United States v. Craft, 535 U.S. 274 (2002)

Page:   Index   1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  Next

274

OCTOBER TERM, 2001

Syllabus

UNITED STATES v. CRAFT

certiorari to the united states court of appeals for the sixth circuit

No. 00-1831. Argued January 14, 2002—Decided April 17, 2002

When respondent's husband failed to pay federal income tax liabilities assessed against him, a federal tax lien attached to "all [of his] property and rights to property." 26 U. S. C. § 6321. After the notice of the lien was filed, respondent and her husband jointly executed a quitclaim deed purporting to transfer to her his interest in a piece of real property in Michigan that they owned as tenants by the entirety. Subsequently, the Internal Revenue Service (IRS) agreed to release the lien and allow respondent to sell the property with half the net proceeds to be held in escrow pending determination of the Government's interest in the property. She brought this action to quiet title to the escrowed proceeds. The Government claimed, among other things, that its lien had attached to the husband's interest in the tenancy by the entirety. The District Court granted the Government summary judgment, but the Sixth Circuit held that no lien attached because the husband had no separate interest in the entireties property under Michigan law, and remanded the case for consideration of an alternative claim not at issue here. In affirming the District Court's decision on remand, the Sixth Circuit held that its prior opinion on the issue whether the lien attached to the husband's entireties property was the law of the case.

Held: The husband's interests in the entireties property constitute "property" or "rights to property" to which a federal tax lien may attach. Pp. 278-289.

(a) Because the federal tax lien statute itself creates no property rights, United States v. Bess, 357 U. S. 51, 55, this Court looks initially to state law to determine what rights the taxpayer has in the property the Government seeks to reach and then to federal law to determine whether such state-delineated rights qualify as property or rights to property under § 6321, Drye v. United States, 528 U. S. 49, 58. A common idiom describes property as a "bundle of sticks"—a collection of individual rights which, in certain combinations, constitute property. State law determines which sticks are in a person's bundle, but federal law determines whether those sticks constitute property for federal tax lien purposes. In looking to state law, this Court must consider the substance of the state law rights, not the labels the State gives them or the conclusions it draws from them. Pp. 278-279.

Page:   Index   1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  Next

Last modified: October 4, 2007