Certificate of Discharge from Federal Tax Lien, Form 14135

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  • #12563
    Terrence Power
    Participant

    Client owns a rental condo with $200k equity. IRS has liens against the property of $650k. I’m trying to prepare the 14135 to get the discharge certificate and I’m a little confused. I believe my case falls under 6325(b)(3) since the net proceeds will only partial pay the IRS liens. If that’s the case, then the instructions for the form talk about a draft escrow agreement to show how the proceeds from sale will be held. I called the title company and asked if they had one and they were clueless. They said the IRS usually sends a payoff statement, or similar, and the funds get disbursed to the IRS at closing. I’m not sure they’ve ever seen liens that high before.

    Anyone have any experience with this? I don’t want to make any errors on the application for discharge and delay closing.

    Thanks.

    #12566
    Eric Green
    Keymaster

    Terry, you are under 6325(b)(2)(A) “The United States receives an amount not less than the value of the United States’ interest.” The United States interest is the taxpayer’s equity. So there is no escrow needed, just send in the 14135 with all the closing documents (HUD breakdown of sales proceeds, contract, appraisal, etc) and state the IRS will receive the equity available. They will send a letter that states upon receipt of a certified check for the amount of the net sales proceeds they will release the property from its lien so the purchaser can get clear title.

    #12584
    Terrence Power
    Participant

    Thanks Eric! I actually found some additional guidance in the IRM and some IRS videos that address lien discharges and forms 14134 and 14135.

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