Millie’s Owner Fails to Regain Silver Lake Cafe : Taxes: A previous co-owner wins the restaurant’s property in IRS auction. The eatery has been a neighborhood institution since the 1920s.

In a sidewalk bidding war in front of her closed Silver Lake restaurant, Magenta lost her 25-seat cafe Monday morning.

Millie’s, a neighborhood institution in continuous operation at least since the 1920s, had been seized by the Internal Revenue Service this month for back taxes. A crowd of 40 turned out for Monday’s auction. Some came to bid against Magenta, and some came to watch her try to buy it back.

“I didn’t expect it to turn out this way,” said the disappointed owner after being advised by her attorney to stop bidding.

Magenta, who uses only a first name, said IRS agents had led her to believe that she could buy back her restaurant and make payments on her debt. But midway through the bidding, she said, her lawyer discovered that the IRS could seize the property again. So he pulled her out of the action.

IRS spokeswoman Nancy McCurley confirmed that if the debt remained unpaid, IRS agents could re-seize the property.

Magenta said she may open another eatery elsewhere.

“The saga’s not over for me, but that chapter is definitely over,” she said.

A few feet away the winning bidder, Paul Greenstein, who previously co-owned the place, grinned in surprise that the fixtures were his for $4,250.

“Well, we just bought a restaurant,” he told four partners, who screamed joyfully and hugged one another.

His next job is negotiating with the building owner, who has said she will rent the Sunset Boulevard building only to Magenta.

Greenstein minimized that obstacle.

“I went into the auction with reservations, and I still have reservations,” he said. “But I think I can get the lease and make it what it used to be: a local hangout, a fun place to be.”

Millie’s, which took its name from a 1941 owner, was bought by Greenstein and a partner in 1984. They refashioned it along hip lines. In its last decade it was a hash-slinging hangout with a jukebox playing rockabilly and walls adorned with 1940s paraphernalia.

Greenstein got out of the business in 1986 after disagreements with his partner. Magenta, who worked for two years under Greenstein’s former partner, acquired the place herself in 1989 with loans from friends.

Her alleged failure to pay $47,000 in Social Security and federal income taxes, plus her involvement with a Utah-based tax protester group, led IRS agents to lock her out and sell the fixtures.

When the auction was all over, some wept.

“I can’t believe it didn’t go to her,” said one of Magenta’s former waitresses, who was teary-eyed. “I was going to go back to work today at 1.”