Reg. § 301.6342-1 Application of proceeds of levy.
(a) Collection of liability Any money realized by proceedings under subchapter D, chapter 64, of the Code or by sale of property redeemed by the United States (if the interest of the United States in the property was a lien arising under the provisions of the Internal Revenue Code), is applied in the manner specified in subparagraphs (1), (2), and (3) of this . Money realized by proceedings under subchapter D, chapter 64, of the Code includes money realized by seizure, by sale of seized property, or by surrender under section (except money realized by the imposition of a 50 percent penalty pursuant to section ).
(1) Expense of levy and sale First, against the expenses of the proceedings or sale, including expenses allowable under section and amounts paid by the United States to redeem property.
(2) Specific tax liability on seized property If the property seized and sold is subject to a tax imposed by any internal revenue law which has not been paid, the amount remaining after applying subparagraph (1) of this , shall then be applied against such tax liability (and, if such tax was not previously assessed, it shall then be assessed);
(3) Liability of delinquent taxpayer The amount, if any, remaining after applying subparagraphs (1) and (2) of this , shall then be applied against the liability in respect of which the levy was made or the sale of redeemed property was conducted.
(b) Surplus proceeds Any surplus proceeds remaining after the application of of this section shall, upon application and satisfactory proof in support thereof, be credited or refunded by the district director to the person or persons legally entitled thereto. The delinquent taxpayer is the person entitled to the surplus proceeds unless another person establishes a superior claim thereto.
[32 FR 15241, Nov. 3, 1967, as amended by T.D. 7180, 37 FR 7320, Apr. 13, 1972]