Facts of the Case
When respondent’s husband failed to pay federal income tax liabilities assessed against him, a federal tax lien attached to all [of his] property and rights to property. After the notice of the lien was filed, respondent and her husband jointly executed a quitclaim deed purporting to transfer to her his interest in a piece of real property in Michigan that they owned as tenants by the entirety. Subsequently, the Internal Revenue Service (IRS) agreed to release the lien and allow respondent to sell the property with half the net proceeds to be held in escrow pending determination of the Government’s interest in the property. She brought this action to quiet title to the escrowed proceeds. The Government claimed, among other things, that its lien had attached to the husband’s interest in the tenancy by the entirety. The District Court granted the Government summary judgment, but the Sixth Circuit held that no lien attached because the husband had no separate interest in the entireties property under Michigan law, and remanded the case for consideration of an alternative claim not at issue here. In affirming the District Court’s decision on remand, the Sixth Circuit held that its prior opinion on the issue whether the lien attached to the husband’s entireties property was the law of the case.
Does a tenant by the entirety possess property or rights to property to which a federal lien may attach?
Yes. In a 6-3 opinion delivered by Justice Sandra Day O’Connor, the Court held that each tenant possesses individual rights in the estate sufficient to constitute property or rights to property for the purposes of the lien. By determining that Michigan law granted the husband the right to use the property, the right to receive income produced by it, the right to exclude others from it, the non-unilateral right to alienate the property, and the right of survivorship, Justice O’Connor reasoned that the rights Michigan law granted to the husband as a tenant by the entirety qualified as property or rights to property under section 6321 and, therefore, the federal tax lien could attach to the husband’s property. Justice Antonin Scalia filed a dissenting opinion, in which Justice Clarence Thomas joined. Justice Thomas also filed a dissenting opinion, in which Justices Scalia and John Paul Stevens joined.
- Citation: 535 US 274 (2002)
- Argued: Jan 14, 2002
- Decided Apr 17, 2002