The U.S. Supreme Court denied review on Jan. 17 of the court of appeals ruling that a Michigan woman who did not owe unpaid taxes to the United States but owned a home with her tax delinquent husband as tenants by the entirety could not prevent the government from selling the property in a tax lien foreclosure (Barczyk v. United States, U.S., No. 11-710, cert. denied 1/17/12).
In U.S. v. Barczyk , No. 10-1498 (6th Cir. 8/17/11), the Sixth Circuit found that the federal government could force the sale of real property held as tenants by the entirety where only one spouse was delinquent and that the sale proceeds should be distributed equally between the federal government and the non-delinquent spouse. Accordingly, not only can joint creditors reach property held as tenants by the entirety, the federal government can also force a sale of property held as tenants by the entirety that is subject to a federal tax lien even if only one spouse is delinquent.
Advisors often recommend that married couples own their residence as tenants by the entirety because of the creditor protections afforded. However, in advising clients, it is important to note that joint creditors can always reach property held tenants by the entirety. Additionally, in light of the decisions in Barr and Barczyk, clients should also be advised that in the event that a tax lien is imposed on either spouse, the federal government can force a sale and that regardless of relative contributions to the purchase of the home or life expectancy, a non-delinquent spouse will receive only 50% of the proceeds of sale.
For more details on this matter go to: http://www.bna.com/us-barczyk-sixth-n12884903539/
James R Malone, Jr • The key case is United States v. Craft, 535 U.S. 234 (2002).The IRS does have a policy position indicating that it will generally not seek to foreclose on real property held this way in so-called full bar states (Pa is one) if the interest was created prior to the decision in Craft. Notice 2003-60, 2003-2 C.B. 643.ReplyDelete
Folks who are from partial bar jurisdictions or who acquired real property after the decision in Craft appear to be out of luck.