NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS SEP 3 2024 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

In re: ALBERT G. FREEMAN, Jr.; No. 23-15827 DEANNA L. FREEMAN, D.C. No. 3:21-cv-08274-DJH Debtors. ______________________________ MEMORANDUM* UNITED STATES OF AMERICA,

Appellant,

v.

LAWRENCE J. WARFIELD, Chapter 7 Trustee,

Appellee.

Appeal from the United States District Court for the District of Arizona Diane J. Humetewa, District Judge, Presiding

Argued and Submitted May 17, 2024 Phoenix, Arizona

Before: GRABER, DESAI, and DE ALBA, Circuit Judges.

The Internal Revenue Service (IRS) appeals the allocation of proceeds from

the sale of real property between the IRS and the Bankruptcy Estate on a pro rata

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. basis, where the IRS held a valid tax lien that included debts for taxes and related

penalties and that exceeded the value of the encumbered property. The Trustee

avoided the penalty portion of the tax lien under 11 U.S.C. § 724(a), which was

automatically preserved pursuant to 11 U.S.C. § 551. The value of the tax portion

was $256,669.98, the value of the penalty portion was $106,645.16, but the net sale

proceeds were $218,917.19.

The parties identified this case as related to United States v. Mackenzie, No.

23-15825, pursuant to Circuit Rule 28-2.6. Because the cases raise the same legal

issues, we consolidated them for purposes of oral argument. We have jurisdiction

under 28 U.S.C. § 158(d)(1).

In light of our opinion in Mackenzie, decided this date, we reverse judgment

in this case. The available proceeds shall be distributed under a “tax-first” method,

consistent with Mackenzie.

REVERSED and REMANDED.