No. 00-1831 

In the Supreme Court of the United States 

UNITED STATES OF AMERICA, PETITIONER 

v. 

SANDRA L. CRAFT 

ON WRIT OF CERTIORARI TO THE 
UNITED STATES COURT OF APPEALS FOR 
THE SIXTH CIRCUIT 

BRIEF FOR THE UNITED STATES 

THEODORE B. OLSON 
Solicitor General 

Counsel of Record 

EILEEN J. O’CONNOR 

Assistant Attorney General 

LAWRENCE G. WALLACE 

Deputy Solicitor General 

KENT L. JONES 

Assistant to the Solicitor 

General 

DAVID ENGLISH CARMACK 
JOAN I. OPPENHEIMER 

Attorneys 

Department of Justice 
Washington, D.C. 20530-0001 
(202) 514-2217 

QUESTION PRESENTED 

Whether the federal tax lien that arises by operation 
of law in “all property and rights to property” of a 
delinquent taxpayer (26 U.S.C. 6321) attaches to the 
rights of that taxpayer in property held in a tenancy by 
the entirety. 

(I) 

TABLE OF CONTENTS 

Page 

Opinions below ............................................................................... 
1 

Jurisdiction ...................................................................................... 1 

Statute involved ............................................................................. 
2 

Statement ........................................................................................ 2 

Summary of argument .................................................................. 
9 

Argument: 

The federal tax lien attaches to the rights of a 

taxpayer in property held in a tenancy by the 

entirety ..................................................................................... 12 

A. A spouse’s interest in a tenancy by the 

entirety is a valuable, legally protected interest 

that is subject to the federal tax lien .......................... 
12 

B. The court of appeals erred in concluding that 

state law governs in determining whether a 

spouse’s interest in a tenancy by the entirety is 

subject to the federal tax lien ....................................... 

16 

C. The holding of the court of appeals would create 

irrationally disparate treatment of similarly 

situated taxpayers and would facilitate fraud on 

the revenue ...................................................................... 

25 

Conclusion ....................................................................................... 32 

TABLE OF AUTHORITIES 

Cases: 

American Trust v. American Community Mutual Ins. 

Co., 142 F.3d 920 (6th Cir. 1998) ........................................ 

20-21 

Arango v. Third Nat’l Bank of Nashville, 992 F.2d 

611 (6th Cir. 1993) .................................................................. 

29 

BNY Fin. Corp. v. Moran, 154 Misc. 2d 435, 584 

N.Y.S.2d 261 (Sup. Ct. 1992) ............................................... 29 

(III) 

IV 

Cases—Continued: Page 

Bank One Ohio Trust Co. v. United States, 80 F.3d 

173 (6th Cir. 1996) .................................................................. 

18 

Beacon Milling Co. v. Larose, 138 Vt. 457, 418 A.2d 

32 (1980) ................................................................................... 

30 

Beal Bank, SSB v. Almand & Assoc., Inc., 780 

So.2d 45 (Fla. 2001) ................................................................ 

29 

Bloomfield v. Brown, 67 R.I. 452, 25 A.2d 354 

(1942) ........................................................................................ 28 

Boggs v. Boggs, 26 Ark. App. 188, 761 S.W.2d 956 

(1988) ........................................................................................ 29 

Ciconte v. Barba, 161 A. 925 (Del. Ch. 1932) .................... 

29 

Cline, In re, 164 B.R. 592 (Bankr. S.D. Ohio 1994) ............ 

26 

Cole v. Cardoza, 441 F.2d 1337 (6th Cir. 1971) ........ 

4, 16, 19 

Colorado Nat’l Bank v. Miles, 711 P.2d 390 (Wyo. 

1985) ......................................................................................... 28 

Commissioner v. Sunnen, 333 U.S. 591 (1948) ................ 

26 

Cox v. Commissioner, 121 F.3d 390 (1997) ....................... 

25 

Cuevas v. Cuevas, 191 So. 2d 843 (Miss. 1966) ................. 

29 

DeYoung v. Mesler, 373 Mich. 499, 130 N.W.2d 38 

(1964) ........................................................................................ 30 

Dealer Supply Co. v. Greene, 108 N.C. App. 31, 

422 S.E.2d 350 (1992), review denied, 333 N.C. 343, 

426 S.E.2d 704 (1993) ............................................................ 

28 

Diss v. Agri Bus. Int’l, Inc., 670 N.E.2d 97 (Ind. 

Ct. App. 1996) ......................................................................... 

28 

Dolan v. Tigard, 512 U.S. 374 (1994) ................................. 

15 

Dow v. State, 396 Mich. 192, 240 N.W.2d 450 

(1976) ........................................................................................ 14 

Drye v. United States, 528 U.S. 49 (1999) ................... 

passim 

Eadus v. Hunter, 249 Mich. 190, 228 N.W. 782 

(1930) ........................................................................................ 14 

Estate of Wall, In re, 440 F.2d 215 (D.C. Cir. 1971) .......... 

29 

Farmers’ & Merchants’ Nat’l Bank & Trust Co. v. 

Globe Indem. Co., 264 Mich. 395, 249 N.W. 882 

(1933) ........................................................................................ 14 

V 

Cases—Continued: Page 

Faulk v. Estate of Haskins, 714 P.2d 354 (Alaska 

1986) ......................................................................................... 29 

Finley v. Thomas, 691 A.2d 1163 (D.C. 1997) .................. 

28 

Geiselman v. United States, 961 F.2d 1 (1st Cir.), 

cert. deneid, 506 U.S. 891 (1992) ......................................... 

28-29 

Glass City Bank v. United States, 326 U.S. 265 

(1945) .............................................................................. 

11, 12, 32 

Hatchett v. IRS, 126 F. Supp. 2d 1038 (E.D. Mich. 

2000), appeal docketed, No. 00-1645 (6th Cir. June 

13, 2000) ................................................................................... 

31 

Hallmark v. Stillings, 648 S.W.2d 230 (Mo. Ct. App. 

1983) ......................................................................................... 30 

Hoffman v. Newell, 60 S.W.2d 607 (Ky. 1932) .................. 

28 

Jewett v. Commissioner, 455 U.S. 305 (1982) ................... 

12 

Kerner v. McDonald, 60 Neb. 663, 84 N.W. 92 

(1900) ........................................................................................ 27 

Koehring v. Bowman, 194 Ind. 433, 142 N.E. 117 

(1924) ........................................................................................ 30 

Koffman v. Smith, 453 Pa. Super. 15, 682 A.2d 

1282 (1996) ............................................................................... 

28 

Loretto v. Teleprompter Manhattan CATV Corp., 

458 U.S. 419 (1982) ................................................................ 

15 

Lowell v. Lowell, 138 Vt. 514, 419 A.2d 321 (1980) .......... 

28 

Madden v. Gosztonyi Sav. & Tr. Co., 331 Pa. 476, 

200 A. 624 (1938) .................................................................... 

30 

Masonry Prods., Inc. v. Tees, 280 F. Supp. 654 

(D.V.I. 1968) ........................................................................... 

28 

Mitchell v. Wilmington Trust Co., 449 A.2d 1055 

(Del. Ch. 1982), aff ’d, 461 A.2d 696 (Del. Super. Ct. 

1983) ......................................................................................... 28 

Morgan v. Commissioner, 309 U.S. 78 (1940) .................. 

17 

Morris v. Solesbee, 8 Ark. App. 123, 892 S.W.2d 281 

(1995) ........................................................................................ 28 

Oliver v. Givens, 204 Va. 123, 129 S.E.2d 661 

(1963) ........................................................................................ 30 

VI 

Cases—Continued: Page 

Rogers v. Rogers: 

136 Mich. App. 125, 356 N.W.2d 288 (1984) ...................... 

14 

257 Va. 323, 512 S.E.2d 821 (1999) ..................................... 

28 

SNB Bank & Trust v. Kensey, 145 Mich. App. 

765, 378 N.W.2d 594 (1985) .................................................. 

28 

Sawada v. Endo, 57 Haw. 608, 561 P.2d 1291 

(1977) ........................................................................................ 28 

Sills, In re, 82 F.3d 111 (5th Cir. 1996) ................................ 

21 

Sitomer v. Orlan, 660 So.2d 1111 (Fla. Dist. Ct. App. 

1995) ......................................................................................... 28 

Snyder, In re, 231 B.R. 437 (Bankr. D. Mass. 1999) .......... 

28-29 

State v. One 1984 Toyota Truck: 

69 Md. App. 235, 517 A.2d 103 (1986), aff ’d, 311 Md. 

171, 533 A.2d 659 (1987) ................................................... 

29 

311 Md. 171, 533 A.2d 659 (1987) ......................................... 

28 

State v. One 1984 Toyota Truck, 69 Md. App. 235, 

517 A.2d 103 (1986), aff ’d, 311 Md. 171, 533 A.2d 

659 (1987) ................................................................................. 

29 

Thor Power Tool Co. v. Commissioner, 439 U.S. 522 

(1979) ........................................................................................ 26 

Traders Travel Int’l, Inc. v. Howser, 69 Haw. 609, 

753 P.2d 244 (1988) ................................................................ 

29 

Tyler v. United States, 281 U.S. 497 (1930) ............ 

10, 23, 24 

United States v. Avila, 88 F.3d 229 (3d Cir. 1996) ........... 

29 

United States v. Barbier, 896 F.2d 377 (9th Cir. 

1990) ......................................................................................... 21 

United States v. Bess, 357 U.S. 51 (1958) ........... 

13, 17, 19, 21 

United States v. Brynes, 848 F. Supp. 1096 (D.R.I. 

1994) ......................................................................................... 29 

United States v. Davenport, 106 F.3d 1333 (7th Cir. 

1997) ......................................................................................... 26 

United States v. Diemer, 859 F. Supp. 126 (D.N.J. 

1994), rev’d on other grounds sub nom. United 

States v. Avila, 88 F.3d 229 (3d Cir. 1996) ..................... 

29 

United States v. Hutcherson, 188 F.2d 326 (8th Cir. 

1951) ......................................................................................... 25 

VII 

Cases—Continued: Page 

United States v. Irvine, 511 U.S. 224 (1994) ................. 

4, 5, 

7-8, 10, 22, 23 
United States v. Jacobs, 306 U.S. 363 (1939) .................... 

24, 27 

United States v. Jones, 877 F. Supp. 907 (D.N.J. 

1995), aff ’d mem., 74 F.3d 1228 (3d Cir. 1995) .................. 

29 

United States v. Kocher, 468 F.2d 503 (2d Cir. 

1972), cert. denied, 411 U.S. 931 (1973) ............................. 

26 

United States v. Mitchell, 403 U.S. 190 (1971) ................. 

19, 21 

United States v. National Bank, 255 F.2d 504 (5th 

Cir. 1958), cert. denied, 358 U.S. 825 (1958) ..................... 

25 

United States v. National Bank of Commerce, 472 

U.S. 713 (1985) .................................. 

5, 9, 10, 12, 13, 16, 19, 25 

United States v. Overman, 424 F.2d 1142 (9th Cir. 

1970) ......................................................................................... 26 

United States v. Ragsdale, 206 F. Supp. 613 (W.D. 

Tenn. 1962) .............................................................................. 

29 

United States v. Rodgers, 461 U.S. 677 (1983) ................. 

4, 10, 

18, 20, 21, 24, 25, 26 

United States v. Rye, 550 F.2d 682 (1st Cir. 
1977) ......................................................................................... 18 

United States v. Sec. Trust & Sav. Bank, 

340 U.S. 47 (1950) ................................................................... 

12 

Van Der Heide, In re, 164 F.3d 1183 (8th Cir. 

1999) ......................................................................................... 28 

Voelker, In re, 42 F.3d 1050 (7th Cir. 1994) ........................ 

21 

Washington v. United States, 402 F.2d 3 (4th Cir. 

1968), cert. denied, 402 U.S. 978 (1971) ............................. 

27 

White v. Watson, 571 S.W.2d 493 (Tenn. Ct. App. 

1978) ......................................................................................... 30 

Wilde v. Mounts, 95 Or. App. 522, 769 P.2d 802 

(1984) ........................................................................................ 29 

Woodard v. Woodard, 216 Mass. 1, 102 N.E. 921 

(1913) ........................................................................................ 29-30 

VIII 

Constitution and statutes: 

Page 

U.S. Const.: 

Art. VI, Cl. 2 (Supremacy Clause) ..................................... 

20 

Amend. XIV (Due Process Clause) .................................... 

14 

Internal Revenue Code (26 U.S.C.): 

§ 2040(b) ................................................................................. 

23 

§ 6013(d)(3) ............................................................................ 
30 

§ 6321 ............................................................. 
2, 9, 12, 13, 16, 17 

§ 6334(a) ................................................................................. 20, 21 

§ 6334(a)(13) .......................................................................... 

21 

§ 6334(c) ................................................................................. 
21 

§ 6334(e) ................................................................................. 
21 

§ 7403 ...................................................................................... 
15, 20 

§ 7403(c) ................................................................................. 
15 

Revenue Act of 1916, ch. 463, § 202(c), 39 Stat. 778 .......... 
23 

Alaska Stat. § 09.38.100(a) (Michie 2001) ............................. 
28 

735 Ill. Comp. Stat. Ann. 5/12-112 (West 1993 & Supp. 
2000) ......................................................................................... 26, 28 

Ky. Rev. Stat. Ann. § 140.050 (Michie 1991) ........................ 

29 

Mich. Comp. Laws Ann. (West): 
§ 552.102 (West 1988 & Supp. 2001) ................................... 
14 

§ 554.872(g) (Supp. 1997) .................................................. 
13, 14 

§ 554.872(i) (Supp. 1997) ....................................................... 
13 

§ 557.71 (1988) ......................................................................... 
14 

§ 700.2901(g) (Supp. 2001) .................................................... 
13, 14 

§ 700.2901(i) (Supp. 2001) ..................................................... 
13 

Ohio Rev. Code Ann. §§ 5302.17-5302.21 (Anderson 
1989 & Supp. 2000) ................................................................ 
26 

Okla. Stat. Ann. tit. 60, § 74 (West 1994) .............................. 
29, 30 

Vt. Stat. Ann. tit. 15: 
§ 1202(2) ................................................................................... 
30 

§ 1204(e)(1) .............................................................................. 
30 

Miscellaneous: 

4 B. Bittker, Federal Taxation of Income, Estates 
and Gifts (1989) ...................................................................... 

13 
Black’s Law Dictionary (rev. 4th ed. 1968) ....................... 13 

IX 

Miscellaneous—Continued: Page 

Comment, Federal Tax Liens and State Homestead 
Exemptions: The Aftermath of United States v. 
Rodgers, 34 Buff. L. Rev. 297 (1985) ................................. 
25 

Comment, United States v. National Bank of Commerce: 

Co-Owners Suffer the “Federal Law Consequences”, 
11 Del. J. Corp. L. 561 (1986) ............................................... 
25 

H.R. Rep. No. 708, 72d Cong., 1st Sess. (1932) ................... 
12 

R. Heaton, Administration of Entireties Property in 

Bankruptcy, 60 Ind. L.J. 305 (1985) .................................. 

26 

S. Johnson, After Drye: The Likely Attachment of 
the Federal Tax Lien to Tenancy-by-the-Entireties 
Interests, 75 Ind. L.J. 1163 (2000) ....................................... 
25 

S. Johnson, Fog, Fairness, and the Federal Fisc: 

Tenancy-by-the-Entireties Interests and the Federal 
Tax Lien, 60 Mo. L. Rev. 839 (1995) ........................ 

25, 27, 32 
Note, Property Subject to the Federal Tax Lien, 
77 Harv. L. Rev. 1485 (1964) ............................................... 
19, 32 

S. Rep. No. 665, 72d Cong., 1st Sess. Pt. 1 (1932) ............... 
12 

W. Plumb, Federal Tax Liens (3d ed. 1972) .............. 16, 21, 30 

In the Supreme Court of the United States 

No. 00-1831 

UNITED STATES OF AMERICA, PETITIONER 

v. 

SANDRA L. CRAFT 

ON WRIT OF CERTIORARI TO THE 
UNITED STATES COURT OF APPEALS 
FOR THE SIXTH CIRCUIT 

BRIEF FOR THE UNITED STATES 
OPINIONS BELOW 

The opinions of the court of appeals (Pet. App. 1a- 
41a, 44a-69a) are reported at 140 F.3d 638 and 233 F.3d 
358. The opinions of the district court (Pet. App. 70a- 
93a, 95a-104a) are reported at 74 A.F.T.R.2d (RIA) 
6362, 76 A.F.T.R.2d (RIA) 7447, and 65 F. Supp. 2d 651. 

JURISDICTION 

The judgment of the court of appeals was entered on 
November 22, 2000. Pet. App. 42a. The petition for 
rehearing was denied on March 16, 2001. Pet. App. 43a. 
The petition for a writ of certiorari was filed on June 8, 
2001, and was granted on September 25, 2001. The 
jurisdiction of this Court rests upon 28 U.S.C. 1254(1). 

(1) 

2 

STATUTE INVOLVED 

Section 6321 of the Internal Revenue Code, 26 U.S.C. 
6321 provides: 

If any person liable to pay any tax neglects or 
refuses to pay the same after demand, the amount 
(including any interest, additional amount, addition 
to tax, or assessable penalty, together with any 
costs that may accrue in addition thereto) shall be a 
lien in favor of the United States upon all property 
and rights to property, whether real or personal, 
belonging to such person. 

STATEMENT 

1. a. Although Don Craft earned substantial income 
from his law practice during the years 1979 through 
1986, he failed to file federal income tax returns for 
each of those years. Pet. App. 45a, 72a. In 1988, the 
Internal Revenue Service assessed $482,446 in unpaid 
income tax liabilities owed by him for those years and 
demanded payment. Id. at 45a. When Mr. Craft failed 
to pay these taxes on demand, the federal tax lien 
attached by operation of law to “all property and rights 
to property” in which he owned any interest. 26 U.S.C. 
6321. Notice of the federal tax lien was filed on March 
30, 1989, in the county of his residence. Pet. App. 45a. 

b. Sandra L. Craft was the wife of Don Craft and is 
the respondent in this case. In 1972, Don and Sandra 
Craft purchased real property in Grand Rapids, Michi- 
gan, as tenants by the entirety. Pet. App. 45a. On 
August 28, 1989, after the notice of tax lien had been 
filed for the taxes owed by Don Craft, the Crafts jointly 
executed a quitclaim deed that purported to transfer 
this property solely to Sandra Craft for one dollar. Id. 
at 45a. When she thereafter attempted to sell the 

3 

property in 1992, a title search revealed the govern- 
ment’s lien. The Internal Revenue Service agreed to 
release the tax lien from this property so that the sale 
could be made, with the stipulation that half of the net 
proceeds—amounting to $59,944.10–-were to be held in 
escrow pending a final determination of the rights of 
the parties.1 

2. Sandra Craft then brought this action to quiet 
title to the escrowed proceeds. The government as- 
serted in its answer (i) that the federal tax lien attached 
to Don Craft’s interest in the property when it was held 
by the Crafts as tenants by the entirety, (ii) that when 
the property was conveyed to respondent it remained 
subject to the government’s lien and (iii) that the 
government is therefore entitled to one-half of the sale 
proceeds. The government further asserted that Don 
and Sandra Craft’s purported conveyance of the prop- 
erty to Sandra Craft was invalid as a fraud on creditors. 
Pet. App. 46a-47a. 

The district court granted the government’s motion 
for summary judgment. The court held (i) that the 
conveyance of the property to respondent terminated 
the tenancy by the entirety, (ii) that, at that moment, 
each spouse took an equal one-half interest in the estate 
and (iii) that the government’s lien attached to Don 
Craft’s one-half interest in the estate at that time and 
remained attached to the property throughout any 
subsequent transfers. Pet. App. 104a. The court con- 

1 Under the escrow agreement, the funds representing Don 
Craft’s 50% share of the sale proceeds are held “in an interest- 
bearing account * * * until such time as a resolution of the tax 
lien dispute is reached and an agreement is signed by both the 
Internal Revenue Service and representatives of Don Craft or 
until ordered to release those funds by an appropriate court 
order.” J.A. 30. 

4 

cluded, however, that the tax lien attached only to the 
value of Don Craft’s interest as of the date of the 
Crafts’ conveyance of the property to respondent and 
not to any appreciation of that property’s value that 
occurred subsequent to that date. Id. at 46a-48a, 104a. 

3. a. Both parties appealed. Pet. App. 44a. On re- 
spondent’s appeal, the Sixth Circuit reversed the 
determination of the district court that the tax lien 
attached to the property.2 Relying on that circuit’s 
earlier decision in Cole v. Cardoza, 441 F.2d 1337 
(1971), the panel majority held that Don Craft never 
had an attachable interest in the property held in a 
tenancy by the entirety—either prior to, or at the tran- 
sitory moment of, the conveyance to respondent. Pet. 
App. 54a-56a. In reaching that conclusion, the majority 
relied on the common-law fiction, adopted in Michigan, 
that property held in a tenancy by the entirety is not 
owned by either of the spouses but is instead owned by 
the “marital unit.” The court concluded that the 
husband (who owed the taxes) had no separate interest 
in entirety property to which the tax lien could attach. 
Ibid. Since Michigan law exempts property held in a 
tenancy by the entirety from seizure by creditors for 
the debts of only one spouse, the majority concluded 
that this property was exempt from the federal tax lien 
for the separate tax debt of one spouse. Id. at 57a-58a. 
According to the panel majority, the decisions of this 
Court in United States v. Irvine, 511 U.S. 224 (1994), 
and United States v. Rodgers, 461 U.S. 677 (1983), have 
no effect “on the government’s ability to attach a lien to 

2 As a result of that ruling, the court of appeals did not consider 
the government’s appeal of the district court’s determination that 
the tax liens did not attach to any appreciation occurring after the 
Crafts’ conveyance of the property to respondent. 

5 

an entireties estate, because these cases do not alter 
the basic tenet that state law governs the issue of 
whether any property interests exist in the first place.” 
Pet. App. 55a. The court remanded the case for con- 
sideration of the fraudulent conveyance issue that had 
not been addressed by the district court. Id. at 58a. 

b. Judge Ryan concurred in the remand but dis- 
sented from the majority’s conclusion that a spouse’s 
interest in entirety property is not “property or rights 
to property” to which the federal tax lien may attach. 
Pet. App. 69a. He concluded that each spouse has 
valuable, legally-protected rights in property held in a 
tenancy by the entirety to which the tax lien attaches 
as a matter of federal law: in particular, each spouse 
has the right to share in the proceeds of any sale or 
lease of the property and the right to the entire 
property if the other spouse predeceases him. Id. at 
61a. Judge Ryan added that this Court’s decisions in 
United States v. National Bank of Commerce, 472 U.S. 
713 (1985), and United States v. Irvine, supra, make it 
clear that the state legal fiction that the husband and 
wife are a single entity—and the associated fiction that 
neither has any separate interest in entirety property 
—cannot be interposed to preclude the operation of the 
federal lien (Pet. App. 63a-64a): 

As the Supreme Court has made clear, such state- 
law fictions, while they are perhaps valid defenses 
against state-law creditors, have no effect on an IRS 
lien. For example, in National Bank of Commerce, 
the fact that no Arkansas creditor could reach funds 
of a taxpayer-debtor that were held in a joint 
account with other nondebtor individuals did not 
prevent the IRS from attaching the entire account. 

* * * 

6 

Although the majority disagrees, I am satisfied 
that United States v. Irvine, 511 U.S. 224 (1994), 
also undermines Sandra Craft’s position. In Irvine, 
the Court reiterated that legal fictions—although 
valid protection from creditors under state law— 
could not be used to avoid federal tax liabilities. 

Judge Ryan noted, moreover, that the majority opinion 
“not only contravenes established precedent,” it also 
“provides an avenue for easy avoidance of federal 
income-tax laws.” Id. at 69a.3 

4. On remand, the district court concluded that 
when, as here, property is made exempt from the 
claims of creditors under state law, a conveyance of that 
property cannot be a fraudulent transfer under state 
law. Pet. App. 79a-85a. The court stated, however, 
that this rule is inapplicable when the debtor, while 
insolvent, places non-exempt funds beyond the reach of 
his creditors by using them to enhance exempt prop- 
erty. Id. at 85a-86a. Since Don Craft had enhanced the 
value of the property by making mortgage payments 
while he was insolvent, the court held that the 
government is entitled to a lien on his share of the sale 
proceeds to the extent of the enhanced value—which 
the court concluded was $6693. Id. at 86a, 92a.4 

3 Judge Ryan was of the view that the federal tax lien would 
not follow the property after its transfer to respondent unless that 
transfer was set aside as fraudulent. See Pet. App. 69a. He 
concurred in the remand solely for the purpose of determining 
whether Don and Sandra Craft’s transfer of the property for $1 to 
Sandra Craft as sole owner constituted a fraud on creditors. Id. at 
68a-69a. 

4 This figure included only the portion of the mortgage pay- 
ments that had been applied to reduce the principal balance of the 
loan. The district court rejected the government’s additional claim 
to recover the far greater interest payments, as well as local ad 

7 

5. Both parties again appealed. Pet. App. 1a-2a. 
The government also petitioned the court of appeals for 
hearing en banc on the ground that the decision in Craft 
I conflicted with the relevant decisions of this Court. 
The court of appeals denied that petition in December 
1999. Pet. App. 6a. 

a. The panel to which the appeal was assigned con- 
cluded that it was bound by the prior decision in Craft I 
and dismissed the government’s appeal.5 Pet. App. 2a. 
The panel stated that it was bound by Craft I because 
the relevant Supreme Court decisions do not “directly 
h[o]ld otherwise” (id. at 11a) and because the recent 
decision of this Court in Drye v. United States, 528 U.S. 
49 (1999), which was issued after Craft I was decided, 
“has not so fundamentally changed the legal landscape 
as to overrule Craft I.” Pet. App. 18a. 

b. In a concurring opinion, Judge Gilman agreed that 
the panel was bound by Craft I but concluded “that the 
result reached in Craft I and that this court endorses 
today, is inconsistent with Supreme Court precedent 
and should be reversed.” Pet. App. 35a. Judge Gilman 
therefore recommended “that this case be revisited en 
banc.” Ibid. 

Judge Gilman stated that the decision in Craft I was 
inconsistent with the decisions of this Court that make 
clear that the federal tax laws are “not struck blind” by 
state-law legal fictions. Pet. App. 36a (quoting United 

valorem property tax payments, that Don Craft made over the 
years with the untaxed income that generated the tax liability in 
the first place. Pet. App. 92a-93a. 

5 On respondent’s appeal, the panel affirmed the district court’s 
ruling that the government is entitled to a lien on the property to 
the extent of taxpayer’s payments of the principal of the out- 
standing mortgage loan made after the taxes began to accrue. Pet. 
App. 20a-23a. 

8 

States v. Irvine, 511 U.S. at 240). Judge Gilman stated 
that (Pet. App. 38a): 

[i]n contravention of Irvine, the majority in Craft I 
failed to look past Michigan’s characterization of an 
individual’s interest in entireties property and 
ignored the substantial rights actually held by Don 
Craft, which similarly had undeniable value. In 
other words, I believe that the majority in Craft I 
was “struck blind” by Michigan’s “legal fictions.” 

Judge Gilman noted that each spouse has several 
valuable, legally-protected rights in entirety property 
to which the federal tax lien may attach: (i) the right to 
enter and enjoy the property and to exclude all others; 
(ii) the right to half of any rental or sale proceeds; (iii) a 
contingent right of survivorship; and (iv) in the event of 
divorce, the right to bring an action for partition and 
sale. Pet. App. 37a-38a. Because these valuable rights 
are protected under state law, “Craft I reached the 
wrong result, and the IRS ought to have had the right 
to attach Don Craft’s valuable interest in the tenancy 
by the entirety.” Id. at 38a. Although Judge Gilman 
believed the panel was bound by Craft I, he recom- 
mended that the case be reheard en banc because 
“Craft I contravenes recent Supreme Court decisions.” 
Id. at 41a. 

c. Following the entry of the panel decision, the gov- 
ernment filed a petition for rehearing en banc. That 
petition was denied when “less than a majority of the 
judges” of that circuit voted to grant it. Pet. App. 43a. 

9 

SUMMARY OF ARGUMENT 

1. Under Section 6321 of the Internal Revenue 
Code, the federal tax lien attaches by operation of law 
to “all property and rights to property” of a delinquent 
taxpayer. 26 U.S.C. 6321. This statutory lien is broad 
in scope and “reveals on its face that Congress meant to 
reach every interest in property that a taxpayer might 
have.” United States v. National Bank of Commerce, 
472 U.S. 713, 720 (1985). As this Court recently con- 
cluded, this expansive federal tax lien “reach[es] every 
species of right or interest protected by law and having 
an exchangeable value.” Drye v. United States, 528 
U.S. 49, 56 (1999). 

The interest of a married taxpayer in property held 
in a tenancy by the entirety is a valuable, legally pro- 
tected “species of right or interest” that is encompassed 
within the federal tax lien. Each spouse has the right 
to use the property, to receive half the proceeds of the 
sale of the property, or to receive the property in fee 
simple absolute on the death of the other spouse. 
Because these legally-protected rights have “undeni- 
able value” (Pet. App. 38a (Gilman, J.)), they constitute 
“property” or “rights to property” within the broad 
scope of the federal tax lien. Drye v. United States, 528 
U.S. at 56. 

2. a. The court of appeals erred in concluding that 
“state law governs the issue of whether any property 
interests exist in the first place” (Pet. App. 55a). It is 
federal law, not state law, that “determine[s] whether 
the taxpayer’s state-delineated rights qualify as ‘prop- 
erty’ or ‘rights to property’ within the compass of the 
federal tax lien legislation.” Drye v. United States, 528 
U.S. at 58. “Once it has been determined that state law 
creates sufficient interests in the taxpayer to satisfy 

10 

the requirements of the statute, state law is inopera- 
tive, and the tax consequences thenceforth are dictated 
by federal law.” United States v. National Bank of 
Commerce, 472 U.S. 713, 722 (1985). 

b. Under the established federal standard, the valu- 
able, legally-protected rights of each spouse in entirety 
property constitutes an interest in “property” or 
“rights to property” to which the federal lien attaches. 
The fact that state law may, in some circumstances, 
preclude other creditors from seizing or foreclosing on 
property held in a tenancy by the entirety does not 
prevent the attachment and enforcement of the federal 
tax lien. As this Court emphasized in United States v. 
Rodgers, 461 U.S. 677, 701 (1983), “state-created ex- 
emptions against forced sale” of jointly-owned property 
are ineffective against the federal tax lien. It is 
“irrelevant” to the enforcement of the federal tax lien 
that state law prohibits other creditors from foreclosing 
on property held in a tenancy by the entirety. United 
States v. National Bank of Commerce, 472 U.S. at 727. 

c. The court of appeals erred in relying on the legal 
fiction employed in Michigan that entirety property is 
owned by the marital unit rather than by the individual 
spouses acting collectively. Federal tax statutes are 
not “struck blind” by state legal fictions concerning 
property ownership. Drye v. United States, 528 U.S. at 
59; United States v. Irvine, 511 U.S. 224, 240 (1994). In 
particular, in applying federal tax statutes affecting 
tenancies by the entirety, courts are to look to the 
“actual” substantive rights of the spouses rather than 
to the “amiable fiction” of state law that such property 
is owned by the “marital unit” rather than by the 
spouses collectively. Tyler v. United States, 281 U.S. 
497, 503 (1930). 

11 

3. The contrary holding of the court of appeals would 
cause an irrationally disparate treatment of similarly 
situated taxpayers. A tenancy by the entirety is the 
only form of joint property ownership that has been 
treated as exempt from the federal tax lien for the 
debts of one spouse. Other types of joint ownership— 
such as homestead property, community property, and 
jointly-owned property—have consistently been held 
subject to the federal tax lien. The decision of the court 
of appeals would create an unwarranted preference for 
taxpayers who own property in a tenancy by the 
entirety over taxpayers who jointly own property in 
the many States that do not recognize, or have 
abolished, that form of ownership. 

The decision of the court of appeals also fails the test 
of common sense, for it “provides an avenue for easy 
avoidance of federal income-tax laws.” Pet. App. 69a 
(Ryan, J.). Under the court’s reasoning, both spouses 
may earn income, refuse to file returns or file only 
separate returns, and avoid paying taxes simply by 
shielding their residence—and, in many States, even 
their bank accounts and other financial assets—in a 
tenancy by the entirety. It is implausible to conclude 
that, in crafting the broad text of the federal tax lien 
statute for the very purpose of “assur[ing] the collec- 
tion of taxes” (Glass City Bank v. United States, 326 
U.S. 265, 267 (1945)), Congress intended to authorize 
such an obvious and facile method for evading and 
obstructing tax collection. 

12 

ARGUMENT 

THE FEDERAL TAX LIEN ATTACHES TO THE 
RIGHTS OF A TAXPAYER IN PROPERTY HELD 
IN A TENANCY BY THE ENTIRETY 

A. A Spouse’s Interest In A Tenancy By The En- 
tirety Is A Valuable, Legally Protected Interest 
That Is Subject To The Federal Tax Lien 

1. When a taxpayer fails to pay taxes after a demand 
for payment has been made, a lien arises by operation 
of law “in favor of the United States upon all property 
and rights to property” of that taxpayer. 26 U.S.C. 
6321. “[T]he purpose of the federal tax lien [is] to 
insure prompt and certain collection of taxes due the 
United States from tax delinquents.” United States v. 
Security Trust & Sav. Bank, 340 U.S. 47, 51 (1950). To 
achieve that goal, Congress employed the broadest 
terminology “to reach every interest in property that a 
taxpayer might have.” United States v. National Bank 
of Commerce, 472 U.S. 713, 720 (1985). Indeed, 
“[s]tronger language could hardly have been selected to 
reveal a purpose to assure the collection of taxes.” 
Glass City Bank v. United States, 326 U.S. 265, 267 
(1945). Recognizing the sweeping text and purpose of 
Section 6321, this Court has recently held that this 
broad federal tax lien “reach[es] every species of right 
or interest protected by law and having an exchange- 
able value.” Drye v. United States, 528 U.S. 49, 56 
(1999). See also Jewett v. Commissioner, 455 U.S. 305, 
309 (1982) (quoting S. Rep. No. 665, 72d Cong., 1st Sess. 
Pt. 1, at 39 (1932); H.R. Rep. No. 708, 72d Cong., 1st 
Sess. 27 (1932)). 

The term “property” is “commonly used to denote 
everything which is the subject of ownership, corporeal 
or incorporeal, tangible or intangible, visible or invisi- 

13 

ble, real or personal; everything that has an exchange- 
able value or which goes to make up wealth or estate. 
It extends to every species of valuable right or interest 

* * *.” Black’s Law Dictionary 1382 (rev. 4th ed. 
1968). The “property” or “rights to property” to which 
the federal tax lien attaches thus includes interests as 
diverse as “unliquidated choses in action, contingent 
remainders, options, alimony, the taxpayer’s interest in 
jointly owned property, business licenses, the cash 
surrender value of life insurance, and property exempt 
under state law.” 4 B. Bittker, Federal Taxation of In- 
come, Estates and Gifts ¶ 111.6.4, at 111-158 (1989). See 
also Drye v. United States, 528 U.S. at 61 (an heir’s 
right to inherit is “property” under Section 6321); 
United States v. National Bank of Commerce, 472 U.S. 
at 723-727 (a depositor’s right to withdraw the entire 
contents of a joint bank account qualifies as “property” 
under Section 6321); United States v. Bess, 357 U.S. at 
56-57 (an insured’s right under a life insurance policy to 
compel his insurer to pay him the cash surrender value 
is “property” subject to the tax lien). 

2. No less than an heir’s right to inherit, the interest 
of a married taxpayer in a tenancy by the entirety is a 
valuable, legally protected “species of right or interest” 
(Drye v. United States, 528 U.S. at 56) and is therefore 
encompassed within the federal tax lien. During the 
period of a tenancy by the entirety, each spouse has 
separate rights in the present use of the property and 
in its disposition upon the termination of the tenancy by 
sale, death or divorce. For example, in Michigan, “joint 
property”—a category that includes a tenancy by the 
entirety in real or personal property —“consist[s] of a 
present interest and a future interest.” Mich. Comp. 
Laws Ann. § 554.872(g), (i) (West Supp. 1997), 
recodified at id. § 700.2901(g), (i) (West Supp. 2001). 

14 

The “present interest” entitles each spouse to reside on 
the property, to exclude third parties from the prop- 
erty, to share in the profits of the property, to join or 
refuse to join in the mortgage, lease, or sale of the 
property and, upon the sale, individually to receive half 
the proceeds. Id. § 557.71 (West 1988); see Rogers v. 
Rogers, 136 Mich. App. 125, 135, 356 N.W.2d 288, 293 
(1984); Farmers’ & Merchants’ Nat’l Bank & Trust Co. 

v. Globe Indem. Co., 264 Mich. 395, 399, 249 N.W. 882, 
883 (1933); Eadus v. Hunter, 249 Mich. 190, 193-196, 228 
N.W. 782, 783-784 (1930). In addition, if a married 
couple divorces, each spouse becomes a tenant in 
common of realty formerly owned by the entirety, 
unless the divorce decree provides otherwise. Mich. 
Comp. Laws Ann. § 552.102 (West 1998 & Supp. 2001). 
The “future interest” in a tenancy by the entirety “is 
the right of survivorship,” which is the right to receive 
the property in fee simple absolute upon the death of 
the other spouse. Id. § 554.872(g) (West Supp. 1997), 
recodified at id. § 700.2901(g) (West Supp. 2001). These 
valuable interests are expressly described as “prop- 
erty” rights under state law (id. § 700.2901(i)), and the 
Michigan Supreme Court has held that each spouse 
holding an interest in a tenancy by the entirety has “a 
significant interest in property” that is protected by the 
Due Process Clause of the United States Constitution. 
Dow v. State, 396 Mich. 192, 204, 240 N.W.2d 450, 456 
(Mich. 1976). 

These valuable rights of each spouse in a tenancy by 
the entirety qualify as “property” or “rights to prop- 
erty” under the broad text of the tax lien statute.6 The 

6 The imposition of a federal tax lien on entirety property does 
not, by itself, divest the “marital estate” from possession. The 
primary effect of a lien is to ensure that such property remains 

15 

right of each spouse “to exclude others” from property 
held in a tenancy by the entirety is “one of the most 
essential sticks in the bundle of rights that are com- 
monly characterized as property.” Dolan v. Tigard, 512 
U.S. 374, 384 (1994). Similarly, each spouse’s right to 
“possess, use and dispose” of the property, in concert 
with the other, is a characteristic attribute of a “prop- 
erty” right. Loretto v. Teleprompter Manhattan CATV 
Corp., 458 U.S. 419, 435 (1982). And, each spouse has 
the right to receive half of the proceeds of a sale or to 
receive the fee simple absolute upon the death of the 
other. These legally-protected rights have undeniable 
value and therefore constitute “property or rights to 
property within the broad scope of the federal tax lien. 
Drye v. United States, 528 U.S. at 56.7 

potentially available for payment of delinquent taxes and cannot be 
transferred free of the government’s claim in the interim. 
Moreover, as this Court emphasized in United States v. Rodgers, 
461 U.S. at 696, the government’s lien reaches only the taxpayer’s 
interest in property. If the government seeks to sell the property 
to enforce its lien under 26 U.S.C. 7403, the court may deny 
foreclosure in “the exercise of reasoned discretion.” 461 U.S. at 
706. And, if a sale is authorized, the non-liable spouse must be 
compensated for her interest “according to the findings of the 
court in respect to the interests of the parties and of the United 
States.” Id. at 697-698 (quoting 26 U.S.C. 7403(c)). 

7 The valuable, legally-protected rights of a taxpayer in 
entirety property are at least as extensive as the right of an heir- 
at-law to inherit under Arkansas law—a right to which the federal 
tax lien attached under this Court’s decision in Drye v. United 
States, 528 U.S. at 59-60. 

16 

B. The Court Of Appeals Erred In Concluding That 

State Law Governs In Determining Whether A 
Spouse’s Interest In A Tenancy By The Entirety 
Is Subject To The Federal Tax Lien 

The court of appeals erred by relying (Pet. App. 51a- 
53a) on its decision in in Cole v. Cardoza, 441 F.2d 1337 
(1971), and in failing to follow the recent, clear guidance 
of this Court in Drye v. United States, supra. 

1. The rationale of Cole v. Cardoza, 441 F.2d at 1343, 
is that state law “governs the property rights of the 
taxpayers” and that courts must therefore “look to the 
law of ” the State in determining whether “the federal 
tax lien attach[es] to the * * * property.” The court 
concluded that, since “tenants by the entirety hold 
under a single title” under Michigan law, the federal tax 
lien cannot attach to the property for the debts of one 
spouse only. Ibid. In the present case, the court of 
appeals repeated the reasoning of Cole by relying on 
what it described as “the basic tenet that state law 
governs the issue * * * whether any property 
interests exist in the first place.” Pet. App. 55a. 

That reasoning is demonstrably incorrect, however, 
for this Court has made it clear that “[i]t is not material 
that the economic benefit to which the [taxpayer’s] 
right pertains is not characterized as ‘property’ by local 
law.” Drye v. United States, 528 U.S. at 58 n.5 (quoting 
W. Plumb, Federal Tax Liens 27 (3d ed. 1972)). This 
Court has instead explained that, while state law deter- 
mines the nature of a taxpayer’s interest in property, 
federal law determines whether that interest is suffi- 
cient to constitute “property” or “rights to property” 
under 26 U.S.C. 6321. As the Court stated in United 
States v. National Bank of Commerce, 472 U.S. at 722 
(internal quotations omitted): 

17 

[o]nce it has been determined that state law creates 
sufficient interests in the taxpayer to satisfy the 
requirements of the statute, state law is inoperative, 
and the tax consequences thenceforth are dictated 
by federal law. 

Courts are therefore to “look * * * to federal law to 
determine whether the taxpayer’s state-delineated 
rights qualify as ‘property’ or ‘rights to property’ 
within the compass of the federal tax lien legislation.” 
Drye v. United States, 528 U.S. at 58. See also United 
States v. Bess, 357 U.S. 51, 56-57 (1958); Morgan v. 
Commissioner, 309 U.S. 78, 80 (1940). And, applying 
this federal standard, this Court has clearly and con- 
cisely held that the tax lien attaches to “every species 
of right or interest protected by law and having an 
exchangeable value.” Drye v. United States, 528 U.S. at 

56. The valuable, legally protected rights possessed by 
each spouse in a tenancy by the entirety constitute 
“property or rights to property” to which the lien 
applies under this expansive federal standard. See 
pages 13-15, supra. 

2. The court of appeals ultimately appeared to 
acknowledge in the present case that each spouse 
possesses valuable rights in a tenancy by the entirety 
that are protected under state law. The court reasoned, 
however, that the federal tax lien does not attach to 
those interests in property—such as the right of 
survivorship—because the rights of each spouse are not 
treated as “separate” or “severable” under state law. 
Pet. App. 57a-58a. 

That reasoning conflicts with the plain text of the tax 
lien statute and with the clear holdings of this Court. 
The federal tax lien attaches to “all property and rights 
to property” (26 U.S.C. 6321 (emphasis added)), not 

18 

merely to property that is immediately transferable by 
the owner of the interest to a third party. For example, 
United States v. Rodgers, 461 U.S. 677, 684-685 (1983), 
concerned a married taxpayer who held an interest in 
homestead property that could not be mortgaged, sold 
or abandoned without the consent of the other spouse 
under state law. The Court expressly held that the 
inability of the taxpayer in Rogers to exercise his rights 
separately from the rights of his spouse was not a basis 
for denying foreclosure of the federal tax lien. Id. at 
702. The Court concluded that the federal tax lien 
reaches the taxpayer’s interest in “the entire property” 
and that, in the event that a judicial foreclosure of that 
lien occurs, the separate rights of the non-liable spouse 
“are adequately discharged by the payment of compen- 
sation.” Id. at 701, 702. See note 6, supra. Courts have 
therefore consistently held that the federal tax lien on 
“all property and rights to property” of a delinquent 
taxpayer attaches not only to presently transferable 
rights but also to those valuable and legally-protected 
interests that the taxpayer would not, acting by him- 
self, be able immediately to transfer or sell. See, e.g., 
Bank One Ohio Trust Co. v. United States, 80 F.3d 173, 
176 (6th Cir. 1996) (federal tax lien attaches to the 
interest of the beneficiary of a spendthrift trust) (cited 
in Drye v. United States, 528 U.S. at 58 n.5 & 60 n.7); 
United States v. Rye, 550 F.2d 682, 684-685 (1st Cir. 
1977) (federal tax lien attaches to taxpayer’s nonassig- 
nable right to receive support payments). The court of 
appeals thus erred in concluding in this case that the 
federal tax lien cannot attach to “property” or “rights 
to property” until those rights are “severable” from the 
rights of others in the same property. 

3. The court of appeals improperly ignored the 
precedents of this Court in relying on the fact that 

19 

Michigan does not authorize the seizure of tenancy by 
the entirety property for the debts of only one spouse. 
Pet. App. 52a (citing Cole v. Cardoza, 441 F.2d at 1343). 
This Court has frequently held that state-law restric- 
tions on seizure and exemptions from foreclosure do not 
prevent the attachment and enforcement of the federal 
tax lien. See Drye v. United States, 528 U.S. at 59 
(quoting United States v. Mitchell, 403 U.S. 190, 204 
(1971) (“exempt status under state law does not bind 
the federal collector”)); Note, Property Subject to the 
Federal Tax Lien, 77 Harv. L. Rev. 1485, 1498 (1964) 
(stripped of its fiction that husband and wife are a legal 
unit, the entirety theory “serves much the same func- 
tion as an exemption created by state law” and thus 
should not “defeat the federal lien”). As this Court 
explained in detail in United States v. National Bank of 
Commerce, 472 U.S. at 727 (citation omitted): 

The question whether a state-law right constitutes 
“property” or “rights to property” is a matter of 
federal law. * * * [T]he facts that under [state] 
law [the taxpayer’s] creditors * * * could not 
[seize or attach the property] are irrelevant. The 
federal statute relates to the taxpayer’s rights to 
property and not to his creditors’ rights. The Court 
of Appeals would remit the IRS to the rights only an 
ordinary creditor would have under state law. That 
result “compare[s] the government to a class of 
creditors to which it is superior.” 

See also United States v. Bess, 357 U.S. at 57 (“[o]nce it 
has been determined that state law creates sufficient 
interests in the insured to satisfy requirements of [the 
statute], state law is inoperative to prevent the attach- 
ment of liens created by federal statutes in favor of the 
United States”). 

20 

For example, in United States v. Rodgers, 461 U.S. at 
701, this Court expressly held that “state-created ex- 
emptions against forced sale” of jointly-owned property 
are ineffective against the federal lien. The tax lien 
involved in Rodgers, like the lien involved here, arose 
from the tax liability of only one spouse and attached to 
that spouse’s interest in the jointly-owned family 
residence. The government sought to foreclose on its 
lien in Rodgers by obtaining a judicial sale of the 
property and compensating the non-liable spouse for 
her separate interest. Although Texas law protected 
homestead property from forced sale for the payment of 
debts (461 U.S. at 684), this Court held that the federal 
tax lien could be foreclosed on the homestead for the 
unpaid taxes of one spouse. See note 6, supra. The 
Court reasoned that the Supremacy Clause of the Con- 
stitution “provides the underpinning for the Federal 
Government’s right to sweep aside state-created ex- 
emptions” (id. at 701) and “allows the federal tax collec- 
tor to convert a non-delinquent spouse’s homestead 
estate into its fair cash value.” Id. at 703-704. 

As this Court pointed out in Drye v. United States, 
528 U.S. at 56-57, the fact that state-law exemptions of 
property from seizure by creditors are ineffective 
against the federal tax lien is corroborated by Section 
6334(a) of the Code, 26 U.S. 6334(a). That statute lists 
thirteen specific categories of property that are exempt 
from administrative levy—such as wearing apparel, 
tools of a trade, employment benefits, and workmen’s 
compensation. Ibid.8 The categories of property listed 

8 The categories of property that are exempt from levy under 
26 U.S.C. 6334(a) are not exempt from judicial sale under 26 U.S.C. 
7403 and have been held not to be exempt from the federal tax lien. 
See American Trust v. American Community Mutual Ins. Co., 

21 

as exempt from federal levy in Section 6334(a) are ex- 
clusive, for the statute specifies that, “[n]otwithstand- 
ing any other law of the United States * * *, no 
property or rights to property shall be exempt from 
levy other than the property specifically made exempt 
by subsection (a).” 26 U.S.C. 6334(c). Property held in 
tenancy by the entirety is not among the types of 
property that are listed as exemptions in this federal 
statute.9 See 26 U.S.C. 6334(a). As this Court empha- 
sized in Drye, “[t]he fact that * * * Congress provided 
specific exemptions from distraint is evidence that Con- 
gress did not intend to recognize further exemptions 
which would prevent attachment of [federal tax] liens 

* * * .” 528 U.S. at 56 (quoting United States v. Bess, 
357 U.S. at 57). “Th[e] language [of Section 6334] is 
specific and it is clear and there is no room in it for 
automatic exemption of property that happens to be 
exempt from state levy under state law.” United States 

v. Mitchell, 403 U.S. 190, 205 (1971) (quoted at Drye v. 
United States, 528 U.S. at 56-57); W. Plumb, supra, at 

20. 

142 F.3d 920, 925 (6th Cir. 1998); In re Sills, 82 F.3d 111, 113 (5th 
Cir. 1996); In re Voelker, 42 F.3d 1050, 1052 (7th Cir. 1994); United 
States v. Barbier, 896 F.2d 377, 389 (9th Cir. 1990). The lien on 
such property could thus be enforced through a judicial foreclosure 
or upon a voluntary sale. 

9 Even though property held in a tenancy by the entirety or 
any other form of joint ownership is subject to the federal tax lien, 
the government cannot administratively levy upon any principal 
residence—regardless of the form of ownership—without the prior 
approval of a federal district court judge or magistrate. 26 U.S.C. 
6334(a)(13) & (e). Moreover, unlike a judicial foreclosure (see note 
6, supra), the government can administratively seize and sell only 
the taxpayer’s interest in jointly held property. See United States 

v. Rodgers, 461 U.S. at 695-696. 

22 

4. The court of appeals also erred in relying on the 
legal fiction employed in Michigan that property held in 
a tenancy by the entirety is owned by the marital unit, 
rather than by the individual spouses acting collec- 
tively. Pet. App. 51a-53a. The court reasoned that the 
consequence of this legal fiction is that neither spouse 
has an interest in “property” or a “right to property” to 
which the federal tax lien could attach. Ibid. 

This Court has repeatedly emphasized that federal 
tax law is not “struck blind” by state legal fictions 
concerning property ownership. Drye v. United States, 
528 U.S. at 59; United States v. Irvine, 511 U.S. 224, 240 
(1994). In Drye, the Court applied that principle in 
holding that the federal tax lien attached to the interest 
of an heir who disclaimed his rights in an intestate 
estate even though state law deemed any such dis- 
claimer to have occurred before the death of the dece- 
dent so that creditors would be unable to attach the 
disclaimant’s interest in the estate. The Court held 
that application of the federal tax lien statute is not 
controlled by the legal fictions of state law and that the 
right of the heir to inherit is “a valuable, transferable, 
legally protected right” to which the federal tax lien 
attached before the disclaimer was made. 528 U.S. at 
59, 60. 

In United States v. Irvine, 511 U.S. at 239-240, this 
Court likewise refused to be “struck blind” by the 
“legal fiction” created by state law that a valid state- 
law disclaimer of an interest in a trust had the effect of 
canceling the transfer of that interest to the disclaimant 
ab initio. The Court explained that “Congress had not 
meant to incorporate state-law fictions as touchstones 
of taxability” and that the fictional construct of state 
law did not destroy the reality that the disclaimant 
possessed—even if only transitorily—a “property” in- 

23 

terest in the trust for purposes of federal tax law. Id. at 
240. 

10 

Indeed, in Tyler v. United States, 281 U.S. 497 (1930), 
this Court specifically rejected the proposition that 
federal tax law is governed by the state law fiction that 
entirety property is owned by the “marital unit” rather 
than by the spouses acting collectively. That case 
concerned the constitutionality of the Revenue Act of 
1916, ch. 463, § 202(c), 39 Stat. 778, which taxed the 
total value of entirety property—both the share attrib- 
utable to the decedent and to the surviving spouse—in 
the estate of the first spouse to die. 

11 The estate 
administrators contended that the entirety property 
was owned by the marital unit under state law and that, 
on the death of the first spouse, the survivor merely 
retained what she already had. They argued that a 
transfer of property therefore did not occur on the date 
of death and that the estate tax, as applied to this 
situation, constituted an unconstitutional direct tax 
without apportionment. 281 U.S. at 500. The Court 
rejected this argument and explained in detail why the 
“amiable fiction of the common law [that] husband and 
wife are but one person” is not binding for purposes of 
federal tax legislation (id. at 503): 

10 In Irvine, the Court emphasized that “the general and 
longstanding rule in federal tax cases [is] that although state law 
creates legal interests and rights in property, federal law deter- 
mines whether and to what extent those interests will be taxed.” 
511 U.S. at 238. Because federal law controls the determination of 
what state-created interests constitute “property” within the 
meaning of federal tax statutes, “state property transfer rules do 
not translate into federal taxation rules.” Id. at 239. 

11 Section 2040(b) of the Internal Revenue Code currently in- 
cludes only one-half of the value of such property in the decedent’s 
gross estate. 26 U.S.C. 2040(b). 

24 

According to the amiable fiction of the common 
law, * * * husband and wife are but one person. 

* * * This view, when applied to a taxing act, 
seems quite unsubstantial. The power of taxation is 
a fundamental and imperious necessity of all gov- 
ernment, not to be restricted by mere legal fictions. 
Whether that power has been properly exercised in 
the present instance must be determined by the 
actual results brought about by the death, rather 
than by a consideration of the artificial rules which 
delimit the title, rights, and powers of tenants by 
the entirety at common law. 

Federal tax law thus looks to “the actual results” 
rather than merely to “the artificial rules” of state law 
in determining the nature and taxability of the rights 
possessed by tenants by the entirety. 281 U.S. at 503. 
In Tyler, because the death of the first spouse resulted 
in an expansion of the survivor’s “actual” property 
rights, the Court upheld the constitutionality of the 
estate tax on the entire value of the entirety property. 
Id. at 504. 

12 

Although the precise question at issue here was not 
presented in United States v. Rodgers, 461 U.S. at 703 

n.31, the Court there stated that it was not convinced of 
the correctness of appellate decisions that, prior to that 
date, had concluded that the federal tax lien would not 
attach to a taxpayer’s interest in a tenancy by the 

12 In explaining the reasoning of Tyler in United States v. 
Jacobs, 306 U.S. 363 (1939), the Court emphasized that “[t]he con- 
stitutionality of an exercise of the taxing power of Congress is not 
to be determined by such * * * ancient fictions” as the ownership 
of entirety property by the marital unit. Id. at 369. 

25 

13 Noting that these older cases had rested on 
“the peculiar legal fiction governing tenancies by the 
entirety in some States,” the Court emphatically ques- 
tioned “if the tenancy by the entirety cases are cor- 
rect.” Ibid. (emphasis in original). As one commentator 
has observed, the reasoning of the older cases that 
relied on the state legal fiction of the “marital unit” 
“was dubious before” and “[n]ow, after Drye, its incor- 
rectness is glaringly clear.” S. Johnson, After Drye: 
The Likely Attachment of the Federal Tax Lien to 
Tenancy-by-the-Entireties Interests, 75 Ind. L.J. 1163, 
1189-1190 (2000). 

entirety. 

14 

C. The Holding Of The Court Of Appeals Would 

Create Irrationally Disparate Treatment Of 
Similarly Situated Taxpayers And Would Facili- 
tate Fraud On The Revenue 

1. This Court has emphasized the importance in a 
national tax system of avoiding “inequalities in the 

13 The cases cited by the Court in Rodgers are United States v. 
National Bank, 255 F.2d 504, 507 (5th Cir. 1958), cert. denied, 358 
U.S. 835 (1958), and United States v. Hutcherson, 188 F.2d 326, 331 
(8th Cir. 1951). The Eighth Circuit recently distinguished its deci- 
sion in Hutcherson in Cox v. Commissioner, 121 F.2d 390, 392 
(1997). 

14 Even before Drye, commentators had concluded that the 
reasoning of United States v. Rodgers, supra, and United States v. 
National Bank of Commerce, supra, required the conclusion that a 
tenancy by the entirety is subject to the federal tax lien. See S. 
Johnson, Fog, Fairness, and the Federal Fisc: Tenancy-by-the- 
Entireties Interests and the Federal Tax Lien, 60 Mo. L. Rev. 839, 
871 (1995); Comment, United States v. National Bank of Com- 
merce: Co-Owners Suffer the “Federal Law Consequences,” 11 Del. 
J. Corp. L. 561, 583 (1986); Comment, Federal Tax Liens and State 
Homestead Exemptions: The Aftermath of United States v. 
Rodgers, 34 Buff. L. Rev. 297, 323 (1985). 

26 

administration of the revenue laws” and of ensuring 
that taxpayers do not receive “treatment different from 
that given to other taxpayers of the same class.” 
Commissioner v. Sunnen, 333 U.S. 591, 599 (1948). The 
Nation’s tax laws are therefore to be interpreted and 
applied to “ensure as far as possible that similarly 
situated taxpayers pay the same tax.” Thor Power Tool 
Co. v. Commissioner, 439 U.S. 522, 544 (1979). 

The decision of the court of appeals disserves that 
principle. The tenancy by the entirety is a form of 
property ownership that exists in 24 States, the Virgin 
Islands and the District of Columbia. 

15 Of all the forms 
of joint property ownership, the tenancy by the en- 
tirety is the only form that has been treated as exempt 
from the federal tax lien. Every other type of jointly- 
owned property has consistently been held subject to 
the federal tax lien. See, e.g., United States v. Rodgers, 
461 U.S. at 690-691 (homestead property); United 
States v. Davenport, 106 F.3d 1333, 1337 (7th Cir. 1997) 
(joint tenancy); United States v. Kocher, 468 F.2d 503, 
507 (2d Cir. 1972), cert. denied, 411 U.S. 931 (1973) 
(tenancy in common); United States v. Overman, 424 
F.2d 1142, 1145 (9th Cir. 1970) (community property); 

15 These States are Alaska, Arkansas, Delaware, Florida, Ha- 
waii, Illinois, Indiana, Kentucky, Maryland, Massachusetts, Michi- 
gan, Missouri, Mississippi, New Jersey, New York, North Caro- 
lina, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, 
Vermont, Virginia, and Wyoming. See R. Heaton, Administration 
of Entireties Property in Bankruptcy, 60 Ind. L.J. 305, 309-310 

n.24 (1985); 735 Ill. Comp. Stat. Ann. 5/12-112 (West 1993 & Supp. 
2000). In addition, between 1972 and 1985, a tenancy by the en- 
tirety could be created in Ohio, and an entirety interest created 
during that period is still treated as valid. Ohio Rev. Code Ann. 
§§ 5302.17-5302.21 (Anderson 1989 & Supp. 2000); see In re Cline, 
164 B.R. 592, 593-594 (Bankr. S.D. Ohio 1994). 

27 

Washington v. United States, 402 F.2d 3, 7 (4th Cir. 
1968), cert. denied, 402 U.S. 978 (1971) (property sub- 
ject to dower interest). Under the decision in this case, 
a taxpayer who owns property in a tenancy by the 
entirety is thus treated more favorably than a taxpayer 
who owns property in the 26 States that do not 
recognize, or have abolished, that form of ownership. 

16 

There is no adequate basis in the text or the purpose 
of the federal tax lien statute for this difference in 
treatment. To the contrary, as this Court has stated, 
there is a “sufficient substantial similarity between 
joint tenancies and tenancies by the entirety to have 
moved Congress to treat them alike for purposes of 
taxation.” United States v. Jacobs, 306 U.S. 363, 370 
(1939). In all other respects, these two forms of 
ownership have consistently received equal treatment 
under the revenue laws (ibid. (emphasis added)). 

A tenancy by the entirety “is essentially a joint 
tenancy, modified by the common law theory that 
husband and wife are one person.” Only a fiction 
stands between the two. Survivorship is the predomi- 
nant and distinguishing feature of each. 

Even within the group of States that recognize ten- 
ancies by the entirety, the decision in this case produces 

16 As part of the progressive recognition of women’s property 
rights during the Nineteenth Century (under what were generally 
known as the Married Women’s Property Acts), several western 
States never chose to adopt the tenancy by the entirety and 
several other States elected to abolish or restrict that form of 
ownership. S. Johnson, supra, 60 Mo. L. Rev. at 843. See, e.g., 
Kerner v. McDonald, 60 Neb. 663, 84 N.W. 92 (1900). In England, 
where the tenancy by the entirety originated, that form of owner- 
ship was abolished in 1925. S. Johnson, supra, 60 Mo. L. Rev. at 
843. 

28 

inconsistent treatment. Under the decision below, 
taxpayers who own entirety property in the States 
where creditors can attach such property for a debt 
owed by one spouse are treated less favorably than 
taxpayers who own such property in the States where 
creditors can attach such property only for a debt owed 
by both spouses. 

17 See, e.g., Geiselman v. United States, 

17 Fourteen States (and the Virgin Islands and the District of 
Columbia) prohibit creditors from attaching entirety property for 
the debts of only one spouse: Delaware, Florida, Hawaii, Illinois, 
Indiana, Maryland, Michigan, Missouri, North Carolina, Penn- 
sylvania, Rhode Island, Virginia, Vermont and Wyoming. See 
Mitchell v. Wilmington Trust Co., 449 A.2d 1055, 1057-1058 (Del. 
Ch. 1982), aff ’ d, 461 A.2d 696 (Del. Super. Ct. 1983); Finley v. 
Thomas, 691 A.2d 1163, 1166 (D.C. 1997); Sitomer v. Orlan, 660 So. 
2d 1111, 1114 (Fla. Dist. Ct. App. 1995); Sawada v. Endo, 57 Haw. 
608, 617, 561 P.2d 1291, 1297 (1977); 735 Ill. Comp. Stat. 5/12-112 
(West 1993 & Supp. 2000); Diss v. Agri Bus. Int’l, Inc., 670 N.E.2d 
97, 99 (Ind. Ct. App. 1996); State v. One 1984 Toyota Truck, 311 
Md. 171, 187, 533 A.2d 659, 667 (1987); SNB Bank & Trust v. 
Kensey, 145 Mich. App. 765, 775-777, 378 N.W.2d 594, 599 (1985); 
In re Van Der Heide, 164 F.3d 1183, 1184 (8th Cir. 1999) (Missouri 
law); Dealer Supply Co. v. Greene, 108 N.C. App. 31, 34, 422 S.E.2d 
350, 352 (1992), review denied, 333 N.C. 343, 426 S.E.2d 704 (1993); 
Koffman v. Smith, 453 Pa. Super. 15, 27, 682 A.2d 1282, 1288 
(1996); Bloomfield v. Brown, 67 R.I. 452, 25 A.2d 354 (1942); 
Masonry Prods., Inc. v. Tees, 280 F. Supp. 654, 657 (D.V.I. 1968); 
Rogers v. Rogers, 257 Va. 323, 326, 512 S.E.2d 821, 822 (Va. 1999); 
Lowell v. Lowell, 138 Vt. 514, 516, 419 A.2d 321, 322 (1980); 
Colorado Nat’l Bank v. Miles, 711 P.2d 390, 393-394 (Wyo. 1985). 
Nine of the States that recognize the tenancy by the entirety, 
however, permit creditors to attach one spouse’s interest in such 
property for the debts of only that spouse, subject to the rights of 
the nondebtor spouse: Alaska, Arkansas, Kentucky, Massachu- 
setts, New Jersey, New York, Oklahoma, Oregon, Rhode Island, 
and Tennessee. See Alaska Stat. § 09.38.100(a) (Michie 2001); 
Morris v. Solesbee, 48 Ark. App. 123, 128, 892 S.W.2d 281, 283 
(1995); Hoffman v. Newell, 60 S.W.2d 607, 613 (Ky. 1932); In re 

29 

961 F.2d 1, 7 (1st Cir.), cert. denied, 506 U.S. 891 (1992) 
(husband’s interest in entirety property is subject to 
the federal tax lien because Massachusetts law permits 
creditors to attach his interest in the property); United 
States v. Diemer, 859 F. Supp. 126, 131 (D.N.J. 1994), 
rev’d on other grounds sub nom. United States v. Avila, 
88 F.3d 229 (3d Cir. 1996) (same under New Jersey 
law); United States v. Brynes, 848 F. Supp. 1096, 1099 
(D.R.I. 1994) (same under Rhode Island law); United 
States v. Ragsdale, 206 F. Supp. 613 (W.D. Tenn. 1962) 
(same under Tennessee law). 

The arbitrary inequality of treatment that results 
under the rationale of the court of appeals is magnified 
by the fact that entirety ownership is not limited to real 
estate. At least fifteen jurisdictions also allow personal 
property—such as automobiles, stocks, bonds and bank 
accounts—to be owned in a tenancy by the entirety. 

18 

Snyder, 231 B.R. 437, 442 (Bankr. D. Mass. 1999); United States v. 
Jones, 877 F. Supp. 907, 916-920 (D.N.J. 1995), aff ’d mem., 74 F.3d 
1228 (3d Cir. 1995); BNY Fin. Corp. v. Moran, 154 Misc. 2d 435, 
436, 584 N.Y.S.2d 261, 262 (Sup. Ct. 1992); Okla. Stat. Ann. tit. 60, § 
74 (West 1994); Wilde v. Mounts, 95 Or. App. 522, 524-525, 769 P.2d 
802, 803-804 (1989); Arango v. Third Nat’l Bank of Nashville, 992 
F.2d 611, 613 (6th Cir. 1993) (Tennessee law). The rule in Missis- 
sippi is uncertain. See Cuevas v. Cuevas, 191 So. 2d 843 (Miss. 
1966). 

18 These jurisdictions are: Alaska, Arkansas, Delaware, the 
District of Columbia, Florida, Hawaii, Kentucky, Maryland, Mas- 
sachusetts, Missouri, Oklahoma, Pennsylvania, Tennessee, Ver- 
mont, and Virginia. See Faulk v. Estate of Haskins, 714 P.2d 354 
(Alaska 1986); Boggs v. Boggs, 26 Ark. App. 188, 190, 761 S.W.2d 
956, 957 (1988); Ciconte v. Barba, 161 A. 925 (Del. Ch. 1932); In re 
Estate of Wall, 440 F.2d 215, 219 (D.C. Cir. 1971); Beal Bank, SSB 

v. Almand & Assoc., Inc. 780 So. 2d 45, 53-54 (Fla. 2001); Traders 
Travel Int’l Inc. v. Howser, 69 Haw. 609, 613, 753 P.2d 244, 246 
(1988); Ky. Rev. Stat. Ann. § 140.050 (Michie 1991); State v. One 
1984 Toyota Truck, 69 Md. App. 235, 237-238, 517 A.2d 103, 104 

30 

Several other States allow some, but not all, types of 
personal property to be owned in a tenancy by the 
entirety. 

19 And one jurisdiction that extends a tenancy 
by the entirety to personal property has recently 
expanded the protections of ownership in tenancy by 
the entirety to members of the same sex who form a 
“civil union.” See Vt. Stat. Ann. tit. 15, §§ 1202(2), 
1204(e)(1). 

2. The decision in this case not only produces incon- 
sistent treatment of similarly situated taxpayers, it also 
provides significant opportunities for obstructing and 
avoiding the collection of taxes. Under the reasoning of 
the decision below, both spouses may earn income, fail 
to file returns or file only separate returns, 

20 place their 

(1986), aff ’d, 311 Md. 171, 533 A.2d 659 (1987); Woodard v. 
Woodard, 216 Mass. 1, 2, 102 N.E. 921 (1913); Hallmark v. 
Stillings, 648 S.W.2d 230, 233 (Mo. Ct. App. 1983); 60 Okla. Stat. 
Ann. § 74 (West 1994); Madden v. Gosztonyi Sav. & Tr. Co., 331 
Pa. 476, 483, 200 A. 624, 628 (1938); White v. Watson, 571 S.W.2d 
493, 495 (Tenn. Ct. App. 1978); Beacon Milling Co. v. Larose, 138 
Vt. 457, 461, 418 A.2d 32, 33 (1980); Oliver v. Givens, 204 Va. 123, 

126, 129 S.E.2d 661, 663 (1963). 

19 For example, Michigan allows bonds, stocks, mortgages, pro- 
missory notes, debentures, and other financial assets to be held in 
a tenancy by the entirety. DeYoung v. Mesler, 373 Mich. 499, 505, 
130 N.W.2d 38, 41 (1964) (dissenting opinion). In Michigan and 
Indiana, personalty derived from real estate (such as crops) and 
the proceeds of the sale of real estate may be owned in tenancy by 
the entirety when the underlying real estate was itself held in that 
form of ownership. See ibid.; Koehring v. Bowman, 194 Ind. 433, 
142 N.E. 117, 118 (1924). 

20 Married taxpayers become jointly and severally liable for 
taxes when they elect to file joint returns. See 26 U.S.C. 
6013(d)(3). Since, if they file a joint return, both spouses are liable 
for the resulting taxes, property held in a tenancy by the entirety 
could then be seized for collection. See Pet. App. 52a; W. Plumb, 
supra, at 37. The tax avoidance scheme sanctioned by the court of 

31 

assets—such as real property, stocks, bonds and bank 
accounts—in a tenancy by the entirety, and claim an 
exemption of that property from tax collection. They 
could then use that “exempt” property to earn income, 
to pay debts to third parties or to make gifts to family 
members free and clear of any lien or liability for taxes. 
It is difficult to conceive of a more simple or widely 
available method of evading the collection of taxes. As 
Judge Ryan emphasized in his separate opinion in this 
case, the majority opinion “not only contravenes 
established precedent, but provides an avenue for easy 
avoidance of federal income-tax laws.” Pet. App. 69a. 

The ready pathway for tax avoidance permitted 
under the decision below is illustrated by the pending 
case of Hatchett v. IRS, 126 F. Supp. 2d 1038 (E.D. 
Mich. 2000), appeal docketed, No. 00-1645 (6th Cir. June 
13, 2000). That case involves a lawyer who accrued 
federal tax debts exceeding $8,000,000 for 1975 through 
1991. Instead of paying these taxes, the lawyer used 
his untaxed income to accumulate equity in four valu- 
able parcels of real estate that he placed in a tenancy by 
the entirety. The district court concluded that the 
federal tax liens did not attach to these properties 
under the reasoning applied by the court of appeals in 
this case. 126 F. Supp. 2d at 1050-1051. 

It is implausible to conclude that, in enacting the 
broad text of the federal tax lien statute, Congress 
intended to authorize such facile and transparent 
schemes to avoid tax collection. Instead, as this Court 
has emphasized, in drafting this lien provision, 
“[s]tronger language could hardly have been selected to 
reveal a purpose to assure the collection of taxes.” 

appeals in this case thus operates only when married taxpayers file 
no returns or file separate, rather than joint, returns. 

32 

Glass City Bank v. United States, 326 U.S. at 267. The 
decision of the court of appeals has thus, in short, “left 
us with a rule which compromises the revenue, creates 
a ready pathway for tax avoidance, defeats equal treat- 
ment of taxpayers, and lacks any defensible doctrinal 
underpinning.” S. Johnson, supra, 60 Mo. L. Rev. at 
888. See also Note, Property Subject to the Federal Tax 
Lien, 77 Harv. L. Rev. at 1498. 

CONCLUSION 

The judgment of the court of appeals should be re- 
versed, and the case should be remanded to that court 
for further proceedings consistent with this Court’s 
opinion. 

Respectfully submitted. 

THEODORE B. OLSON 
Solicitor General 

EILEEN J. O’CONNOR 

Assistant Attorney General 

LAWRENCE G. WALLACE 

Deputy Solicitor General 

KENT L. JONES 

Assistant to the Solicitor 

General 

DAVID ENGLISH CARMACK 
JOAN I. OPPENHEIMER 

Attorneys 

NOVEMBER 2001