T.C. Memo. 2010-225

UNITED STATES TAX COURT

ALDEN J. AND NANCY E. APPLETON, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 20965-09L. Filed October 18, 2010.

Alden J. and Nancy E. Appleton, pro sese.

Jeremy L. McPherson, for respondent.

MEMORANDUM OPINION

DEAN, Special Trial Judge: This case is before the Court on

respondent’s motion for summary judgment under Rule 121. Unless

otherwise indicated, subsequent section references are to the

Internal Revenue Code, and all Rule references are to the Tax

Court Rules of Practice and Procedure. 
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Background

At the time the petition was filed, petitioners resided in

California. 

Petitioners filed their joint 1997 Federal income tax return

in November 2000 reporting an unpaid tax liability. On August

14, 2001, Alden J. Appleton’s (petitioner) assets were placed in

receivership by a California State court.

On November 12, 2008, respondent sent petitioners a Notice

of Federal Tax Lien Filing and Your Right to a Hearing Under IRC

6320. Petitioners timely filed Form 12153, Request for a

Collection Due Process or Equivalent Hearing, for their 1997 tax

year, and participated in a telephone hearing with a settlement

officer. Petitioners did not present collection alternatives,

request innocent spouse relief, or otherwise challenge their

underlying tax liability. Instead petitioners alleged that

respondent lacked the authority to record a Federal tax lien

while petitioner’s assets were in a “receivership proceeding”. 

Respondent issued a Notice of Determination Concerning

Collection Action(s) Under Section 6320 and/or 6330, determining

that the filing of the notice of Federal tax lien was

appropriate. Petitioners timely filed a petition with this Court

in response to respondent’s notice of determination for the 1997

tax year.
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Discussion

I. Summary Judgment Standard

Summary judgment serves to “expedite litigation and avoid

unnecessary and expensive trials.” Fla. Peach Corp. v.

Commissioner, 90 T.C. 678, 681 (1988). Either party may move for

summary judgment upon all or any part of the legal issues in

controversy. Rule 121(a). Summary judgment may be granted only

if there is no genuine issue of material fact. Naftel v.

Commissioner, 85 T.C. 527, 529 (1985).

Petitioners object to respondent’s motion for summary

judgment, alleging respondent is proscribed from recording a

Federal tax lien against petitioners because petitioner and his

property are in the hands of a receiver.

II. Receivership Proceedings

A court-appointed receiver takes property placed in

receivership subject to the liens, equities, and rights of

existing creditors. United States v. Bess, 357 U.S. 51, 57

(1958); Camerer v. Cal. Sav. & Commercial Bank of San Diego, 48

P.2d 39 (Cal. 1935); Cal. Natl. Bank of Sacramento v. El Dorado

Lime & Minerals Co., 2 P.2d 785, 786 (Cal. 1931); H.D. Roosen Co.

v. Pac. Radio Publg. Co., 11 P.2d 873, 876 (Cal. Ct. App. 1932);

see also 75 C.J.S., Receivers, sec. 122 (2002). While a debtor’s

assets are in receivership, creditors are prohibited from taking

any action that would interfere with a receiver’s possession or
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control of the assets, but creditors are permitted to take action

that does not interfere with a receiver’s possession or control

of the receivership property. Hart v. United States, 207 F.2d

813 (8th Cir. 1953). Assets that are subject to the receivership

are not subject to levy or any other enforced collection

proceeding. United States v. Allen, 328 F.2d 377 (5th Cir.

1964). 

Petitioners argue that respondent’s act of recording a

Federal tax lien is tantamount to collection and is effectively a

levy on the receivership property. Petitioners state that

“Respondent wrongly and mistakenly characterizes petitioner’s

argument as being confused and unaware of the functional

distinctions between liens and levies.” Petitioners continue:

“Respondent confuses its duty to actually collect taxes pursuant

to * * * 26 CFR 301.6903, 1(b) [sic] and 26 CFR 301.6871(a)-

2(a)”. “Petitioner argues that it is not reasonable that the

government would be satisfied to merely have its obligations

collateralized * * * when the path to actual collection occurs

more quickly and is less speculative and is specifically

prescribed by regulation that names respondent’s ‘Director’ and

prescribes the Director’s duties where the taxpayer is the

subject of a receivership.” Petitioner surmises that “a lien is

an affirmative attempt at a levying upon assets”.
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Petitioners’ reasoning is premised on section 301.6871(a)-2,

Proced. & Admin. Regs. Section 301.6871(a)-2(a), Proced. &

Admin. Regs., provides that during a proceeding under the

Bankruptcy Act or a receivership proceeding, generally the assets

of the taxpayer are under the control of the court and the

collection of taxes cannot be made by levying upon such assets. 

Petitioners find respondent’s act of recording a Federal tax lien

as tantamount to a levy because there is no other method through

which respondent can collateralize his claim. Petitioners

conclude that pursuant to section 301.6871(a)-2, Proced. & Admin.

Regs., respondent is proscribed from recording a Federal tax lien

against petitioner, who is in a receivership proceeding, because

the lien is tantamount to a levy. Petitioners’ reliance on

section 6871 is misplaced. Section 6871 relates to the

assessment and collection of deficiencies, not to the unpaid

portion of tax reported on a return. Consequently, the Court

discusses the difference between a lien and a levy as described

under sections 6321 and 6331. 

Petitioners’ reasoning disregards the difference between a

tax lien and a tax levy. A tax levy is an enforcement device

that forces a debtor to relinquish his property and results in

the Government’s taking custody of the debtor’s property. 

Elliott, Federal Tax Collections, Liens, and Levies, par. 9.05,

at 9-12 (2d ed. 2008). The taxpayer’s property and rights to
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property are subject to “distraint and seizure by any means.” 

Sec. 6331(b). For that reason, the Government’s levying power is

limited because it is an immediate seizure of assets that does

not require judicial intervention. A lien, however, is merely a

security interest that does not involve the seizure of property. 

See sec. 6321; United States v. Barbier, 896 F.2d 377, 379 (9th

Cir. 1990). A lien enables the debtor to maintain possession of

the property while allowing the Government to preserve its claim

should the status of the property later change. See United

States v. Barbier, supra at 379; Black’s Law Dictionary 941 (8th

ed. 2004). 

As petitioners correctly note, a levy is not permitted on

property that is in the hands of a receiver or that is subject to

a receivership proceeding.1 See sec. 301.6331-1(a)(3), Proced. &

Admin. Regs. The Internal Revenue Code, however, does not so

restrict the recording of a Federal tax lien against a taxpayer

whose assets have been placed in receivership. See United States

v. Barbier, supra at 379.

Respondent has not levied on petitioners’ property and

section 301.6871(a)-2, Proced. & Admin. Regs., does not require

1The Court notes that sec. 6871(c) provides that no petition

for redetermination of a deficiency can be filed in this Court

after the appointment of a receiver. See Kane v. Commissioner,

93 T.C. 782, 787 (1989); Levine v. Commissioner, T.C. Memo. 1987-

564. However, the petition in this case was not filed in

response to a notice of deficiency.
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the Commissioner to levy on a taxpayer’s property. Rather, it

provides the procedures for and restrictions on the

Commissioner’s collection activity for those taxpayers in a

receivership proceeding. The regulations proscribe levying on

the assets of the taxpayer that are under the control of the

court and provide that the collection of taxes cannot be made by

levying upon such assets. Respondent has recorded a Federal tax

lien. Petitioners’ assertion that respondent’s lien is

speculative and that the regulations require him to collect the

tax immediately is incorrect, and respondent is not statutorily

so instructed. Respondent may file a security interest to

preserve his claim without forcing petitioners to relinquish

their property.

Recording a Federal tax lien does not impair a receiver’s

right to control and access to the property that is the subject

of the receivership. Respondent is not now prevented from

protecting his interests by recording a Federal tax lien against

petitioner, whose assets have been placed in receivership. This

procedure protects the future interests of the Government, if and

when the property is released from the receivership proceeding.
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Because there remain no genuine issues of material fact for

trial, respondent is entitled to summary judgment as a matter of

law. 

To reflect the foregoing,

An appropriate order and 

decision will be entered.