The opinion of the court was delivered by: LASKER
Memorandum LASKER, District Judge:
On March 17, 1975, Realty Control Corporation (Realty) transferred to De West Realty Corp. (De West), the plaintiff in this action, a parcel of real estate described as 256-262 West 46th Street and 734-736 8th Avenue, New York, New York. The District Office of Internal Revenue Service had been investigating Realty, as well as approximately thirty other real estate businesses owned or controlled by Jacob Fine, and in the belief that the March 17th transfer was without any apparent consideration, assessed tax liability against De West as a transferee of property of Realty pursuant to 26 U.S.C. § 6901 which authorizes the Government to assess and collect a tax liability from certain transferees of a taxpayer's property. Because prior attempts by IRS officials to collect taxes owed by Fine's other businesses had on a number of occasions been frustrated by real estate transactions similar to the one between Realty and De West, a "jeopardy" assessment was made under 26 U.S.C. § 6861 which provides that when the Commissioner of Internal Revenue finds that collection of a tax due and owing from a taxpayer will be "jeopardized by delay" in collection, the Commissioner may immediately assess the tax and upon "notice and demand" "for payment thereof", followed by the taxpayer's "failure or refusal to pay such tax," may immediately levy on the taxpayer's assets.
A jeopardy transferee assessment of $856,135.68 -- the amount of Realty's corporate income tax liability for the tax years 1971 and 1973, which IRS states is approximately the value of the transferred property at the time of transfer -- was made on August 14, 1975, and on the same day De West received a Notice of Jeopardy Assessment. The assessment represents a one million dollar evaluation of the property minus approximately $200,000. in encumbrances.
One day later, on August 15, 1975, a Notice of Federal Tax Lien was filed against De West in New York County and in Albany, New York.
On September 22, 1975, IRS assessed De West $16,552.59 for its own separate liability for income and F.I.C.A. taxes withheld for employees for the second quarter of 1975.
On September 29, 1975, De West received a "90 day letter" from IRS, as required by 26 U.S.C. § 6213, stating that if De West wished to contest the jeopardy assessment, it had to do so by filing a petition with the United States Tax Court within 90 days. De West filed a timely petition on December 24, 1975, opposing the jeopardy transferee assessment.
Before De West's petition was filed but prior to the expiration of the 90 day period, on November 3, 1975, the IRS levied against the property that had been transferred. A Notice of Sealed Bid Sale was sent to De West and on February 27, 1976, the property was sold at a public auction for Fifty Thousand Dollars ($50,000.) to the only individual who submitted a bid. A certificate of sale was issued on March 26, 1976 and the deed was to be delivered on July 26, 1976, after the expiration of the 120 day redemption period as provided in 26 U.S.C. § 6337(b).
De West asserts that the IRS also placed "levies and seizures" on other real estate which it owns and income from such property, although the Government states that only notices of tax liens on such property have been filed pursuant to 26 U.S.C. § 6323.
On the basis of these facts, De West filed a complaint alleging:
(1) that the assessment which IRS made on the transferred property was "arbitrary and capricious" and in bad faith (1st and 9th causes of action);
(2) that the IRS may collect against De West as a transferee only by levying against the property that was allegedly fraudulently conveyed (2nd, 3rd, 4th, 5th, 7th and 9th causes of action); and
(3) that the IRS had no authority to foreclose on the property in order to collect the transferee assessment once De West had filed a timely petition with the Tax Court (8th cause of action).
De West moves for a preliminary order:
(1) enjoining the defendants from placing any further liens on any property acquired by De West other than from Realty;
(2) enjoining the Government from "receiving payment on behalf of the plaintiff and not crediting the plaintiff's liability";
(3) requiring the removal of all transferee liens from property De West owns and acquired from person other than from Realty;
(4) enjoining the selling of its property prior to a Tax Court determination;
(5) enjoining the defendants from placing arbitrary and capricious values on property; and
(6) prohibiting the defendants from violating IRS administrative procedure by denying De West the right to a conference with IRS officials before ...