Washington (April 18, 2002) -- The U.S. Supreme Court has ruled in a 6-3 decision that a husband's interests in property he held with his wife as tenants by the entirety may be attached by a federal tax lien to recover unpaid taxes owed separately by the husband.

The Court reversed the Sixth Circuit, which had held that no lien attached because the husband had no separate interest in the entireties property under Michigan law. Justices Scalia, Stevens and Thomas dissented.

The husband, Don Craft, owed $482,000 in back taxes for failure to file from 1979 to 1986. When he failed to pay, a federal tax lien attached to "all property and rights to property, whether real or personal, belonging to him" under Code section 6321. After notice of the lien was filed, Craft and his wife executed a quitclaim deed purporting to transfer to her his interest in the property.

Although state law determines what rights a taxpayer has in property, federal law determines whether those rights constitute property for purposes of the federal tax lien, according to the Court. It found that Craft’s rights constituted property, which is attachable under the federal tax lien law.

-- Roger Russell

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