[Code of Federal Regulations]
[Title 26, Volume 18]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR301.6867-1]

[Page 466-468]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 301_PROCEDURE AND ADMINISTRATION--Table of Contents
 
                 Jeopardy, Bankruptcy, and Receiverships
 
Sec. 301.6867-1  Presumptions where owner of large amount of cash is 
not identified.

    (a) General rule. For purposes of section 6851 (relating to 
termination assessments) and section 6861 (relating to jeopardy 
assessments), if cash in excess of $10,000 is found in the physical 
possession of an individual who does not claim either ownership of that 
cash or ownership by some other person whose identity the Commissioner 
can readily ascertain and who acknowledges ownership of that cash as of 
the date the cash was found, then, it shall be presumed that--
    (1) The cash represents gross income of an unknown single 
individual; and
    (2) That the collection of tax on that income will be jeopardized by 
delay.
    (b) Rules for assessment. The Commissioner may make an assessment 
pursuant to section 6851 or section 6861, as appropriate, using the 
rules for assessment specified in this paragraph. In the case of any 
assessment resulting from the application of paragraph (a) of this 
section--
    (1) The entire amount of cash is treated as taxable income for the 
taxable year in which the cash is found;
    (2) The income is treated as taxable at the highest rate of tax 
specified in section 1 of the Internal Revenue Code; and
    (3) Except as provided in paragraph (c), the possessor of the cash 
is treated (solely with respect to that cash) as the taxpayer for 
purposes of chapters 63 and 64 and section 7429(a)(1) of the Internal 
Revenue Code.
    (c) Effect of later substitution of true owner--(1) In general. If 
an assessment resulting from the application of paragraph (a) of this 
section is later abated and replaced by an assessment against the true 
owner of the cash, the later assessment is treated for purposes of

[[Page 467]]

all laws relating to lien, levy, and collection as relating back to the 
date of the original assessment. Notwithstanding the preceding sentence, 
any notice and review provided for by section 7429 and the notice of 
deficiency issued to the true owner relative to the later assessment are 
to be made within the prescribed time limits, using the actual date of 
the later assessment against the true owner.
    (2) Example. The provisions of paragraph (c)(1) of this section may 
be illustrated by the following example:

    Example. On June 5, 1994, A is found in possession of a bag, 
containing $200,000, which A claims he was holding for a friend whose 
name A cannot remember. Because A does not claim ownership of the cash 
and does not provide the name of the true owner so that the Commissioner 
can identify the true owner and have that person acknowledge ownership 
of the cash, it is presumed that the cash represents gross income of an 
individual for calendar year 1994, and that the collection of tax on 
that gross income will be jeopardized by delay. Accordingly, on June 17, 
1994, a termination assessment under section 6851 is made against A, in 
his capacity as possessor of the cash. On June 21, 1994, the written 
statement of information provided for by section 7429(a)(1) is given to 
A. No request for review under section 7429(a)(2) is made by the true 
owner within 30 days after the day on which A was furnished the written 
statement provided for in section 7429(a)(1). Subsequently, individual B 
comes to the Service and states that he is the owner of the cash. On 
September 2, 1994, the Service determines that B was the true owner of 
the cash on June 5, 1994. On September 9, 1994, the Service abates the 
termination assessment made against A solely as possessor of cash and, 
after determining that jeopardy exists, replaces it with a termination 
assessment under section 6851 against B. The lien against B that arises 
under section 6321 is treated as arising on June 17, 1994. However, 
within 5 days after September 9, 1994, the Service must give B the 
written statement of information required by section 7429(a)(1) so that 
B can make a request for review under section 7429(a)(2). In addition, a 
notice of deficiency must be sent to B within 60 days after the later of 
the due date or the actual filing of B's tax return for 1994, as 
required by section 6851(b).

    (d) Rights of possessor of cash--(1) Action permitted. Section 6867 
provides that the possessor of cash is treated as the taxpayer for 
purposes of chapter 63 (relating to assessment) and chapter 64 (relating 
to collection) of the Internal Revenue Code. Accordingly, the possessor 
of cash may file a petition with the United States Tax Court, within the 
applicable time limits, challenging the notice of deficiency issued to 
the possessor solely in that person's capacity as possessor of cash.
    (2) Actions not permitted. Section 6867 provides that the possessor 
of cash is treated as the taxpayer solely for purposes of section 
7429(a)(1), and is entitled to the written statement of information 
provided for by that section. The possessor of cash is not treated as 
the taxpayer for purposes of sections 7429(a)(2) and 7429(b), relating 
to administrative and judicial review of termination and jeopardy 
assessments, and may not maintain an action under section 7429 for such 
review. The possessor of cash is not treated as the taxpayer for 
purposes of section 7422, relating to civil actions for refund, or 
chapter 65 of the Internal Revenue Code, relating to abatements, 
credits, and refunds, and may not institute a suit for refund in 
district court after the deficiency has been collected.
    (e) Rights of true owner of cash--(1) Actions permitted. The true 
owner of cash may request administrative review under section 7429(a)(2) 
and may maintain a civil action under section 7429(b) for judicial 
review of an assessment under section 6851 or section 6861 made against 
the possessor solely in that person's capacity as possessor of cash. 
Such an action, however, must be preceded by a request for review under 
section 7429(a)(2) made by the true owner within 30 days after the day 
on which the possessor is furnished the written statement provided for 
in section 7429(a)(1). In addition, after the deficiency asserted 
against the possessor of cash has been levied upon, the true owner of 
cash may bring an action in federal district court to recover the cash, 
as provided in section 7426, relating to civil actions by persons other 
than taxpayers. See, however, section 6532(c), relating to the 9-month 
statute of limitations for suits under section 7426. In addition, the 
true owner of cash, with the permission of the court, may appear before 
the United States Tax Court in any proceeding that may be filed by the 
possessor of the cash challenging the notice of deficiency

[[Page 468]]

issued to the possessor solely in that person's capacity as possessor of 
the cash.
    (2) Actions not permitted. The true owner of cash may not file a 
petition with the United States Tax Court challenging the notice of 
deficiency issued to the possessor solely in that person's capacity as 
possessor of cash. Notwithstanding the preceding sentence, the true 
owner of cash may file a petition with the United States Tax Court 
challenging any notice of deficiency issued to the true owner following 
the abatement of the assessment made against the possessor of cash.
    (f) Definitions. For the purposes of this section and section 6867--
    (1) Cash. The term cash includes any cash equivalents.
    (2) Cash equivalent--(i) In general. The term cash equivalent 
includes foreign currency, any bearer obligation, and any medium of 
exchange that is of a type that has been frequently used in illegal 
activities, as listed in paragraph (f)(2)(ii) of this section.
    (ii) Specific cash equivalents. For purposes of paragraph (f)(2)(i), 
the following are also cash equivalents--
    (A) Coins;
    (B) Precious metals;
    (C) Jewelry;
    (D) Precious stones;
    (E) Postage stamps;
    (F) Traveler's checks in any form;
    (G) Negotiable instruments (including personal checks, business 
checks, official bank checks, cashier's checks, notes, and money orders) 
that are either in bearer form, endorsed without restriction, made out 
to a fictitious payee, or otherwise in such form that title thereto 
passes upon delivery;
    (H) Incomplete instruments (including personal checks, business 
checks, official bank checks, cashier's checks, notes, and money orders) 
signed but with the payee's name omitted; and
    (I) Securities or stock in bearer form or otherwise in such form 
that title thereto passes upon delivery.
    (iii) Value of cash equivalents. A cash equivalent is taken into 
account at its fair market value except in the case of a bearer 
obligation, in which case it is taken into account at its face value.
    (3) Possessor of cash. An individual is considered to be the 
possessor of cash if the cash is found on that individual's person or in 
that individual's possession or is found in any object, container, 
vehicle, or area under that individual's custody or control.
    (4) True owner of the cash. The true owner of cash is the individual 
who beneficially owns the cash on the date such cash is found in the 
physical possession of the individual described in paragraph (f)(3) of 
this section. An agent, bailee, or other custodian of the cash is not 
the true owner of cash. A true owner of cash does not include an 
individual who, subsequent to the date on which the cash is found in the 
physical possession of the individual described in paragraph (f)(3) of 
this section, obtains ownership of the cash by purchase, subrogation, 
descent, or other means.
    (g) Effective date. This section is effective with respect to cash 
found in the physical possession of an individual on or after August 3, 
1995.

[T.D. 8605, 60 FR 39654, Aug. 3, 1995]

                      Bankruptcy and Receiverships