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upon service of the notice of levy. Resolution Trust Corporation
v. Gill, 960 F.2d 336, 340 (3d Cir. 1992).7
Service of a notice of levy constitutes a seizure of
property, see sec. 6331(b) (equating levy and seizure); Phelps v.
United States, 421 U.S. 330, 337 (1975) (stating that “notice of
levy and demand are equivalent to seizure”); however, it does not
transfer ownership of property to the Internal Revenue Service
(IRS). “Ownership of the property is transferred only when the
property is sold to a bona fide purchaser at a tax sale.” United
States v. Whiting Pools, Inc., 462 U.S. 198, 211 (1983).
Instead, a notice of levy gives the Commissioner the right to all
property levied upon and creates a custodial relationship between
the third party and the IRS so that the property comes into the
constructive possession of the Government. United States v.
Natl. Bank of Commerce, 472 U.S. 713, 720 (1985). For these
7 Under sec. 6332(a), any person in possession of (or
obligated with respect to) property or rights to property subject
to levy upon which a levy has been made shall, upon demand of the
Secretary, surrender such property or rights (or discharge such
obligation) to the Secretary. If the third party honors the
levy, he or she is discharged from any obligation or liability to
the delinquent taxpayer (or any other person) with respect to
such property or rights to property arising from such surrender
or payment. Sec. 6332(e). If, on the other hand, the third
party refuses to honor a levy, he or she becomes personally
liable to the Government. Sec. 6332(d)(1) and (2); see United
States v. Natl. Bank of Commerce, 472 U.S. 713, 721 (1985).
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