Section of Taxation Publications
  VOL. 60
NO. 1
FALL 2006
Contents | TTL Home


Note: The following is an excerpt from the introduction to the article as published in The Tax Lawyer. Author citations have been omitted for brevity. Tax Section members may read the article in its entirety in Adobe Acrobat format.

Upsetting the Government’s Right to Redemption Under Section 7425
Carl Hinnescheidt


In Ellis v. United States, the United States District Court for the Middle District of North Carolina granted summary judgment for the plaintiff in a quiet title action. The dispute over the property’s ownership arose due to conflicting interpretations of when the government’s 120-day right to redeem property, for which it holds a junior lien, should begin to toll under section 7425(d). Dismissing competing factors that called into question the practicality of such an interpretation, the court focused its analysis on a plain reading of Regulation section 301.7425-2(b), which defined the pivotal “date of sale” as the date of the public auction. The court held that the 120-day period called for by section 7425(d)(1) began on the date of the public auction regardless of the subsequent 19-day upset bid period during which the government could not redeem the property. Therefore, the government’s attempt to redeem the property was ineffective because it was outside the statutory window.

This Note argues that the court’s opinion was incorrect in holding that the date of sale was the date the public auction was held and the more appropriate result should set the date of sale as the end of the upset period. Part I sets forth the facts of Ellis, and describes the court’s opinion. Part II.A examines how the court confused the policy relevant to the dispute by failing to account for governmental involvement. Part II.B argues that, because the rights of the government during the upset bid period are inferior to the right of redemption, equating the upset bid period to the redemption period is improper. Part II.C highlights how a liberal reading of the term date of sale would be consistent with the rest of the court’s statutory interpretation and would more accurately treat the upset bid period as an extension of the public auction bidding. Part III explores the ramifications of the Ellis decision on future transactions and the courts’ handling of future disputes.



Published by
Section of Taxation, American Bar Association
With the Assistance of
Georgetown University Law Center


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