of the taxpayer, and
   3. The date and place of filing of the notice;

iii) With respect to the property to be sold, the following information --

1. 1. A detailed description, including location, of the property affected by the notice (in the case of real property, the street address, city, and State and the legal description contained in the title or deed to the property and, if available, a copy of the abstract of title),
   2. The date, time, place, and terms of the proposed sale of the property, and
   3. In the case of a sale of perishable property described in paragraph (c) of this section, a statement of the reasons why the property is believed to be perishable; and

4. The approximate amount of the principal obligation, including interest, secured by the lien sought to be enforced and a description of the other expenses (such as legal expenses, selling costs, etc.) which may be charged against the sale proceeds.

If the above information is not included in the notice, it will be considered inadequate by a district director. If the notice is inadequate, under Federal Tax Regulations Section 301.7425-3(d)(2), the district director is to give written notice to the person who submitted the notice of what information is inadequate. However, when the name and address of the person submitting the notice is not included, the notice is inadequate for all purposes, and the district director is not required to notify anyone of the inadequacy.

If the district director gives notice of the inadequacy, a notice complying with the above requirements must be submitted at least 25 days before the date of the scheduled foreclosure sale.

If notice is given on time and contains the name and address of the person who submitted it, the district director must give written notice of the inadequacy to the person who submitted it at least 5 days before the date of the sale. If the district director does not do so, the notice will be considered adequate.

The district director also has discretion to consent to the sale of the property free of the lien or the title of the United States even if notice is given less than 25 days before the scheduled sale.

When a title examiner discovers a federal tax lien in connection with a foreclosure, it should be brought to our underwriters’ attention to assess the adequacy of any notice given and possible risks which might result from an inadequacy in the notice or failure to file a timely notice.

This is another article taken from the lecture materials presented by Asset Preservation and Statewide Title concerning like-kind exchanges.

5. SPECIAL RULES FOR IDENTIFICATION AND RECEIPT OF REPLACEMENT PROPERTY TO BE PRODUCED—

1. IN GENERAL. A transfer of relinquished property in a deferred exchange will not fail to qualify for nonrecognition of gain or loss under section 1031 merely because the replacement property is not in existence or is being produced at the time the property is identified as replacement property. For purposes of this paragraph (e), the terms "produced" and "production" have the same meanings as provided in section 263A(g)(1) and the regulations thereunder.
2. IDENTIFICATION OF REPLACEMENT PROPERTY TO BE PRODUCED.

1. 1. In the case of replacement property that is to be produced, the replacement property must be identified as provided in paragraph (c) of this section (relating to identification of replacement property). For example, if the identified replacement property consists of improved real property where the improvements are to be constructed, the description of the replacement property satisfies the requirements of paragraph (c)(3) of this section (relating to description of replacement property) if a legal description is provided for the underlying land and as much detail is provided regarding construction of the improvements as is practicable at the time the identification is made.
   2. For purposes of paragraphs (c)(4)(i)(B) and (c)(5) of this section (relating to the 200-percent rule and incidental property), the fair market value of replacement property that is to be produced is its estimated fair market value as of the date it is expected to be received by the taxpayer.

1. RECEIPT OF REPLACEMENT PROPERTY TO BE PRODUCED.

1. 1. For purposes of paragraph (d)(1)(ii) of this section (relating to receipt of the identified replacement property), in determining whether the replacement property received by the taxpayer is substantially the same property as identified where the identified replacement property is property to be produced, variations due to usual or typical production changes are not taken into account. However, if substantial changes are made in the property to be produced, the replacement property received will not be considered to be substantially the same property as identified.
   2. If the identified replacement property is personal property to be produced, the replacement property received will not be considered to be substantially the same property as identified unless production of the replacement property received is completed on or before the date the property is received by the taxpayer.
   3. If the identified replacement property is real property to be produced and the production of the property is not completed on or before the date the taxpayer receives the property, the property received will be considered to be substantially the same property as identified only if, had production been completed on or before the date the taxpayer receives the replacement property, the property received would have been considered to be substantially the same property as identified. Even so, the property received is considered to be substantially the same property as identified only to the extent the property received constitutes real property under local law.

1. ADDITIONAL RULES. The transfer of relinquished property is not within the provisions of section 1031(a) if the relinquished property is transferred in exchange for services (including production services). Thus, any additional production occurring with respect to the replacement property after the property is received by the taxpayer will not be treated as the receipt of property of a like kind.
2. EXAMPLE.

1. 1. B, a calendar year taxpayer, and C agree to enter into a deferred exchange. Pursuant to their agreement, B transfers improved property X and personal property Y to C on May 17, 1991. On or before November 13, 1991 (the end of the exchange period), C is required to transfer to B real property M, on which C is constructing improvements, and personal property N, which C is producing. C is obligated to complete the improvements and production regardless of when properties M and N are transferred to B. Properties M and N are identified in a manner that satisfies paragraphs (c) (relating to identification of replacement property) and (e)(2) of this section. In addition, properties M and N are of a like kind, respectively, to real property X and personal property Y (determined without regard to section 1031(a)(3) and this section). On November 13, 1991, when construction of the improvements to property M is 20 percent completed and the production of property N is 90 percent completed, C transfers to B property M and property N. If construction of the improvements had been completed, property M would have been considered to be substantially the same property as identified. Under local law, property M constitutes real property to the extent of the underlying land and the 20 percent of the construction that is completed.
   2. Because property N is personal property to be produced and production of property N is not completed before the date the property is received by B, property N is not considered to be substantially the same property as identified and is treated as property which is not of a like kind to property Y.
   3. Property M is considered to be substantially the same property as identified to the extent of the underlying land and the 20 percent of the construction that is completed when property M is received by B. However, any additional construction performed by C with respect to property M after November 13, 1991, is not treated as the receipt of property of a like kind.

(g) SAFE HARBORS—

1. 1. IN GENERAL. Paragraphs (g)(2) through (g)(5) of this section set forth four safe harbors the use of which will result in a determination that the taxpayer is not in actual or constructive receipt of money or other property for purposes of section 1031 and this section. More than one safe harbor can be used in the same deferred exchange, but the terms and conditions of each must be separately satisfied. For purposes of the safe harbor rules, the term "taxpayer" does not include a person or entity utilized in a safe harbor (e.g., a qualified intermediary).
   2. SECURITY OR GUARANTEE ARRANGEMENTS.

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   1. In the case of a deferred exchange, the determination of whether the taxpayer is in actual or constructive receipt of money or other property before the taxpayer actually receives like-kind replacement property will be made without regard to the fact that the obligation of the taxpayer’s transferee to transfer the replacement property to the taxpayer is or may be secured or guaranteed by one or more of the following—

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       1. A mortgage, deed of trust, or other security interest in property (other than cash or a cash equivalent),
       2. A standby letter of credit which satisfies all of the requirements of Section 15A.453-1(b)(3)(iii) and which may not be drawn upon in the absence of a default of the transferee’s obligation to transfer like-kind replacement property to the taxpayer, or
       3. A guarantee of a third party.

1. 1. Paragraph (g)(2)(i) of this section ceases to apply at the time the taxpayer has an immediate ability or unrestricted right to receive money or other property pursuant to the security or guarantee arrangement.

1. 1. QUALIFIED ESCROW ACCOUNTS AND QUALIFIED TRUSTS.

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   1. In the case of a deferred exchange, the determination of whether the taxpayer is in actual or constructive receipt of money or other property before the taxpayer actually receives like-kind replacement property will be made without regard to the fact that the obligation of the taxpayer’s transferee to transfer the replacement property to the taxpayer is or may be secured by cash or a cash equivalent if the cash or cash equivalent is held in a qualified escrow account or in a qualified trust.
   2. A qualified escrow account is an escrow account wherein—

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       1. The escrow holder is not the taxpayer or a disqualified person (as defined in paragraph (k) of this section), and
       2. The escrow agreement expressly limits the taxpayer’s rights to receive, pledge, borrow, or otherwise obtain the benefits of the cash or cash equivalent held in the escrow account as provided in paragraph (g)(6) of this section.

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   1. A qualified trust is a trust wherein—

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       1. The trustee is not the taxpayer or a disqualified person (as defined in paragraph (k) of this section, except that for this purpose the relationship between the taxpayer and the trustee created by the qualified trust will not be considered a relationship under section 267(b)), and
       2. The trust agreement expressly limits the taxpayer’s rights to receive, pledge, borrow, or otherwise obtain the benefits of the cash or cash equivalent held by the trustee as provided in paragraph (g)(6) of this section.

1. 1. Paragraph (g)(3)(i) of this section ceases to apply at the time the taxpayer has an immediate ability or unrestricted right to receive, pledge, borrow, or otherwise obtain the benefits of the cash or cash equivalent held in the qualified escrow account or qualified trust. Rights conferred upon the taxpayer under state law to terminate or dismiss the escrow holder of a qualified escrow account or the trustee of a qualified trust are disregarded for this purpose.
   2. A taxpayer may receive money or other property directly from a party to the exchange, but not from a qualified escrow account or a qualified trust, without affecting the application of paragraph (g)(3)(i) of this section.

1. 1. QUALIFIED INTERMEDIARIES.

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   1. In the case of a taxpayer’s transfer of relinquished property involving a qualified intermediary, the qualified intermediary is not considered the agent of the taxpayer for purposes of section 1031(a). In such a case, the taxpayer’s transfer of relinquished property and subsequent receipt of like-kind replacement property is treated as an exchange, and the determination of whether the taxpayer is in actual or constructive receipt of money or other property before the taxpayer actually receives like-kind replacement property is made as if the qualified intermediary is not the agent of the taxpayer.
   2. Paragraph (g)(4)(i) of this section applies only if the agreement between the taxpayer and the qualified intermediary expressly limits the taxpayer’s rights to receive, pledge, borrow, or otherwise obtain the benefits of money or other property held by the qualified intermediary as provided in paragraph (g)(6) of this section.
   3. A qualified intermediary is a person who—

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       1. Is not the taxpayer or a disqualified person (as defined in paragraph (k) of this section), and
       2. Enters in to a written agreement with the taxpayer (the "exchange agreement") and, as required by the exchange agreement, acquires the relinquished property from the taxpayer, transfers the relinquished property, acquires the replacement property, and transfers the replacement property to the taxpayer.

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   1. Regardless of whether an intermediary acquires and transfers property under general tax principals, solely for purposes of paragraph (g)(4)(iii)(B) of this section—

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       1. An intermediary is treated as acquiring and transferring property if the intermediary acquires and transfers legal title to that property,
       2. An intermediary is treated as acquiring and transferring the relinquished property if the intermediary (either on its own behalf or as the agent of any party to the transaction) enters in to an agreement with a person other than the taxpayer for the transfer of the relinquished property to that person and, pursuant to that agreement, the relinquished property is transferred to that person, and
       3. An intermediary is treated as acquiring land transferring replacement property if the intermediary (either on its own behalf or as the agent of any party to the transaction) enters into an agreement with the owner of the replacement property for the transfer of that property and, pursuant to that agreement, the replacement property is transferred to the taxpayer.

1. 1. Solely for the purposes of paragraphs (g)(4)(iii) and (g)(4)(iv) of this section, an intermediary is treated as entering into an agreement if the rights of a party to the agreement are assigned to the intermediary and all parties to that agreement are notified in writing of the assignment on or before the date of the relevant transfer of property. For example, if a taxpayer enters into an agreement for the transfer of relinquished property and thereafter assigns its rights in that agreement to an intermediary and all parties to that agreement are notified in writing of the assignment on or before the date of the transfer of the relinquished property, the intermediary is treated as entering into that agreement. If the relinquished property is transferred pursuant to that agreement, the intermediary is treated as having acquired and transferred the relinquished property.
   2. Paragraph (g)(4)(i) of this section ceases to apply at the time the taxpayer has an immediate ability or unrestricted right to receive, pledge, borrow, or otherwise obtain the benefits of money or other property held by the qualified intermediary. Rights conferred upon the taxpayer under state law to terminate or dismiss the qualified intermediary are disregarded for this purpose.
   3. A taxpayer may receive money or other property directly from a party to the transaction other than the qualified intermediary without affecting the application of paragraph (g)(4)(i) of this section.

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   1. INTEREST AND GROWTH FACTORS. In the case of a deferred exchange, the determination of whether the taxpayer is in actual or constructive receipt of money or other property before the taxpayer actually receives the like-kind replacement property will be made without regard to the fact that the taxpayer is or may be entitled to receive any interest or growth factor with respect to the deferred exchange. The preceding sentence applies only if the agreement pursuant to which the taxpayer is or may be entitled to the interest or growth factor expressly limits the taxpayer’s rights to receive the interest or growth factor as provided in paragraph (g)(6) of this section. For additional rules concerning interest or growth factors, see paragraph (h) of this section.
   2. ADDITIONAL RESTRICTONS ON SAFE HARBORS UNDER PARAGRAPHS (g)(3) THROUGH (g)(5).

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   1. An agreement limits a taxpayer’s rights as provided in this paragraph (g)(6) only if the agreement provides that the taxpayer has no rights, except as provided in paragraph (g)(6)(ii) and (g)(6)(iii) of this section, to receive, pledge, borrow, or otherwise obtain the benefits of money or other property before the end of the exchange period.
   2. The agreement may provide that if the taxpayer has not identified replacement property, the taxpayer may have rights to receive, pledge, borrow, or otherwise obtain the benefits of money or other property upon or after—

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       1. The receipt by the taxpayer of all of the replacement property to which the taxpayer is entitled under the exchange agreement, or
       2. The occurrence after the end of the identification period of a material and substantial contingency that—

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           1. Relates to the deferred exchange,
           2. Is provided for in writing, and
           3. Is beyond the control of the taxpayer and of any disqualified person (as defined in paragraph (k) of this section), other than the person obligated to transfer the replacement property to the taxpayer.