12.3.1 Federal Tax Liens and Judicial Foreclosure.

JurisdictionArizona

A federal tax lien or a title derived from enforcement of a federal tax lien may be extinguished or discharged under local law only as prescribed in 28 U.S.C. § 2410 (Actions affecting property on which United States has a lien) or 26 U.S.C. § 7425 (Discharge of liens). 26 C.F.R. § 301.7425-1(a) (1982).

In any foreclosure of a mortgage or other lien upon real property where a judicial sale is sought, the United States has consented to joinder as a party defendant. 28 U.S.C. § 2410(a) and (c). Joinder of the United States is mandatory only if notice of the federal tax lien has been properly filed. 26 U.S.C. § 7425(a)(1). A “judicial sale” is a sale “based on an order, decree or judgment directing sale.” A.H. & R.S. Coal Corp. v. United States, 461 F. Supp. 752, 755 (W.D. Pa. 1978). If notice of a federal tax lien has not been filed, even if the law makes no provision for filing, a judicial sale has the same effect on the federal tax lien as provided by local law. 26 U.S.C. § 7425(a)(2). However, if the United States is not joined as a party and the judicial sale discharges the federal tax lien, the United States may still assert its claim against the net proceeds of the sale at any time before distribution of such proceeds is ordered, and the lien will have the same priority as it had against the property sold. 26 U.S.C. § 7425(a)...

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