In United States v. Davis, the Sixth Circuit Court of Appeals upheld the district court’s order allowing the federal government to enforce its tax lien, and sell the property owned by a husband and wife even though the wife was not responsible for the unpaid taxes.
The relevant facts in Davis are that a husband and wife owned a primary residence and a vacation home as joint tenants in the entirety. “Joint tenants in the entirety” is a special type of ownership between a husband and wife whereby each owns the undivided whole of the property, coupled with the right of survivorship, so that upon the death of one, the survivor is entitled to the decedent’s share of the property. The husband in Davis owed taxes related to a business he operated separate from his wife. Because of the husband’s tax debt, a tax lien was placed on the properties in relation to the husband’s ownership interest in those properties.
At some point, the government filed an action with the district court to order the sale of the properties pursuant to 28 USC §7403, which allows the court discretion to order the sale of property to satisfy tax debts. The sale would allow the government to take 50% of the sale proceeds to satisfy the husband’s debt and the remaining 50% would be distributed to the wife. Thereafter, the wife stipulated to allow the sale of the vacation home, but she vehemently opposed the sale of the couple’s primary residence.
The wife argued in large part that the sale of the couple’s primary residence to satisfy the husband’s tax debt would leave her undercompensated. In support of this argument, the wife argued that she had a longer life expectancy and, therefore, she alleged she had a larger interest in the property. She explained that she was in much better health than her husband who had “heart disease, a stint [sic] and is a diabetic.” In addition, she argued that the type of sale proposed by the government typically yields only 80% of fair market value. For these reasons, the wife argued that the forced sale would not adequately compensate her for her interest in the property. The Court of Appeals, however, disagreed with the wife’s arguments and upheld the district court’s decision to force the sale of the primary residence. The Court of Appeals also noted that “differences in life expectancy do not result in different survivorship interests.” Therefore, the husband and wife, regardless of life expectancies, had equal interests in he property.
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