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 

REPLY BRIEF FOR THE UNITED STATES 

THEODORE B. OLSON 
Solicitor General 

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

TABLE OF CONTENTS 

Page 

I. A spouse’s interest in a tenancy by the entirety is a 
valuable, legally protected interest that is subject 
to the federal tax lien ............................................................ 
1 

II. Respondent errs in her interpretation of the rele- 
vant decisions of this Court and in her interpreta- 
tion of the legislative history of the federal tax 

lien statute .............................................................................. 

7 

TABLE OF AUTHORITIES 

Cases: 

Albro v. Allen, 434 Mich. 271, 454 N.W.2d 85 
(1990) ........................................................................................ 6 

Arango, In re, 992 F.2d 611 (6th Cir. 1993) ......................... 

4 

Bank One Ohio Trust Co. v. United States, 
80 F.3d 173 (6th Cir. 1996) .................................................... 
8, 15 

Brafman v. United States, 384 F.2d 663 (5th Cir. 
1967) ......................................................................................... 13 

California Div. of Labor Standards Enforcement 

v. Dillingham Constr., N.A., Inc., 519 U.S. 316 
(1997) ........................................................................................ 11 

Central Bank of Denver, N.A. v. First Interstate 
Bank of Denver, N.A., 511 U.S. 164 (1994) ...................... 

11 

Dow v. State, 396 Mich. 192, 240 N.W.2d 450 
(1976) ........................................................................................ 2 

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

passim 

Geiselman v. United States, 961 F.2d 1 (1st Cir.), 
cert. denied, 506 U.S. 891 (1992) ......................................... 
14 

Gentry v. United States, 962 F.2d 555 (6th Cir. 
1992) ......................................................................................... 13 

Glass City Bank v. United States, 326 U.S. 265 
(1945) ...................................................................................... 7, 12 

(I) 

II 

Cases—Continued: Page 

Hefti v. United States, 8 F.3d 1169 (7th Cir. 
1993) ......................................................................................... 13 

Huff v. United States, 10 F.3d 1440 (9th Cir. 
1990), cert. denied, 512 U.S. 1219 (1994) ........................... 

13 

Hughes v. United States, 953 F.2d 531 (9th Cir. 
1992) ......................................................................................... 13 

Ignasiak, In re, 22 B.R. 828 (Bankr. E.D. Mich. 1982) ...... 

2 

Jackson, In re, 92 B.R. 211 (W.D. Mich. 1989) ................... 
2 

Jewell v. Commissioner, 455 U.S. 305 (1982) ................... 
1 

Leuschner v. First W. Bank & Trust Co., 
261 F.2d 705 (9th Cir. 1958) ................................................. 
4 

Napotnik v. Equibank & Parkvale Sav. Ass’n, 
679 F.2d 316 (3d Cir. 1982) ................................................... 
4 

O’Hagan v. United States, 86 F.3d 776 (8th Cir. 
1996) ......................................................................................... 3, 18 

Pension Benefit Guar. Corp. v. LTV Corp., 
496 U.S. 633 (1990) ................................................................. 

11 

Raffaele v. Granger, 196 F.2d 620 (3d Cir. 1952) ............. 
10 

Rogers v. Rogers, 136 Mich. App. 125, 356 N.W.2d 
288 (1984) ................................................................................. 
6 

Rosenberg’s Will, In re, 308 N.Y.S.2d 51 (Surr. 1970) ...... 
4, 5 

Sanford v. Bertrau, 204 Mich. 244, 169 N.W. 880 
(1918) ........................................................................................ 5 

Shades Ridge Holding Co. v. United States, 
888 F.2d 725 (11th Cir. 1989), cert. denied sub nom. 

Fiorella v. United States, 494 U.S. 1027 (1990) ............ 
13 

Shaw v. United States, 94 F. Supp. 245 (W.D. Mich. 
1939) ......................................................................................... 9, 10 

Thomas v. DeBaum, 14 N.J. Eq. 37 (N.J. Ch. 
1861) ......................................................................................... 9 

Tillery v. Parks, 630 F.2d 775 (10th Cir. 1980) ................ 

6 

21 West Lancaster Corp. v. Main Line Rest., Inc., 
790 F.2d 354 (3d Cir. 1986) ................................................... 
15 

Tyler v. United States, 281 U.S. 497 (1930) ....................... 
6, 7 

United States v. Bess, 357 U.S. 51 (1958) .................... 2, 9, 19 

III 

Cases—Continued: Page 

United States v. Bryant, 15 F.3d 756 (8th Cir. 
1994) ......................................................................................... 13 

United States v. Chila, 871 F.2d 1015 (11th Cir.), 
cert. denied, 493 U.S. 956 (1989) ......................................... 

13 

United States v. Estate of Romani, 523 U.S. 517 
(1998) ........................................................................................ 11 

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

Cir. 1951) ................................................................................. 
10 

United States v. Irvine, 511 U.S. 224 (1994) ..................... 
6 

United States v. Jacobs, 306 U.S. 363 (1939) ..................... 
18 

United States v. Jones, 877 F. Supp. 907 (D.N.J.), 
aff ’d, 74 F.3d 1228 (3d Cir. 1995) ......................................... 
4 

United States v. Mitchell, 403 U.S. 190 (1971) ................. 
9 

United States v. National Bank of Commerce, 
472 U.S. 713 (1985) .................................................. 
1, 6, 7, 12, 13 

United States v. Overman, 424 F.2d 1142 (9th Cir. 
1970) ....................................................................................... 6 

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

9, 11, 

12, 13, 15, 16, 17, 18 
United States v. Rye, 550 F.2d 682 (1st Cir. 1977) .......... 

15 

United States v. Smith, 950 F. Supp. 1394 
(N.D. Ind. 1996) ...................................................................... 
13 

Wickerstorm, In re, 113 B.R. 339 (Bankr. W.D. Mich. 
1990) ......................................................................................... 2 

Constitution and statutes, regulation: 

U.S. Const.: 

Art. VI, Cl. 2 (Supremacy Clause) ...................................... 
9 

Amend. XIV (Due Process Clause) .................................... 
3 

Internal Revenue Code (26 U.S.C.): 
§ 6203 ........................................................................................ 
13 

§ 6321 ....................................................................... 
3, 7, 8, 12, 14 

§ 6322 ........................................................................................ 
13 

§ 7403 .............................................................................. 
12, 13, 14 

§ 7403(a) ................................................................................... 13 

IV 

Statutes and regulation—Continued: 
Page 

Mich. Comp. Laws Ann. (West): 
§ 552.102 (1998 & Supp. 2001) .............................................. 
2 

§ 554.872(g) (Supp. 1997) ...................................................... 
2, 5 

§ 554.872(i) (Supp. 1997) ....................................................... 
2, 6 

§ 557.71 (1988) ................................................................... 
2, 3, 17 

§ 700.2901(g) (Supp. 2001) .................................................... 
2, 6 

§ 700.2901(i) (Supp. 2001) ..................................................... 
2, 6 

26 C.F.R. 301.6203-1 ................................................................. 
13 

Miscellaneous: 

H.R. 8300, 83d Cong., 2d Sess. (1954) ................................... 

10, 11 

H.R. Rep. No. 1337, 83d Cong., 2d Sess. (1954) .................. 
11 

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

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

16-17 
W. Plumb, Federal Liens and Priorities—Agenda for 
the Next Decade II, 77 Yale L.J. 605 (1968) ..................... 
4, 5 

W. Plumb, Federal Tax Liens (3d ed. 1972) ......................... 
6 

Restatement of Trusts (Supp. 1948) ...................................... 
4 

S. Rep. No. 1622, 83d Cong., 2d Sess. (1954) ....................... 
10 

State Bar of Michigan, Michigan Land Titles Standards 
(5th ed.) .................................................................................... 17 

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 

REPLY BRIEF FOR THE UNITED STATES 

I. A SPOUSE’S INTEREST IN A TENANCY BY THE 

ENTIRETY IS A VALUABLE, LEGALLY PRO- 
TECTED INTEREST THAT IS SUBJECT TO THE 
FEDERAL TAX LIEN. 

1. This Court has long held that the broad text of the 
federal tax lien “reveals on its face” that Congress meant to 
reach “every species of right or interest protected by law 
and having an exchangeable value.” Drye v. United States, 
528 U.S. 49, 56 (1999) (quoting Jewett v. Commissioner, 455 
U.S. 305, 309 (1982)). See also United States v. National 
Bank of Commerce, 472 U.S. 713, 719-720 (1985). The valu- 
able, legally-protected rights of a tenant by the entirety 
come within the scope of this broad provision. 

Each spouse has a present interest in entirety property 
that entitles him to reside on the property, to exclude third 

(1) 

2 

parties from the property, 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. Pet. Br. 14 (citing cases); Mich. 
Comp. Laws Ann. § 554.872(g), (i) (West Supp. 1997), 
recodified at id. § 700.2901(g), (i) (West Supp. 2001); id. 
§ 557.71 (West 1988).1 Furthermore, upon a divorce, the 
tenants by the entirety become tenants in common, and each 
has the right to bring an action for partition and sale. See id. 
§ 552.102 (West 1998 & Supp. 2001). Each spouse also has a 
future interest in a tenancy by the entirety, 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 id. § 700.2901(g) (West Supp. 2001). 

These valuable interests are expressly described as “prop- 
erty” rights under state law (Mich. Comp. Laws Ann. 
§ 700.2901(i) (West Supp. 2001)), and the Michigan Supreme 

1 When entireties property is sold, “the spouses are generally each 
entitled to a one-half interest [in the proceeds] as tenants in common” 
unless they “reinvest[] in other similar entireties property within a 
reasonable period of time.” In re Wickstrom, 113 B.R. 339, 349 (Bankr. 
W.D. Mich. 1980); see also In re Jackson, 92 B.R. 211, 214 (W.D. Mich. 
1989). When the property involved in this case was sold, and the tenancy 
by the entirety thereby terminated, the taxpayer’s “future right to half of 
the proceeds became a present interest” to which the tax lien continued to 
attach. Pet. App. 69a (Ryan, J.). 

Moreover, in the district court, respondent acknowledged that the 
tenancy by the entirety had been terminated even prior to the sale, when 
the property was quitclaimed by Don Craft to respondent in 1989. See 
Pet. App. 3a; J.A. 50-51. That quitclaim, of course, did not destroy the 
federal lien, which passes with the property and also attaches to the 
proceeds. See, e.g., Drye v. United States, 528 U.S. at 53-54; United States 

v. Bess, 357 U.S. 51, 57 (1958). “[W]here an estate by the entirety is 
severed each spouse is deemed entitled to an undivided one-half interest 
in the equity of the property.” In re Ignasiak 22 B.R. 828, 830 (Bankr. 
E.D. Mich. 1982). 

3 

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, 453 n.10, 456 (1976) (“each spouse” is 
entitled to “separate notice”). These valuable, legally- 
protected rights constitute “property or rights to property” 
within the broad scope of the federal tax lien. See Drye v. 
United States, 528 U.S. at 56. 

2. a. Respondent insists, however, that property held in a 
tenancy by the entirety belongs to the “marital estate” and 
that “all that belongs to each spouse is a present right to 
share use of the property with the other (so long as the 
marriage lasts) and a future right” of survivorship. Resp. 
Br. 15. Even if all that belonged to each spouse were the 
present right to share the use of the property, that would be 
a sufficient interest to qualify as “property” or “rights to 
property” for purposes of Section 6321 of the Internal Reve- 
nue Code. See Pet. Br. 14-15, 18. A spouse’s present inter- 
est in entirety property, however, consists of far more than 
simply the right to share the use of the property: “[a] 
husband and wife shall be equally entitled to the rents, pro- 
ducts, income, or profits, and to the control and management 
of real or personal property held by them as tenants by the 
entirety.” Mich. Comp. Laws Ann. § 557.71 (West 1988). A 
spouse’s separate right to receive half the income or rents 
from real or personal property and half the proceeds upon 
the sale of the property is a right that has an obvious 
“pecuniary value” and is therefore subject to the federal tax 
lien. Drye v. United States, 528 U.S. at 60 n.7. 

The present case involves the enforcement of the federal 
tax lien against the delinquent spouse’s individual right to 
receive half of the proceeds upon the sale of the property. 
See Pet. App. 46a-47a. The application of the tax lien to the 
valuable right of the delinquent spouse to receive his 50% 

4 

share of the proceeds of the sale of the property falls 
squarely within the precedents of this Court—for it is well 
established that the right to receive money is a “property” 
right. Drye v. United States, 528 U.S. at 58. 

b. Because the property involved in this case has been 
sold, this case does not also concern the application of the 
federal tax lien against each spouse’s future interest in en- 
tirety property. It is well established, however, that a right 
of survivorship is a species of “property” or “rights to prop- 
erty” to which the federal tax lien properly attaches. A right 
of survivorship is a common property right; it exists both for 
tenancies by the entirety and for other types of joint and 
separate ownerships. For example, in O’Hagan v. United 
States, 86 F.3d 776, 784 (1996), the Eighth Circuit held that 
the United States has “a valid lien on Mr. O’Hagan’s survi- 
vorship interest” in jointly owned Minnesota homestead 
property. The court emphasized that the federal lien in the 
right of survivorship “provides protection for the govern- 
ment without affecting Mrs. O’Hagan’s interests.” Ibid. 
(citing W. Plumb, Federal Liens and Priorities—Agenda for 
the Next Decade II, 77 Yale L. J. 605, 638 (1968)). See also In 
re Arango, 992 F.2d 611, 613 (6th Cir. 1993); Napotnik v. 
Equibank & Parkvale Savings Ass’n, 679 F.2d 316, 319 (3d 
Cir. 1982); United States v. Jones, 877 F. Supp. 907, 917 
(D.N.J.) (the lien in the taxpayer’s interest in jointly held 
property is “subject to [the] right of survivorship” of the 
other owner), aff ’d, 74 F.3d 1228 (3d Cir. 1995) (Table).2 

2 In a variety of situations, courts have concluded that a conditional 
right to receive property in the future constitutes a valuable, legally pro- 
tected right to which the federal tax lien applies. See, e.g., Leuschner v. 
First W. Bank & Trust Co., 261 F.2d 705, 707 (9th Cir. 1958) (citing 
Restatement of Trusts § 157 (Supp. 1948) (expectation of receiving dis- 
tributions from a spendthrift trust); In re Rosenberg’s Will, 308 N.Y.S.2d 
51, 57 (N.Y. Surr. 1970) (a trust remainder contingent on surviving to the 
age of fifty is subject to the federal tax lien). The court explained in In re 

5 

Respondent offers no authority for her unsubstantiated 
assertion (Resp. Br. 16) that the right of survivorship is “too 
ephemeral” to be subject to the tax lien.3 In Drye v. United 
States, 528 U.S. at 53, 61, this Court held that the ephemeral 
right of an heir to disclaim (or not disclaim) an intestate 
estate within the nine months following the decedent’s death 
is subject to the federal tax lien because it is a valuable and 
legally protected right. Here, as in Drye, the obvious eco- 
nomic reality is that the taxpayer’s interest in the property 
is a valuable and legally protected interest.4 As numerous 

Rosenberg’s Will that “the federal tax lien attaches” to “future” as well as 
present interests because “the statute * * * provides that the tax lien 
shall be a lien “ ‘upon all property and rights to property’ ” and “ ‘[r]ights 
to property include future rights whether equitable, contingent or 
vested.’ ” Ibid. 

3 Contrary to respondent’s contention (Resp. Br. 39), Prof. Plumb did 
not condone the immunity of entirety property from the federal tax lien. 
Instead, he characterized this immunity as a “privileged sanctuary * * * 
[that] would be difficult enough to justify [even] if it were confined to 
homestead property * * *.” W. Plumb, Federal Liens and Priorities— 
Agenda for the Next Decade II, 77 Yale L.J. 605, 636 (1968). Prof. Plumb 
emphasized that “the right to use and enjoy the property, to share in its 
income, and to take the whole if he or she survives” is a valuable right 
belonging to each spouse in a tenancy by the entirety, and that “some way 
should be found to apply” those “tangible property rights” to the tax 
liability of the defaulting spouse. Id. at 637. 

4 The two concurring judges in the decisions below acknowledged that 
the right of survivorship in a tenancy by the entirety is “a contingent 
future interest” that constitutes a species of property to which the federal 
tax lien properly attaches. Pet. App. 41a, 61a-63a. See id. at 69a (Ryan, 
J.) (Under “established precedent,” “Don Craft had a separate, attachable, 
future interest in the tenancy by the entirety.”). 

An early Michigan case states in dicta that “the right of survivorship is 
merely an incident of an estate by entirety and does not constitute a 
remainder, either vested or contingent.” Sanford v. Bertrau, 204 Mich. 
244, 248, 169 N.W. 880, 881 (1918). Recent Michigan authority, however, 
establishes that the right of survivorship constitutes an interest in “prop- 

6 

courts have emphasized (Tillery v. Parks, 630 F.2d 775, 777 
(10th Cir. 1980) (quoting United States v. Overman, 424 F.2d 
1142, 1145 (9th Cir. 1970))): 

[A]ll that section 6321 requires is that the interest be 
“property” or “rights to property.” It is of no statutory 
moment how extensive may be those rights under state 
law, or what restrictions exist on the enjoyment of those 
rights. 

c. Relying on what has been described as an “amiable 
fiction of the common law” (Tyler v. United States, 281 U.S. 
497, 503 (1930)), respondent asserts (Resp. Br. 7, 15, 28) that 
an interest in entireties property is owned by the marital 
unit rather than by the individual spouses acting collectively 
and is therefore immune from the federal tax lien. As 
discussed in our opening brief (Pet. Br. 22-24), however, this 
Court has often 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). Indeed in Tyler v. 
United States, 281 U.S. at 503, the Court expressly rejected 

erty” for purposes of state law. See Mich. Comp. Laws Ann. § 554.872(g), 
(i) (West Supp. 1997), recodified id. § 700.2901(g), (i) (West Supp. 2001); 
Rogers v. Rogers, 136 Mich. App. 125, 135, 356 N.W.2d 288, 293 (1984). Cf. 
Albro v. Allen, 434 Mich. 271, 275, 454 N.W.2d 85, 88 (1990). In any event, 
the proper characterization of a right of survivorship as “property” or 
“rights to property” for the purposes of the federal tax lien is a question of 
federal, not state, law. Drye v. United States, 528 U.S. at 58. “It is not 
material that the economic benefit to which the [taxpayer’s] right pertains 
is not characterized as ‘property’ by local law.” Id. at 58 n.5 (quoting W. 
Plumb, Federal Tax Liens 27 (3d ed. 1972)). “Once 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.” United States v. 
National Bank of Commerce, 472 U.S. 713, 722 (1985) (internal quotation 
marks omitted). See also Pet. Br. 16-17. 

7 

the proposition that federal tax law is bound by the “amiable 
fiction” that entirety property is owned by the marital unit 
rather than by the spouses. The Court held in Tyler that the 
“artificial rules” of state law that ascribe ownership of the 
property to the marital unit do not obscure the reality that 
each spouse holds individual rights and interests in the 
property to which the provisions of federal law may directly 
apply. Id. at 503-504.5 For the reasons detailed in our 
opening brief, the reasoning of Tyler applies directly to the 
present case. Pet. Br. 23-25. 

II. RESPONDENT ERRS IN HER INTERPRETATION 

OF THE RELEVANT DECISIONS OF THIS 
COURT AND IN HER INTERPRETATION OF THE 
LEGISLATIVE HISTORY OF THE FEDERAL TAX 
LIEN STATUTE. 

1. Respondent contends (Resp. Br. 14-15) that the term 
“property” in Section 6321 should be given a limited defini- 
tion that she would draw from nineteenth century dictionar- 
ies. That argument, however, ignores the numerous deci- 
sions of this Court that have clearly held that “[t]he 
statutory language ‘all property and rights to property,’ 
appearing in § 6321 * * * is broad 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. at 719-720. Accord, Drye v. United 
States, 528 U.S. at 56. See also Glass City Bank v. United 

5 In Tyler, the Court explained that, “[b]efore the death of the 
husband * * *, the wife had the right to possess and use the whole 
property, but so, also, had her husband.” 281 U.S. at 503. “At his death, 
however, and because of it, she, for the first time, became entitled to 
exclusive possession, use and enjoyment * * * .” Id. at 504. “Thus the 
death of one of the parties to the tenancy became the ‘generating source’ 
of important and definite accessions to the property rights of the other.” 
Ibid. (emphasis added). 

8 

States, 326 U.S. 265, 267 (1945) (“Stronger language could 
hardly have been selected to reveal a purpose to assure the 
collection of taxes.”). 

Respondent further incorrectly asserts that the “ ‘belong- 
ing to’ language in the [federal tax lien] statute reenforces” a 
narrow understanding of the statute.6 Resp. Br. 15. This 
statutory language does not bear the weight that respondent 
would place on it. What “belongs to” a taxpayer who holds 
entirety property are the actual rights and interests in such 
property that exist under Michigan law—rights that we 
have described in detail both in our opening brief (Pet. Br. 
13-15) and at pages 1-3, supra. Respondent makes no effort 
in her brief to refute our description of the ample rights that 
each spouse possesses in entirety property under Michigan 
law. Instead, respondent simply ignores this fundamental 
issue entirely. 

2. Respondent urges that, when Congress first enacted 
the statutory predecessor of Section 6321 in 1866, “it was 
well accepted that creditors could not place liens on real 
property owned by the entireties to satisfy the debt of one 
member of the marital unit.” Resp. Br. 16. Respondent’s 

6 The statute imposes the federal tax lien “upon all property and 
rights to property, whether real or personal, belonging to” the taxpayer. 
26 U.S.C. 6321. Respondent repeatedly quotes the words “property * * * 
belonging to the taxpayer” (Resp. Br. 1, 10, 21, 27, 31, 35) using the ellipsis 
to omit the phrase “or rights to property” that precedes “belonging to the 
taxpayer” in the tax lien statute. The additional phrase—“and rights to 
property”—that respondent omits, makes clear that a taxpayer need not 
have an exclusive or unrestricted ownership for the tax lien to apply. As 
the court explained in holding that the federal tax lien attaches to the 
taxpayer’s interest in a spendthrift trust in Bank One Ohio Trust Co. v. 
United States, 80 F.3d 173, 176 (6th Cir. 1996), “when Congress says, as it 
has done in § 6321, that an unpaid tax ‘shall’ constitute a lien upon ‘all’ of a 
delinquent taxpayer’s property or rights to property, it follows that the 
tax is a lien both on property that is alienable under state law and on 
property that is not.” 

9 

reliance on the rights of creditors under state law, however, 
is plainly misconceived.7 This Court has repeatedly held that 
Congress did not intend to incorporate state-law exemptions 
and that such exemptions cannot prevent the attachment of 
the federal tax lien. See, e.g., Drye v. United States, 528 U.S. 
at 59 (“exempt status under state law does not bind the 
federal collector”); United States v. Rodgers, 461 U.S. 677, 
701 (1983) (the Supremacy Clause of the Constitution “pro- 
vides the underpinning for the Federal Government’s right 
to sweep aside state-created exemptions”); United States v. 
Bess, 357 U.S. 51, 57 (1958) (“state law is inoperative to 
prevent the attachment of liens created by federal statutes 
in favor of the United States”). See also United States v. 
Mitchell, 403 U.S. 190, 205 (1971) (“there is no room” in the 
federal statutes “for automatic exemption of property that 
happens to be exempt from state levy under state law”). See 
Pet. Br. 19-21. 

3. Although the basic text of what is now the federal tax 
lien statute was first enacted in 1866, it appears that the 
earliest decision that addresses whether that statute applies 
to tenancies by the entirety was issued in 1939. Resp. Br. 23 
(citing Shaw v. United States, 94 F. Supp. 245 (W.D. Mich.)).8 

7 Respondent has cited only one state court decision (and no federal 
decision) involving a state-law exemption for tenancies by the entirety 
that predates the enactment of the 1866 predecessor of the federal tax lien 
statute. Resp. Br. 18 (citing Thomas v. DeBaum, 14 N.J. Eq. 37 (N.J. Ch. 
1861)). 

8 Prior to the burgeoning application of the federal income tax during 
the first third of the 20th Century, there were relatively few occasions for 
individuals—who might own property in a tenancy by the entirety—to be 
subject to the federal tax lien. In this context, there is no basis for (and no 
relevance to) respondent’s assertion (Resp. Br. 23) that the Shaw case— 
which was decided in 1939 and involved taxes due for some preceding year 
—was the first time that the United States took the position that the tax 
lien reaches such property. Certainly nothing in the decision in that case 
supports that assertion. Instead, it appears probable that the United 

10 

It was not until the early 1950’s that two courts of appeals 
held that the federal tax lien does not apply to tenancies by 
the entirety. United States v. Hutcherson, 188 F.2d 326 (8th 
Cir. 1951); Raffaele v. Granger, 196 F.2d 620 (3d Cir. 1952). 
Respondent errs in claiming (Resp. Br. 23-24) that Congress 
ratified these early and narrow interpretations of the statute 
by not expressly rejecting them in enacting the Internal 
Revenue Code of 1954. 

a. As part of the enactment of the 1954 Code, Congress 
considered but did not adopt a proposed amendment to Sec- 
tion 6321 that would have added a parenthetical phrase to 
the statute to clarify that the federal tax lien attaches to 
“property and rights to property” of a delinquent taxpayer 
“(including the interest of such person as tenant by the 
entirety).” H.R. 8300, 83d Cong., 2d Sess. § 6321 (1954). The 
Senate rejected this proposal, not because of any stated 
disagreement with it, but because it was “not clear what 
change in existing law would be made by the parenthetical 
phrase.” S. Rep. No. 1622, 83d Cong., 2d Sess. 575 (1954).9 
Respondent nevertheless contends that the failure of Con- 
gress to enact this clarifying amendment should be under- 
stood as an expression of a legislative intent to ratify the 
decisions that had then recently held that the federal tax lien 
does not attach to entirety property. Resp. Br. 25. 

States had then (as now) routinely applied its lien to jointly owned 
property. The district court in Shaw, while acknowledging that “the rule 
in a number of states is to the contrary,” rejected the government’s claim 
only because “the Supreme Court of Michigan” had adopted the rule “that 
no portion of an estate by the entireties may be subjected to a lien for the 
individual indebtedness of either spouse.” 94 F. Supp. at 246. 

9 The Senate Report stated (S. Rep. No. 1622, supra, at 575): 

It is not clear what change in existing law would be made by the 
parenthetical phrase [suggested by the House]. The deletion of the 
phrase is intended to continue existing law. 

11 

It is well established, however, that “Congressional inac- 
tion lacks persuasive significance because several equally 
tenable inferences may be drawn from such inaction, includ- 
ing the inference that the existing legislation already incor- 
porated the offered change.” Central Bank of Denver, N.A. 

v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 187 
(1994). See also Pension Benefit Guaranty Corp. v. LTV 
Corp., 496 U.S. 633, 650 (1990) (failed legislative proposals 
are “a particularly dangerous ground on which to rest an 
interpretation of a prior statute”); United States v. Estate 
of Romani, 523 U.S. 517, 535 (1998) (Scalia, J., concurring 
(“Congress cannot express its will by a failure to legislate. 
The act of refusing to enact a law (if that can be called an act) 
has utterly no legal effect, and thus has utterly no place in a 
serious discussion of the law.”). 

This Court has, moreover, expressly rejected the argu- 
ment that “Congress’ unwillingness to amend [the statute] in 
response to * * * [lower court] decisions is evidence that 
Congress believed that those opinions accurately interpreted 
[the statute’s] scope.” California Division of Labor Stan- 
dards Enforcement v. Dillingham Construction., N.A., Inc., 
519 U.S. 316, 331 n.8 (1997). Accord, Central Bank of 
Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 
U.S. at 186. The absence of a statutory amendment to cor- 
rect the two appellate decisions that had incorrectly inter- 
preted Section 6321 thus clearly does not support the asser- 
tion that Congress thereby ratified those decisions. 

b. Moreover, in United States v. Rodgers, 461 U.S. at 
702-704 n. 31, this Court addressed and rejected the identical 
argument that respondent raises here. As the Court 
explained at length in Rodgers, the legislative history of the 
proposed 1954 amendment to Section 6321 refutes the con- 
tention that Congress was of the view that the federal tax 
lien does not attach to an interest in entirety property. The 
Court emphasized in Rodgers that the House Report de- 

12 

scribed the proposed amendment as merely a “clarification” 
of, rather than a change in, existing law. Id. at 703-704 n.31; 
see H.R. Rep. No. 1337, 83d Cong., 2d Sess. A406 (1954). 
Indeed, the clarifying amendment drafted by the House 
Ways and Means Committee clearly reflected the assump- 
tion that each spouse has a “right to property” in a tenancy 
by the entirety, for it appended the parenthetical “(including 
the interest of such person as tenant by the entirety)” to that 
phrase. See H.R. 8300, supra, § 6321. 

And, as the Court stated in Rodgers, “the Senate rejected 
that clarification, not necessarily because it disagreed with 
it, but more likely because it found it superfluous.” 461 U.S. 
at 704 n.31. As the Court concluded in Rodgers, the legis- 
lative history of the 1954 Code reflects, if anything, the 
assumption by Congress that the federal tax lien attaches to 
an interest in a tenancy by the entirety without the neces- 
sity of an amendment. Ibid. 

4. Respondent errs in claiming that the “markedly- 
broader coverage of property interests susceptible to fore- 
closure” under the provisions of Section 7403 demonstrates 
that Section 6321 “was not designed to cover all conceivable 
interests in property.” Resp. Br. 21. In the first place, this 
argument simply ignores the decisions of this Court holding 
that the statutory language “all property and rights to 
property” in Section 6321 “is broad 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. at 719-720. Accord, Drye v. United 
States, 528 U.S. at 56; Glass City Bank v. United States, 326 
U.S. at 267. 

Moreover, the wording of the foreclosure provisions of 
Section 7403 does not support respondent’s contention. Sec- 
tion 7403 permits the government to bring suit “to enforce 
the lien” of Section 6321 or “to subject any property, of 
whatever nature, of the delinquent, or in which he has any 

13 

right, title, or interest, to the payment of such tax or 
liability.” 26 U.S.C. 7403(a). Respondent claims (Resp. Br. 

21) that the latter phrase is broader than the text of Section 
6321 and that Section 6321 therefore must not reach “every 
interest in property that a taxpayer might have” (United 
States v. National Bank of Commerce, 472 U.S. at 720). As 
this Court has explained, however, the additional language 
in Section 7403 addresses situations that do not involve the 
government’s lien, for it “contemplate[s], not merely the sale 
of the delinquent taxpayer’s own interest, but the sale of the 
entire property * * * and the recognition of third-party 
interests * * * .” United States v. Rodgers, 461 U.S. at 694 
(emphasis added). 

For example, under Section 7403, the government may 
seek a judicial sale of homestead property in which both the 
taxpayer and the nonliable spouse have an interest. 

10 United 
States v. Rodgers, 461 U.S. at 709-711. Section 7403 also en- 
ables the government to satisfy a taxpayer’s tax liability 
from property that the taxpayer has fraudulently conveyed 
to a third party. See, e.g., United States v. Bryant, 15 F.3d 
756, 757 (8th Cir. 1994); Shades Ridge Holding Co. v. United 
States, 888 F.2d 725, 727 (11th Cir. 1989), cert. denied sub 
nom. Fiorella v. United States, 494 U.S. 1027 (1990); United 
States v. Smith, 950 F. Supp. 1394, 1398 (N.D. Ind. 1996). 
And, Section 7403 enables the government to collect taxes in 
cases where the taxpayer has property but the federal tax 
lien is procedurally invalid or where there is as yet no lien 
because the tax has not yet been assessed. 

11 The specialized 

10 Of course, the nonliable spouse is entitled to compensation for her 
property interest. United States v. Rodgers, 461 U.S. at 702. 

11 A federal tax lien does not arise until “the assessment is made.” 
26 U.S.C. 6322. See also 26 U.S.C. 6203; 26 C.F.R. 301.6203-1. Taxpayers 
have frequently challenged liens by making procedural challenges to the 
validity of the assessment. See, e.g., Hefti v. IRS, 8 F.3d 1169, 1172 (7th 
Cir. 1993); Gentry v. United States, 962 F.2d 555, 557 (6th Cir. 1992); 

14 

wording employed in 26 U.S.C. 7403 thus does not support 
respondent’s novel assertion—contrary to this Court’s 
precedent—that the term “property” in Section 6321 has a 
narrow scope. 

5. a. Respondent incorrectly asserts that United States v. 
Drye holds that a property interest “must” (Resp. Br. 27) be 
pecuniary in nature, “must” have ripened into a present 
estate, and “must” be capable of transfer by the taxpayer to 
another before the federal tax lien can apply. This Court did 
not adopt the rules that respondent proposes. 

Instead, in Drye, the Court stated that, “in determining 
whether a federal taxpayer’s state-law rights constitute 
‘property’ or ‘rights to property,’ the important considera- 
tion is the breadth of the control the [taxpayer] could 
exercise over the property.” Drye v. United States, 528 U.S. 
at 61 (internal quotation marks omitted). The Court exam- 
ined the taxpayer’s rights under state law and concluded 
that his “unqualified right to receive the entire value of his 
mother’s estate * * * or to channel that value to his 
daughter” indicated that he possessed a sufficient “right to 
property” for the federal tax lien to attach. At the same 
time, the Court emphasized that (id. at 60 n.7): 

we do not mean to suggest that transferability is essen- 
tial to the existence of “property” or “rights to property” 
under that section. For example, although we do not 
here decide the matter, we note that an interest in a 
spendthrift trust has been held to constitute “ ‘property’ 

Geiselman v. United States, 961 F.2d 1, 5-6 (1st Cir.) (per curiam), cert. 
denied, 506 U.S. 891 (1992); Hughes v. United States, 953 F.2d 531, 535 
(9th Cir. 1992); United States v. Chila, 871 F.2d 1015, 1017 (11th Cir.), 
cert. denied, 493 U.S. 956 (1989). Some challenges have been successful. 
See Huff v. United States, 10 F.3d 1440, 1445-1446 (9th Cir. 1993), cert. 
denied, 512 U.S. 1219 (1994); Brafman v. United States, 384 F.2d 863, 867 
(5th Cir. 1967). 

15 

for purposes of § 6321” even though the beneficiary may 
not transfer that interest to third parties. See Bank 
One, 80 F.3d, at 176.[12] 

The text of the Court’s decision in Drye also refutes 
respondent’s further contention that a property interest 
cannot be subject to the federal tax lien unless it is “a non- 
personal interest that others (besides the taxpayer) may 
equivalently enjoy.” Resp. Br. 27. The Court characterized 
the right to inherit in Drye as “a right that is indeed personal 
and not marketable” but nevertheless held that this valuable 
and legally protected right is subject to the federal tax lien. 
528 U.S. at 60. 

b. Respondent has also seriously erred in her description 
of this Court’s decision in United States v. Rodgers, supra. 
In Rodgers, the Court held that a federal tax lien could be 
foreclosed on the interest of a delinquent taxpayer in 
homestead property even though, under state law, such 
property could not be mortgaged, sold or abandoned without 
the consent of the other spouse. 461 U.S. at 685. 
Respondent asserts that Rodgers differs from the present 
case because the spouses in that case held “separate right[s]” 
to the property. Resp. Br. 28. This Court, however, plainly 
did not adopt that rationale in Rodgers. 

13 Instead, the Court 

12 The case cited by the Court is Bank One Ohio Trust Co. v. United 
States, 80 F.3d 173 (6th Cir. 1996). Other cases have also held that valu- 
able, legally protected interests in property are subject to the federal tax 
lien even if the taxpayer could not immediately transfer those interests to 
a third party. See, e.g., 21 West Lancaster Corp. v. Main Line Restaurant, 
Inc., 790 F.2d 354, 357-358 (3d Cir. 1986); United States v. Rye, 550 F.2d 
682, 684-685 (1st Cir. 1977). See also pages 3-4 & note 2, supra. 

13 In any event, as we have shown above, each spouse does hold 
valuable, separate rights in a tenancy by the entirety. See Pet. Br. 13-15; 
pages 1-3 & note 1, supra. Indeed, the precise issue presented in this case 
concerns the separate right of the delinquent spouse to receive 50% of the 
proceeds of the sale of the property. See page 3, supra; Pet. App. 46a-47a. 

16 

held that the fact that the taxpayer was not able to exercise 
his rights separately from the rights of his spouse was not a 
basis for denying foreclosure of the federal tax lien. 461 U.S. 
at 700-702. The Court emphasized in Rodgers that neither 
the “homestead estate * * * claimed by a nondelinquent 
spouse” nor the “state-created exemptions against forced 
sale” precluded judicial enforcement of the federal tax lien. 
Id. at 701. 

Respondent also errs in stating that in Rodgers “the 
majority halfheartedly embraced” her argument that “the 
lien statute * * * does not cover tenancies by the entirety.” 
Resp. Br. 30. The Court in Rodgers plainly did not accept 
that contention. The Court noted that a “line of cases” had 
held “that, as a result of the peculiar legal fiction governing 
tenancies by the entirety in some States, no tax lien could 
attach in the first place because neither spouse possessed an 
independent interest in the property.” 461 U.S. at 703 n.31. 
The Court observed, however, that in such cases the gov- 
ernment was “merely trying to exercise one of the more 
benign rights of a lienholder” and emphatically questioned 
“if the tenancy by the entirety cases are correct.” Ibid. As 
we discuss above (page 11, supra), the Court in Rodgers then 
reviewed the legislative history of the proposed 1954 
amendment to clarify the application of the tax lien to the 
interest of a taxpayer in a tenancy by the entirety and stated 
that the failure of the Senate to adopt the amendment 
appeared not to be “because it disagreed with it, but more 
likely because it found it superfluous.” Id. at 704 n.31. 

14 

14 The Court in Rodgers also plainly did not embrace respondent’s 
novel proposition that the difference in the wording of Sections 6321 and 
7403 indicates that the tax lien statute “was not designed to cover all 
conceivable interests in property.” Resp. Br. 21, 30. See pages 12-13, 
supra; S. Johnson, Fog, Fairness, and the Federal Fisc: Tenancy-by-the- 
Entireties Interests and the Federal Tax Lien, 60 Mo. L. Rev. 839, 869 

17 

These passages in Rodgers, which dispute the “line of cases” 
and the legislative history on which respondent relies, 
cannot properly be described as a “halfhearted” acceptance 
of her position. 

6. Respondent argues that “countless questions” would 
be raised if the federal tax lien applies to property held in a 
tenancy by the entirety. Resp. Br. 33. Among the questions 
raised by respondent are (i) whether the federal tax lien 
would be subject to the survivorship right of a nondelinquent 
spouse; 

15 (ii) if so, whether the IRS would seek immediate 
foreclosure in every case like this; 

16 and (iii) how the value of 
the taxpayer’s interest is then to be determined. 

17 

None of these questions is unique to entirety property. 
See, e.g., note 17, supra. They arise whenever any type of 
jointly-owned property is subjected to the federal tax lien 
for the tax debts of only one of the owners. 

18 See, e.g., 

(1995) (“Rodgers * * * renders the entireties bar [to tax collection] hard 
to defend.”). 

15 The answer to this question is ordinarily “yes,” because the United 
States steps into the shoes of the delinquent taxpayer. 

16 As reflected in the facts of the present case and of a long line of 
similar cases, the answer to this question is “no.” 

17 The answer to the valuation issue has factual variations, but the 
“rough idea” is discussed in a detailed example given by this Court in 
United States v. Rodgers, 461 U.S. at 698. 

18 Respondent’s suggestion (Resp. Br. 32) that the government’s 
position would adversely affect the marketability of titles ignores the fact 
that the Michigan bar has long warned title examiners that, in view of the 
1975 enactment of Michigan’s Married Women’s Property Act (Mich. 
Comp. Laws Ann. § 557.71 (West 1988)), it would be risky to ignore a 
federal tax lien against one of two spouses owning entirety property. See 
C.A. App. 107-108 (Standard 20.2 of the Michigan Land Titles Standards 
(5th ed.), published by the State Bar of Michigan, Real Property Section). 
Moreover, in 1983, this Court itself questioned the validity of appellate 
decisions that had then held the tax lien inapplicable to tenancies by the 
entirety in United States v. Rodgers, 461 U.S. at 702-704 n.31. 

18 

United States v. Rodgers, supra (homestead property); 
O’Hagan v. United States, supra (jointly owned property). 
The necessity of resolving these issues is simply one of the 
“practical consequences” of the failure of one of the joint 
owners to pay taxes as they come due. United States v. 
Rodgers, 461 U.S. at 698. These “practical consequences” 
have not prevented the prompt and efficient application and 
enforcement of the federal tax lien to every other type of 
jointly-owned property. See Pet. Br. 26-27. 

Respondent nonetheless asserts that special treatment is 
warranted in this case because a tenancy by the entirety is 
“different” from other types of joint ownership. Resp. Br. 

40. As this Court has observed, however, there is “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). The Court has emphasized that (ibid.) 
(footnote omitted): 

[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 predominant and distinguishing 
feature of each. 

7. Finally, respondent incorrectly states (Resp. Br. 12) 
that the “ready availability of fraudulent-conveyance stat- 
utes” demonstrates that the government is “more than 
amply equipped” to collect tax liabilities. One need look no 
further than the present case to see the error in that 
contention. Fraudulent conveyance laws have provided no 
meaningful assistance to the government in either this case 
or other similar cases: courts have reasoned that, if entirety 
property is exempt from creditor execution under state law, 
then the transfer of that property between spouses cannot 

19 

19 Pet. 
App. 81a-83a. For example, in the present case, the United 
States was able to recover only the small amount of pay- 
ments made by the taxpayer that enhanced the value of the 
property while he was insolvent. Id. at 85a-86a. That 
“fraudulent enhancement” theory enabled the government 
to collect only $6693 of a tax liability which, with interest, 
exceeds $482,446. Id. at 45a, 92a. 

Other taxpayers have consciously employed the tenancy 
by the entirety wholly to avoid their tax obligations. See 
Pet. Br. 31. It is, as we have stressed, “difficult to conceive 
of a more simple or widely available method of evading the 
collection of taxes.” Ibid. The decision of the court of 
appeals should be rejected not only because it “contravenes 
established precedent” but also because it “provides an 
avenue for easy avoidance of federal income-tax laws.” Pet. 
App. 69a (Ryan, J.). 

* * * * * 

19 Respondent is also wide of the mark in suggesting (Resp. Br. 12, 22) 
that the enactment of an unlimited marital deduction for the gift tax 
indicates that a transfer of entireties property between spouses is a per- 
missible means of tax avoidance. The marital deduction avoids the 
application of the gift tax on the transfer; it does not mean that property 
to which the federal tax lien has attached because of a delinquency in some 
other tax (such as the income tax) may be transferred free and clear of 
that lien. See United States v. Bess, 357 U.S. 51, 57 (1958) (“[t]he transfer 
of property subsequent to the attachment of the lien does not affect the 
lien”). 

represent a fraudulent conveyance under state law. 

20 

For the foregoing reasons and those stated in our opening 
brief, the judgment of the court of appeals should be 
reversed. 

Respectfully submitted. 

THEODORE B. OLSON 
Solicitor General 

JANUARY 2002