B-156868, JUL. 19, 1965

B-156868, JUL. 19, 1965

TO THE SECRETARY OF AGRICULTURE:

THERE IS FORWARDED HEREWITH A FILE WHICH WAS TRANSMITTED TO OUR OFFICE BY THE FOREST SERVICE WITH A REQUEST FOR PERMISSION TO TRANSFER A $2,000 CASH BOND FROM THE ACCOUNT "12X6875/11) SUSPENSE, FOREST SERVICE" TO "12X6304 TIMBER SALE DEPOSITS, FOREST SERVICE.'

UNDER THE TERMS OF THE THIRD PARTY AGREEMENTS APPROVED BY THE FOREST SERVICE, THE ELDORADO LUMBER COMPANY TOOK OVER (1) TIMBER SALE CONTRACT NO. 12-11-156; 37155, WITH IRON MOUNTAIN LUMBER, INC., AND (2) TIMBER SALE CONTRACT NO. 12-11-156; 37243, WITH SURPRISE VALLEY LUMBER CO., INC. THE ORIGINAL PURCHASERS HAD DEPOSITED CASH PERFORMANCE BONDS IN THE AMOUNTS OF $2,000 AND $5,000, RESPECTIVELY, AND, UNDER THE THIRD PARTY AGREEMENTS, ELDORADO ACQUIRED THE RIGHT TO RECEIVE REFUNDS OF THOSE AMOUNTS UPON SATISFACTORY COMPLETION OF THE CONTRACTS. CONTRACT NO. 37155 WAS SATISFACTORILY COMPLETED BUT ELDORADO FAILED TO COMPLETE CONTRACT NO. 37243 AND THE TIMBER WAS RESOLD AT A LOSS TO THE UNITED STATES. THE EXACT AMOUNT OF THE LOSS, ESTIMATED TO BE ABOUT $55,639, WILL NOT BE KNOWN UNTIL THE RESALE IS COMPLETED 2 TO 5 YEARS HENCE. THE $5,000 CASH PERFORMANCE BOND DEPOSITED UNDER THE DEFAULTED CONTRACT (NO. 37243) AND OTHER MONEYS OF ELDORADO IN THE HANDS OF THE FOREST SERVICE HAVE BEEN APPLIED IN PARTIAL LIQUIDATION OF THE INDEBTEDNESS, REDUCING THE ESTIMATED LOSS TO $43,183.46.

SECTION 13A2 OF EACH OF THE CONTRACTS INVOLVED PROVIDES IN EFFECT FOR THE RETURN OF THE CASH DEPOSITS IN LIEU OF A SURETY BOND "AS SOON AS SECURITY FOR THE PERFORMANCE OF THIS CONTRACT, OR THE SETTLEMENT OF CLAIMS INCIDENT THERETO, IS NO LONGER NECESSARY.' IN A SOMEWHAT SIMILAR CASE, INVOLVING A FOREST SERVICE CONTRACT, OUR OFFICE HELD INB 150897, MAY 6, 1963, THAT MONEYS DEPOSITED IN LIEU OF A SURETY BOND UNDER ONE CONTRACT WHICH HAS BEEN SATISFACTORILY COMPLETED MAY NOT BE APPLIED AGAINST AN INDEBTEDNESS OF THE SAME CONTRACTOR UNDER ANOTHER CONTRACT. ALSO, SEE 33 COMP. GEN. 262. ACCORDINGLY, THE REQUEST OF THE FOREST SERVICE FOR PERMISSION TO TRANSFER THE $2,000 CASH BOND TO THE TIMBER SALES ACCOUNT FOR THE PURPOSE OF EFFECTING COLLECTION OF THE AMOUNT OWED BY ELDORADO UNDER CONTRACT NO. 37243 MUST BE DENIED. IT IS NOTED, HOWEVER, THAT THE INTERNAL REVENUE SERVICE HAS FILED A LEVY WITH THE FOREST SERVICE AGAINST ELDORADO FOR UNPAID TAXES AMOUNTING TO $36,737.41. UNDER THE PROVISIONS OF 26 U.S.C. 6321 THE INTERNAL REVENUE SERVICE ACQUIRES A LIEN ON PROPERTY, REAL OR PERSONAL, OF A DELINQUENT TAXPAYER FROM THE TIME AN ASSESSMENT OF SUCH TAXES IS MADE, SUBJECT TO CERTAIN CONDITIONS STATED IN SECTIONS 6322 AND 6323 OF 26 U.S.C., NOT HERE INVOLVED. APPROPRIATE ACTION SHOULD BE TAKEN THEREFORE TO HONOR THE NOTICE OF LEVY DATED JULY 2, 1962, ISSUED BY THE INTERNAL REVENUE SERVICE.