Automatic Stay: Rolling The Dice With A Tax Deed

Can the IRS issue a tax deed for real property after a bankruptcy has been filed where the tax sale took place prior to bankruptcy, or is that a violation of the automatic stay? In reaching its decision the Rugroden court evaluated (i) the nature of the debtor's property interest after the IRS sale, (ii) the effect of the automatic stay on the debtor's right of redemption, and (iii) whether issuance of the tax deed deprived the estate of any property interest in violation of the automatic stay.

Rugrodeninvolved an IRS levy on two parcels of real estate to pay income taxes. Under the Internal Revenue Code, real and personal property are treated differently. When there is a sale of real estate, the winning bidder obtains a certificate of sale as opposed to the property itself. The taxpayer has a right to redeem the property within 180 days after the sale by paying the tax sale purchaser the amount it paid plus 20% interest. If the property is not redeemed, the IRS