UNITED STATES OF AMERICA, PETITIONER V. NATIONAL BANK OF COMMERCE

   No. 84-498

   In the Supreme Court of the United States

   October Term, 1984

   On Writ of Certiorari To The United States Court of Appeals For The
Eighth Circuit

   Brief For The United States

            TABLE OF CONTENTS
   Opinions below
   Jurisdiction
   Statutes involved
   Statement
   Summary of argument
   Argument:
      Since the delinquent taxpayer had the unrestricted
      right under state law to withdraw the full amount
      on deposit in his joint checking and savings accounts,
      the IRS had a corresponding right to levy on those
      accounts in satisfaction of his tax liability, and
      the court of appeals thus erred in declining to
      hold the bank personally liable for its refusal
      to honor the levy
      A. The Internal Revenue Code grants the
          Commissioner broad power to levy on all "property
          and rights to property" belonging to a delinquent
          taxpayer
      B. The delinquent taxpayer's unrestricted right to
          compel payment of the account balances to him
          constituted "property (or) rights to property"
          within the meaning of Section 6331(a)
      C. The justifications advanced by the court of
          appeals do not support its decision to remit the
          IRS to only those remedies that an ordinary
          creditor would have under state law
      D. The court of appeals' decision would pose a
          serious threat to the federal tax collection
          process
   Conclusion

                            OPINIONS BELOW

   The opinion of the court of appeals (Pet. App. 1a-17a) is reported
at 726 F.2d 1292.  The opinion of the district court (Pet. App.
18a-29a) is reported at 554 F.Supp. 110.

                             JURISDICTION

   The judgment of the court of appeals (Pet. App. 30a) was entered on
January 31, 1984.  A timely petition for rehearing was denied on April
30, 1984 (Pet. App. 31a).  On July 21, 1984, Justice Blackmun extended
the time within which to petition for a writ of certiorari to and
including September 27, 1984.  The petition was filed on that date and
was granted on January 7, 1985 (J.A. 27).  The jurisdiction of this
Court rests on 28 U.S.C. 1254(1).

                           STATUTES INVOLVED

   The relevant portions of Sections 6321, 6331, 6332, 7403 and 7426
of the Internal Revenue Code of 1954 (26 U.S.C.) and of Ark. Stat.
Ann. Sections 67-521, 67-552 (1980) are set out in a statutory
appendix (Pet. App. 32a-38a)

                          QUESTION PRESENTED

   Section 6331(a) of the Internal Revenue Code authorizes the IRS to
collect unpaid taxes by levy upon "all property and rights to property
* * * belonging to" a delinquent taxpayer.  Section 6332(a) in turn
requires any custodian of such "property" or "rights to property" to
surrender it upon demand of the IRS.  The question presented is
whether, where a delinquent taxpayer has an unrestricted right under
his contract with a bank and state banking law to withdraw without
notice to his co-depositors the full amount on deposit in a joint
checking or savings account, the IRS has a corresponding right to levy
on the account in satisfaction of that taxpayer's tax liability, or
whether (as the court of appeals held) the IRS must negate or quantify
the potential claims of all the delinquent taxpayer's co-depositors as
a precondition to a valid administrative levy.

                               STATEMENT

   1. Roy Reeves owes $857 in federal income taxes for 1977, based
upon an assessment made against him on December 10, 1979 (Pet. App.
2a).  He has a checking account and a savings account at the National
Bank of Commerce, a banking corporation doing business in Pine Bluff,
Arkansas (id. at 1a-3a).  Both accounts are held in the names of "Roy
Reeves or Ruby Reeves or Neva R. Reeves" (id. at 3a;  J.A. 9, 14-15).
/1/ Each of the three, Roy, Ruby, and Neva, is authorized to withdraw
money up to the full amount of the outstanding balance in each account
(Pet. App. 3a;  J.A. 9, 12).  It is not known which of the three
co-depositors owned the funds before the funds were deposited in the
accounts, or in what proportion (Pet. App. 3a;  J.A. 12, 22).  It was
stipulated below that no evidence would be submitted as to the
co-depositors' respective claims, inter sese, to the funds (Pet. App.
3a;  J.A. 17).

   Section 6331(a) of the Code /2/ provides that the IRS may collect
the taxes of a delinquent taxpayer "by levy upon all property and
rights to property * * * belonging to such person." Section 6332(a) in
turn provides that anyone "in possession of (or obligated with respect
to) property or rights to property subject to levy upon which a levy
has been made" shall surrender such property or rights upon demand of
the IRS.  Pursuant to these Sections, the Commissioner, in an effort
to collect Roy's unpaid taxes, served a notice of levy against the
bank with respect to the two accounts described above.  On the date
the notice of levy was served -- June 13, 1980 -- the balance in the
checking account was $322 and the balance in the savings account was
$1,242 (Pet. App. 3a;  J.A. 11-12).  The IRS demanded that the bank
pay over to it sufficient monies from the accounts to satisfy Roy's
$857 tax liability (J.A. 9, 12).

   2. The bank refused to comply with the levy, contending that it did
not know how much of the money on deposit belonged to Roy, as opposed
to Ruby or Neva (Pet. App. 1a;  J.A. 19).  The government then brought
this action against the bank in the United States District Court for
the Eastern District of Arkansas, pursuant to Code Section 6332(c)(1).
 That Section provides that "(a)ny person who fails or refuses to
surrender any property or rights to property, subject to levy, upon
demand by the (IRS), shall be liable in his own person and estate" up
to the value of the property or rights not surrendered or the amount
of the tax due, whichever is less.  The government accordingly sought
judgment against the bank in the amount of $857 (J.A. 7, 15).  /3/

   The case was submitted to the district court on cross-motions for
summary judgment and on the bank's motion to dismiss the complaint
(Pet. App. 18a;  J.A. 18-24).  /4/ The district court granted the
bank's motion to dismiss, concluding (Pet. App. 23a) that due process
mandates "something more" than the Code's levy procedures provide.  In
the court's view, "the minimum due process required in distraint
actions against joint bank accounts" obligates the IRS to identify the
delinquent taxpayer's co-depositors and provide them with notice and
an opportunity to be heard (Pet. App. 24a-25a).  The district court
then outlined in detail the procedures it believed the Constitution
requires the IRS to follow when levying on joint bank accounts.  /5/

   3. The court of appeals affirmed (Pet. App. 1a-17a).  /6/ Although
it expressed no opinion on the constitutional analysis advanced by the
district court (id. at 2a, 17a), it reached essentially the same
result as a matter of statutory construction.  In the court of
appeals' view, the IRS, when levying on a joint bank account, must
bear the burden of proving "the actual value of the delinquent
taxpayer's interest in (the) jointly owned property" (id. at 2a).
Since "the rights of the various parties" to the funds at issue here
had not yet been determined (id. at 17a), the court concluded that the
government had not shown the bank to be in possession of "property
(or) rights to property * * * belonging to" Roy, as Section 6331(a)
requires.

   The Eighth Circuit acknowledged that, under Arkansas banking law,
"Roy could have withdrawn any amount he wished from the account(s) and
used it to pay his debts, including federal income taxes, and his
co-owners would have had no lawful complaint against the bank" (Pet.
App. 6a).  The court also found some force in the argument that "the
very right, conferred by statute, to make withdrawals is a 'right to
property' belonging to Roy, on which the government could levy" (id.
at 7a).  The court nevertheless refused to accept the government's
contention that it "st(ood) in Roy's shoes and could do anything Roy
could do," pointing out that, "at least as to ordinary creditors,
(that was) not the law of Arkansas." Under Arkansas garnishment law,
the court noted, a creditor of a bank co-depositor is not "subrogated
to that co-owner's power to withdraw the entire account." Rather, a
creditor in an Arkansas garnishment proceeding "must join both
co-owners as defendants" and permit them to "show by parol or
otherwise the extent of (their) interest in the account." Ibid.  /7/
The court of appeals concluded that a similar rule should apply in
administrative levy proceedings under the Internal Revenue Code, and
accordingly held that the government could not prevail without
negating or quantifying the claims that Ruby or Neva might have to the
funds in question.

   In upholding the bank's refusal to honor the levy, the court of
appeals also expressed the belief that IRS administrative levies are
"not normally intended for use as against property in which third
parties have an interest" or "against property bearing on its face the
names of third parties" (Pet. App. 17a).  The government's proper
remedy in such situations, the court of appeals said, is to "bring()
suit to foreclose its lien under Section 7403, joining as defendants
the * * * co-owners of the account" (ibid).  The court appeared to
agree with the government's contention that "a number of cases --
probably the majority -- either expressly or by implication hold that
a person holding property in which both the taxpayer and someone else
have an interest, must honor a Section 6331 levy" (Pet. App. 11a).
But the court rejected the reasoning of these cases, concluding that
the possibility that Ruby and Neva might have claims to the funds
justified the bank in refusing to honor the levy, and thus prevented
the government from maintaining an action to impose personal liability
upon it.

                          SUMMARY OF ARGUMENT

   1. The question in this case is whether Roy's joint bank accounts
were "property (or) rights to property belonging to" him and thus were
subject to IRS levy in satisfaction of his taxes.  In answering this
question, state law determines the nature and extent of Roy's rights
in the accounts.  Federal law determines whether Roy's rights, as thus
defined, constitute "property" or "rights to property" as those terms
are used in the applicable sections of the Internal Revenue Code.

   In United States v. Bess, 357 U.S. 51 (1958), this Court squarely
held that a taxpayer who has the contractual right to compel payment
of a sum to him in accordance with the contract's term has "property
(or) rights to property" within the meaning of the Code's lien and
levy provisions.  The Court in Bess made clear that the right to enjoy
possession of property -- that is, the ownership of a power that may
be exercised to create a beneficial interest in oneself -- is the
essence of a "right to property" for federal tax collection purposes.
This principle is reflected in numerous decisions involving taxpayers'
interests in property as diverse as bank accounts, trusts, commercial
contracts, and insurance policies.

   In the present case, Roy possessed the unrestricted right under
state law and his contract with the bank to compel it to pay him the
full outstanding balance in each account.  He had the right to make
withdrawals without notice to his co-depositors, and to withdraw funds
for any reason he chose, including satisfaction of his federal taxes.
This absolute right to compel payment and thus to enjoy possession of
the funds was "property" or a "right to property" belonging to Roy
within the meaning of Sections 6331 and 6332.  Under the plain
language of those Sections, therefore, the IRS had power to levy on
the accounts to satisfy Roy's tax liability, and the bank is
personally liable for its failure to honor the levy.

   This straightforward statutory answer is strongly supported by
common sense.  It is hornbook tax law that the IRS "steps into the
taxpayer's shoes" when levying on his property.  The IRS, in other
words, acquires whatever rights the taxpayer himself possesses.  Since
Roy had the right to withdraw money from the accounts and use it to
pay his taxes, the IRS by its levy sought to do exactly what he could
have done of his own volition.  It is inconceivable that Congress
intended to prohibit the IRS from levying on property which, like the
bank accounts here, is freely accessible to the delinquent taxpayer.

   2. In rejecting this common-sense approach, the court of appeals
relied largely on state garnishment law, under which Roy's creditors
would not be subrogated to his right to withdraw and spend the funds
and thus would not "stand in his shoes." It has been established for
decades, however, that state creditors' rights laws do not bind the
IRS in its efforts to collect taxes.  Indeed, the restrictions imposed
by state law on ordinary creditors' rights have no logical bearing on
the question whether a taxpayer's state-defined interests are
"property (or) rights to property belonging to" him within the meaning
of the Internal Revenue Code.  By remitting the IRS to only those
remedies that an ordinary creditor would have under state law, the
court of appeals has effectively deprived the Code's administrative
levy provisions of any force in this context.

   3. The court of appeals suggested that the bank could refuse to
honor the levy because of the possibility that Roy's co-depositors
might have competing claims to some or all of the funds on deposit.
It has long been established, however, that potential disputes as to
ownership are not a defense to a suit to enforce an IRS levy.  Rather,
Congress has provided that the custodian must surrender the property
to the IRS at once, and that ownership disputes (if any) will be
resolved in a post-seizure administrative or judicial proceeding
initiated by the third-party claimant.  This Court has repeatedly
sustained the constitutionality of this post-seizure hearing
procedure, reasoning that "(p)roperty rights must yield provisionally
to governmental need" (Phillips v. Commissioner, 283 U.S. 589, 595
(1931)).  In holding that the validity of such third-party claims must
be finally resolved -- indeed, that the mere possibility of their
arising must be anticipated and eliminated -- before compliance with a
levy can be required, the court of appeals ignored the statutory
scheme that Congress established.

   4. The court of appeals' errors appear with striking clarity when
one considers the practical effect of its holding.  Administrative
levies are the Commissioner's primary tool for the collection of
delinquent taxes.  This is so because levy, as compared with seizure
of physical assets and the Commissioner's various judicial remedies,
is "quick and relatively inexpensive" (United States v. Rodgers, 461
U.S. 677, 699 (1983)).  The IRS serves hundreds of thousands of levies
on joint bank accounts every year.  Banks have routinely honored such
levies, co-depositors have rarely complained, and litigation has
seldom resulted.

   On the court of appeals' theory, however, a bank can refuse with
impunity to honor a levy on a joint account unless the IRS proves to
the bank's satisfaction the proportionate "ownership interests" of the
various co-depositors.  This would make administrative levies so
burdensome as to be impractical whenever a delinquent taxpayer's
property is titled in more than one name.  Differentiating joint
depositor's respective ownership interests "involves one of the
murkiest areas of property law" (Plumb, Federal Liens and Priorities
-- Agenda for the Next Decade II, 77 Yale L.J. 605, 629 (1968)).  Who
"owns" the funds in a joint checking account may depend, for example,
on who deposited the money, who wrote the checks, what the checks were
used to pay for, and what sort of understanding (tacit or explicit)
the parties might have had among themselves.  Quite obviously, the IRS
would not find it easy to bear the burden of proving all this in an
administrative levy proceeding.

   Faced with the virtual impossibility of resolving such ownership
disputes administratively, the government would have no practical
alternative but to follow the Eighth Circuit's suggestion (Pet. App.
17a) and bring suits under Code Section 7403 to foreclose its tax
liens, joining all co-depositors as defendants.  Since the IRS serves
levies on several hundred thousand joint bank accounts every year,
however, such suits would place an intolerable burden on the
government and on the courts.  In effect, the Commissioner's power of
administrative levy could be nullified simply by the taxpayer's
unilateral act of adding another person's name to his property, a
result that Congress cannot possibly have intended.

                               ARGUMENT

 SINCE THE DELINQUENT TAXPAYER HAD THE UNRESTRICTED RIGHT UNDER STATE
LAW TO WITHDRAW THE FULL AMOUNT ON DEPOSIT IN HIS JOINT CHECKING AND
SAVINGS ACCOUNTS, THE IRS HAD A CORRESPONDING RIGHT TO LEVY ON THOSE
ACCOUNTS IN SATISFACTION OF HIS TAX LIABILITY, AND THE COURT OF
APPEALS THUS ERRED IN DECLINING TO HOLD THE BANK PERSONALLY LIABLE FOR
ITS REFUSAL TO HONOR THE LEVY

      A.  The Internal Revenue Code Grants the Commissioner Broad

               Power to Levy on All "Property and Rights to Property"

               Belonging to a Delinquent Taxpayer

   1. Section 6321 of the Code provides that, "(i)f any person liable
to pay any tax neglects or refuses to pay the same" after assessment,
notice and demand, the amount of the unpaid taxes "shall be a lien in
favor of the United States upon all property and rights to property,
whether real or personal, belonging to such person." The lien
generally arises when the assessment is made, and it continues until
the taxpayer's liability "is satisfied or becomes unenforceable by
reason of lapse of time" (I.R.C. Section 6322).  In impressing a lien
upon "all property and rights to property" belonging to a tax
delinquent, Congress cast its net broadly to reach every interest in
property that a taxpayer might have -- including interests as diverse
as options, contingent remainders, business licenses, unliquidated
choses in action, and after-acquired property.  See 4 Bittker, Federal
Taxation of Income, Estates and Gifts Paragraph 111.5.4, at 111-100
(1981).  Indeed, as this Court has noted, "(s)tronger language could
hardly have been selected to reveal a purpose to assure the collection
of taxes" (Glass City Bank v. United States, 326 U.S. 265, 267
(1945)).

   A federal tax lien, however, is not self-executing.  The IRS must
take affirmative action to enforce collection of unpaid taxes, and the
Code affords it two principal tools for that purpose.  One of these
tools is a lien-foreclosure suit.  Section 7403(a) authorizes the
Attorney General, at the request of the Secretary of the Treasury, to
institute a civil action in federal district court to enforce a tax
lien and "to subject any property, of whatever nature, of the
delinquent or in which he has any right, title, or interest, to the
payment of such tax." All persons "having liens upon or claiming any
interest in the property" must be joined as parties (I.R.C. Section
7403(b)).  A lien-foreclosure suit is a plenary action in which the
court "adjudicate(s) all matters involved" and "finally determines the
merits of all claims to and liens upon the property" (I.R.C. Section
7403(c)).  The court may decree sale of the property and distribution
of the proceeds "according to the findings of the court in respect to
the interests of the parties and of the United States" (ibid.).  See
generally United States v. Rodgers, 461 U.S. 677, 680-682 (1983);  4
Bittker, supra, Paragraph 111.5.6, at 111-112.

   Alternatively, the IRS may collect unpaid taxes by administrative
levy, a procedure that, unlike the procedure described above,
typically "does not require any judicial intervention" (Rodgers, 461
U.S. at 682).  Section 6331(a) provides that, "(i)f any person liable
to pay any tax neglects or refuses to pay the same within 10 days
after notice and demand, it shall be lawful for the Secretary to
collect such tax * * * by levy upon all property and rights to
property * * * belonging to such person or on which there is a
(federal tax) lien." Section 6331(b) defines "levy" to include "the
power of distraint and seizure by any means."

   Where the taxpayer's property is held by a third party, the IRS
typically serves a "notice of levy" upon the custodian pursuant to
Section 6332(a).  That Section provides that

      any person in possession of (or obligated with respect to)
      property or rights to property subject to levy upon which a levy
      has been made shall, upon demand of the Secretary, surrender
      such property or rights (or discharge such obligation) to the
      Secretary, except such part of the property or rights as is, at
      the time of such demand, subject to an attachment or execution
      under any judicial process.

The notice of levy gives the IRS the right to all property levied
upon, whether tangible or intangible (United States v. Eiland, 223
F.2d 118, 121 (4th Cir. 1955)), and creates a custodial relationship
between the person holding the property and the IRS, so that the
property comes into the constructive possession of the government
(Phelps v. United States, 421 U.S. 330, 334 (1975)).  If the custodian
honors the levy, he is "discharged from any obligation or liability to
the delinquent taxpayer with respect to (the) property or rights to
property" thus surrendered (I.R.C. Section 6332(d)).

   If the custodian refuses to honor a proper levy, on the other hand,
he incurs liability to the government for his refusal.  Section
6332(c)(1) provides that

      (a)ny person who fails or refuses to surrender any property or
      rights to property, subject to levy, upon demand by the
      Secretary, shall be liable in his own person and estate to the
      United States in a sum equal to the value of the property or
      rights not so surrendered, but not exceeding the amount of taxes
      for the collection of which such levy has been made, together
      with costs and interest on such sum * * * .

Such personal liability is necessary to enforce IRS levies.  Without
it, people could ignore levies with impunity and the government's
ability to collect taxes would be seriously impaired.  /8/

   Administrative levy "is a summary, non-judicial process, a method
of self-help authorized by statute which provides the Commissioner
with a prompt and convenient method for satisfying delinquent tax
claims." United States v. Sullivan, 333 F.2d 100, 116 (3d Cir. 1964).
The levy is "a provisional remedy." 4 Bittker, supra, Paragraph
111.5.5, at 111-108.  Unlike a lien-foreclosure suit, it does not
determine "whether the government's rights to the seized property are
superior to those of other claimants," but it does protect the
government "against diversion, loss, or concealment of the property"
while such claims are being resolved (id. at 111-108, 111-111).  The
"underlying principle" justifying administrative levies is "the need
of the government promptly to secure its revenues." Phillips v.
Commissioner, 283 U.S. 589, 596 (1931).  Indeed, "the existence of the
levy power is an essential part of our self-assessment tax system,"
for it "enhances voluntary compliance in the collection of taxes that
this Court has described as 'the life-blood of government.'" G.M.
Leasing Corp. v. United States, 429 U.S. 338, 350 (1977) (quoting Bull
v. United States, 295 U.S. 247, 259 (1935)).  Among the chief
advantages of administrative levy "is that it is quick and relatively
inexpensive" (Rodgers, 461 U.S. at 699).  Indeed, "(i)n terms of cost,
time, and energy, (it) normally constitutes the least expensive method
by which the government may collect an assessed tax." W. Plumb,
Federal Tax Liens 256 (3d ed. 1972).  The constitutionality of the
levy procedure "has long been settled." Phillips, 283 U.S. at 595.
Accord, e.g., G.M. Leasing Corp., 429 U.S. at 352 n.18;  Fuentes v.
Shevin, 407 U.S. 67, 91-92 & n.24 (1972).

   2. In the present case, the IRS decided to pursue the
administrative route and to collect Roy's unpaid taxes by levying upon
his bank accounts.  It is well established that bank accounts are a
species of property "subject to levy" within the meaning of Section
6332(a).  Levies on bank accounts have been permitted since 1924
(Revenue Act of 1924, ch. 234, Section 1016, 43 Stat. 343), and the
Treasury Regulations explicitly state that "(l)evy may be made by
serving a notice of levy on any person in possession of, or obligated
with respect to, property or rights to property * * * including * * *
bank accounts" (Treas. Reg. Section 301.6331-1(a)(1)).  /9/ Although
the Code specifies certain types of property that are exempt from IRS
levy, /10/ none of those exemptions covers bank accounts.

   The courts have uniformly held, in accordance with the plain
language of Sections 6331 and 6332, that a bank (or other person)
served with an IRS notice of levy "has only two defenses for a failure
to comply with the demand." United States v. Sterling National Bank,
494 F.2d 919, 921 (2d Cir. 1974) (citing cases).  One defense is that
the person is neither "in possession of" nor "obligated with respect
to" property or rights to property belonging to the tax delinquent.
The other defense is that the taxpayer's property is "subject to a
prior judicial attachment or execution." Id. at 921.  Accord, e.g.,
Bank of Nevada v. United States, 251 F.2d 820, 824 (9th Cir. 1957),
cert. denied, 356 U.S. 938 (1958);  Commonwealth Bank v. United
States, 115 F.2d 327, 330-331 (6th Cir. 1940);  M. Saltzman, IRS
Practice and Procedure Paragraph 14.16, at 14-80 (1981) (citing
cases).

   The bank in this case was obviously "obligated with respect to" the
bank accounts in question because, as it concedes (Br. in Opp. 12), it
was "obligated to honor any withdrawal requests Roy might make." And
the bank has never suggested that the accounts were subject to a prior
judicial attachment or execution.  The controlling question,
therefore, is whether those accounts constituted "property (or) rights
to property * * * belonging to" Roy (I.R.C. Section 6331(a)).

 B. The Delinquent Taxpayer's Unrestricted Right to Compel Payment of
the Account Balances to Him Constituted "Property (or) Rights to
Property" Within the Meaning of Section 6331(a)

   1. In deciding whether an entitlement amounts of "property (or)
rights to property" within the meaning of Sections 6321 and 6331,
"'state law controls in determining the nature of the legal interest
which the taxpayer ha(s) in the property.'" Aquilino v. United States,
363 U.S. 509, 513 (1960) (quoting Morgan v. Commissioner, 309 U.S. 78,
82 (1940)).  Accord, e.g., Rodgers, 461 U.S. at 683.  This principle
follows from the fact that the Internal Revenue Code "creates no
property rights, but merely attaches consequences, federally defined,
to rights created under state law." United States v. Bess, 357 U.S.
51, 55 (1958).  But while the existence of rights or interests is a
question of state law, "(t)he classification of (those) interests is a
federal question." Fidelity & Deposit Co. v. New York City Housing
Authority, 241 F.2d 142, 144 (2d Cir. 1957).  The levy and lien
provisions of the Code, in other words, "require the courts to
determine for federal purposes whether (the) state-created interests
are 'property' or 'rights to property'" as those words are used in
Sections 6321 and 6331.  Fidelity & Deposit Co., 241 F.2d at 144.
Accord, e.g., J.A. Wynne Co. v. R. D. Phillips Constr. Co., 641 F.2d
205, 208 (5th Cir. 1981);  Randall v. H. Nakashima & Co., 542 F.2d
270, 272-273 (5th Cir. 1976);  United States v. Citizens & Southern
National Bank, 538 F.2d 1101, 1105 (5th Cir. 1976), cert. denied, 430
U.S. 945 (1977);  W. Plumb, Federal Tax Liens, supra, at 27;  M.
Saltzman, supra, Paragraph 14.08, at 14-34;  Note, Property Subject to
the Federal Tax Lien, 77 Harv. L. Rev. 1485, 1486-1487 (1964).
"(O)nce it has been determined that state law creates sufficient
interests in the (taxpayer) to satisfy the requirements of" the
Internal Revenue Code, in short, "state law is inoperative" and tax
consequences thenceforth are dictated by federal law (Bess, 357 U.S.
at 56-57).

   The application of these principles is illustrated by this Court's
decision in United States v. Bess, supra.  The question there was
whether a delinquent taxpayer's interests in insurance policies
covering his life constituted "property (or) rights to property" to
which a federal tax lien could attach (357 U.S. at 55).  After noting
that "the rights of the insured are measured by the policy contract as
enforced by (relevant) state law," the Court held that the insured did
not have "'property' or 'rights to property' in the (insurance)
proceeds, within the meaning of (the predecessor of Section 6321)"
(357 U.S. at 55-56).  The Court reasoned that the insured "could not
enjoy the possession of the proceeds in his lifetime" and that the
proceeds were "reducible to possession by another only upon (his)
death" (ibid.).  Contrariwise, the Court held that the insured did
have "'property or 'rights of property,' within the meaning of (the
predecessor of Section 6321), in the cash surrender value" (357 U.S.
at 56).  The Court reasoned that the insured had "the right under the
policy contract to compel the insurer to pay him this sum" and thus
possessed "a chose in action * * * which he could have collected from
the insurance companies in accordance with the terms of the policies"
(357 U.S. at 56 (original quotation marks omitted)).  The Court
accordingly held that the insured's interest in the cash surrender
value was subject to the federal tax lien.  The fact that "under state
law the insured's property right represented by the cash surrender
value (was) not subject to creditors' liens" was, in the Court's
analysis, irrelevant (357 U.S. at 56-57).

   This Court's decision in Bess makes clear that a taxpayer who has
the contractual right to compel payment of a sum to him in accordance
with the contract's terms has "property (or) rights to property"
within the meaning of Section 6331.  /11/ Indeed, the Eighth Circuit
itself has held, on another occasion, that "(t)he unqualified
contractual right to receive property is itself a property right
subject to seizure by levy." St. Louis Union Trust Co. v. United
States, 617 F.2d 1293, 1302 (1980).  And it makes no difference
whether the "contract" in question is a trust indenture, /12/ an
ordinary commercial contract, /13/ an insurance policy, /14/ or (as
here) a bank account.  In each case, the determination whether a
taxpayer has "property (or) rights to property" within the meaning of
Section 6331 depends on whether state law gives him a "right to compel
payment," that is, endows him with powers of disposition that may "be
exercised to create a beneficial interest in * * * himself." Note,
supra, 77 Harv. L. Rev. at 1488-1489.

   2. In the instant case, the question whether Roy had a "right * * *
defined by state law" (Bess, 357 U.S. at 55) is measured by his
contract with the bank, as enforced by relevant Arkansas statutory
provisions.  See id. at 55-56;  United States v. Citizens & Southern
National Bank, 538 F.2d at 1105-1107;  United States v. Bowery Savings
Bank, 297 F.2d 380, 382-383 (2d Cir. 1961);  Rev. Rul. 55-187, 1955-1
C.B. 197.  Under Arkansas banking law, Roy possessed the unqualified
right to withdraw the full amount on deposit in the joint checking and
savings accounts without notice to his co-depositors.  /15/ The bank
for its part was obligated to honor any withdrawal requests Roy might
make, again up to the full amount of the accounts.  /16/ Indeed, the
bank stipulated that Roy "was authorized to make withdrawals from the
* * * accounts" (J.A. 12), and it is beyond dispute that he was
authorized to withdraw all of the available funds for whatever reason
he chose.  The Eighth Circuit thus correctly concluded that, under
Arkansas law, "Roy could have withdrawn any amount he wished from the
account(s) and used it to pay his debts, including federal income
taxes, and his co-owners would have had no lawful complaint against
the bank" (Pet. App. 6a).

   That conclusion should have brought the court of appeals' analysis
swiftly to an end.  Here, as in Bess, Roy had the absolute right under
state law and his contract with the bank "to compel (it) to pay him"
the full outstanding balance in the joint checking and savings
accounts, and he thus possessed "a chose in action * * * which he
could have collected from the (bank) in accordance with the terms of"
those accounts (Bess, 357 U.S. at 56).  That right constituted
"property (or) rights to property belonging to" Roy within the meaning
of Section 6331(a), for it was a power of disposition that he could
have exercised at any time "to create a beneficial interest in * * *
himself" (Note, supra, 77 Harv. L. Rev. at 1489).  The bank, in turn,
was "obligated with respect to" Roy's right to property (I.R.C.
Section 6332(a)), since state law required it to honor any withdrawal
requests, up to the full outstanding balance, that Roy might make.
The bank thus had no basis for refusing to honor the levy, and the
courts below erred in declining to hold it personally liable under
Section 6332(c)(1) in the amount of Roy's $857 unpaid tax liability.

   3. The vast majority of the courts that have considered the
question have held, consistently with the view we urge here, that a
delinquent taxpayer's unrestricted right to withdraw funds from a bank
account constitutes "property" or "rights to property" subject to IRS
levy, regardless of the fact that there may exist other claims to the
funds on deposit and that the question of ultimate ownership may thus
be unresolved.  In United States v. Sterling National Bank, 494 F.2d
919 (2d Cir. 1974), a bank contended that its depositor had no
"property (or) rights to property" in a checking account because the
bank had an unexercised right of setoff (494 F.2d at 921).  After
consulting relevant state law, the Second Circuit (id. at 922)
rejected this argument:

      Under any realistic definition of "property" the full amount in
      (the delinquent taxpayer's) account was his property or his
      right to property.  Until the bank acted to restrict his right
      to draw on the funds, (the taxpayer) was entitled to write
      checks up to the full amount in the account.  * * * * * At any
      time up to when the IRS served its notice of levy, (the
      taxpayer) could have written a check payable to the IRS for the
      balance of his account.  Here the IRS was asserting no right to
      the funds in the checking account that (the taxpayer) did not
      already have.

The Second Circuit accordingly held that "all the funds in (the
delinquent taxpayer's) checking account were his property" and hence
were subject to levy in satisfaction of his taxes (ibid.).  The same
result has been reached, for substantially similar reasons, by the
Fifth /17/ and the Ninth Circuits, /18/ by numerous district courts,
/19/ and by the IRS in its published rulings.  /20/

   This substantial body of judicial authority, rejected by the court
of appeals below, is firmly supported by common sense.  It is well
established that the IRS in a levy proceeding "'steps into the
taxpayer's shoes.'" Rodgers, 461 U.S. at 691 n.16 (quoting 4 Bittker,
supra, Paragraph 111.5.4, at 111-102);  M. Saltzman, supra, Paragraph
14.08, at 14-32.  The IRS, in other words, acquires whatever rights
the taxpayer himself possesses.  /21/ Since Roy had the right to
withdraw the outstanding balance in each bank account and use it to
pay his taxes, the IRS, by virtue of the levy, sought to do on his
behalf exactly what he could have done of his own volition.  In such
circumstances, where a bank depositor under state law has the
unrestricted right to withdraw funds from the account, "it is
inconceivable that Congress * * * intended to prohibit the Government
from levying on that which is plainly accessible to the delinquent
taxpayer-depositor." United States v. First National Bank, 348 F.
Supp. 388, 389 (D. Ariz. 1970), aff'd per curiam, 458 F.2d 513 (9th
Cir. 1972).  Accord, United States v. Citizens & Southern National
Bank, 538 F.2d at 1107.

 C. The Justifications Advanced by the Court of Appeals Do Not Support
Its Decision to Remit the IRS to Only Those Remedies That an Ordinary
Creditor Would Have Under State Law

   The Eighth Circuit's decision in this case is the only recent
appellate decision to sustain a bank's refusal to honor an IRS levy in
circumstances like those here.  /22/ The court adduced three principal
justifications to support its result.  First, it believed that result
to be required by the provisions of Arkansas law governing the rights
of creditors generally.  Second, it reasoned that the bank had a
defense because Ruby and Neva might have competing claims to part or
all of the funds on deposit.  Third, and more generally, it suggested
that "levy is not normally intended for use as against property * * *
bearing on its face the names of third parties, and in which those
parties likely have a property interest" (Pet. App. 17a).  There is no
merit to any of these theories.

   1. In holding that Roy did not possess "property (or) rights to
property" on which the IRS could levy, the court of appeals relied
heavily on Arkansas creditors' rights law.  It rejected the
government's contention that the IRS in a levy proceeding "would stand
in Roy's shoes and could do anything Roy could do," reasoning that,
"at least as to ordinary creditors, (that) is not the law of Arkansas"
(Pet. App. 7a).  Under Arkansas garnishment law, as construed by that
State's courts, a creditor of a bank co-depositor is not "subrogated
to that co-owner's power to withdraw the entire account" (ibid.,
citing Hayden v. Gardner, 238 Ark, 351, 381 S.W. 2d 752 (1964)).
Rather, a creditor in an Arkansas garnishment proceeding must "join
both co-owners as defendants" and permit them to "show by parol or
otherwise the extent of (their) interest in the account" (Pet. App.
7a).  The court of appeals believed that a similar rule should apply
in federal tax collection cases involving joint bank accounts.  It
accordingly concluded (id. at 17a) that the government may not
effectively levy on such accounts but must bring a Section 7403 action
to foreclose its tax lien, joining all co-depositors as defendants.

   This reasoning seriously misconceives the role properly played by
state law in federal tax collection matters.  As noted above (at
18-21), this Court has repeatedly held that state law is relevant only
in "determining the nature of the legal interest which the taxpayer
ha(s) in the property . . . sought to be reached" by the federal
taxing statute.  Aquilino, 363 U.S. at 513 (emphasis added;  original
quotation marks omitted).  Once the nature of the taxpayer's legal
interest is defined, the question whether that interest constitutes
"property" or "rights to property," as those terms are used in
Sections 6321 and 6331, is a question of federal law. Bess, 357 U.S.
at 56-57;  J.A. Wynne Co., 641 F.2d at 208;  Randall, 542 F.2d at
272-273;  United States v. Citizens & Southern National Bank, 538 F.2d
at 1105;  Fidelity & Deposit Co., 241 F.2d at 144;  W. Plumb, Federal
Tax Liens, supra, at 27;  M. Saltzman, supra, Paragraph 14.08, at
14-34;  Note, supra, 77 Harv. L. Rev. at 1486-1487.  The fact that
under state law ordinary creditors may be unable to reach the full
value of the taxpayer's legal interest, therefore, does not determine
whether that interest constitutes "property (or) rights to property"
within the meaning of Section 6331(a).  In Bess, this Court held it
irrelevant that "under state law the (taxpayer's) property right * * *
was not subject to creditors' liens," ruling that, "once it has been
determined that state law creates sufficient interests in the
(taxpayer) to satisfy the requirements of (the predecessor of Section
6321), state law is inoperative" (357 U.S. at 56-57 (citations
omitted)).  /23/

   Contrary to the court of appeals' conclusion, therefore, the facts
that under Arkansas law Roy's creditors (unlike Roy himself) could not
exercise his right of withdrawal in their favor (Pet. App. 7a) and
would have to join his co-depositors in a garnishment proceeding
(ibid.) are irrelevant in answering the question presented here.  The
federal statute, after all, refers to the taxpayer's property and
rights to property, not to his creditor's rights.  Yet the court of
appeals has effectively deprived the federal levy statute of all
independent force, by remitting the IRS to only the rights that an
ordinary creditor of the taxpayer would have under state law.  That
result is plainly wrong, for it is to "compare the government to a
class of creditors to which it is superior" (Randall, 542 F.2d at 274
n.8).

   Here, as in Bess, Roy had the unqualified right under state law to
compel the bank to pay him the full outstanding balance in each
account.  That right belonging to Roy constituted "property (or)
rights to property" within the meaning of Section 6331(a).  The court
of appeals erred in concluding that the restrictions imposed by
Arkansas garnishment law on creditors generally could alter that
result.

   2. As a second justification for declining to impose personal
liability on the bank, the court of appeals suggested that a custodian
of property may "assert(), as a defense to a Section 6332 action to
enforce the levy, that someone other than the taxpayer ha(s) an
interest in the property" (Pet. App. 13a).  The court noted that Ruby
and Neva were nominal co-owners of the accounts and that their "rights
(might) be affected if the levy (were) honored" (id. at 10a).  It was
thus proper for the bank, in the Eighth Circuit's view, to refuse to
comply with the levy "until the rights of the various parties have
been determined" (id. at 17a).  A contrary rule, the court said,
"might expose the bank to double liability" -- once to the IRS, and
possibly again "after being sued by Ruby or Neva" (id. at 15a).

   This reasoning is spurious.  To begin with, the courts have
uniformly held that a person served with a notice of levy has two --
and only two -- possible defenses for failure to comply with the
demand:  (1) that he is not in possession of the taxpayer's property,
and (2) that the property is subject to a prior judicial attachment or
execution.  E.g., United States v. Sterling National Bank, 494 F.2d at
921;  Bank of Nevada v. United States, 251 F.2d at 824;  Commonwealth
Bank v. United States, 115 F.2d at 330-331.  See M. Saltzman, supra,
Paragraph 14.16, at 14-80.  The fact that other parties may have
competing claims to the property is not one of these defenses.  /24/
Indeed, a custodian of property must honor an IRS levy even if he
himself asserts a claim superior to the government's tax lien.  4
Bittker, supra, Paragraph 111.5.5, at 111-110.  This is because
administrative levy "is only a provisional remedy" (id. at 111-108).
"(T)he final judgment in (a levy) action settles no rights in the
property subject to seizure" (United States v. New England Merchants
National Bank, 465 F. Supp. 83, 87 (D. Mass. 1979)), and does not
determine "whether the government's rights to the seized property are
superior to those of other claimants." 4 Bittker, supra, Paragraph
111.5.5, at 111-108.

   This is not to say, of course, that the rights of other claimants
are ignored under the Internal Revenue Code.  In enacting the Code's
summary collection procedures, Congress fully recognized that the IRS
would occasionally levy in error, and that, "where the Government
levies on property which, in part at least, a third person considers
to be his, he is entitled to have his case heard in court." S. Rep.
1708, 89th Cong., 2d Sess. 29 (1966).  Congress accordingly provided
in Section 7426 of the Code that a person claiming an interest in
property seized for another's taxes may bring a "wrongful levy" action
against the United States to have the property (or the proceeds of its
sale) returned.  /25/ Congress likewise provided, in Section 6343(b),
that an aggrieved claimant may file, before proceeding to court, an
administrative request for return of the property at issue.  See
Treas. Reg. Section 301.6343-1(b)(2).  This Court has repeatedly
sustained the constitutionality of this post-seizure hearing
procedure, reasoning that "(p)roperty rights must yield provisionally
to governmental need" (Phillips, 283 U.S. at 595) because "the very
existence of government depends upon the prompt collection of the
revenues" (G.M. Leasing Corp., 429 U.S. at 352 n.18).

   In its solicitude for the potential claims of Roy's co-depositors,
the court of appeals has ignored the statutory scheme that Congress
established.  Congress determined that the interests of the government
in the speedy collection of taxes and the interests of other claimants
to the delinquent taxpayer's property are best reconciled by
permitting the IRS to levy on the taxpayer's assets at once, leaving
ownership disputes to be resolved in a post-seizure administrative or
judicial hearing.  Indeed, the courts repeatedly have held that,
"(w)hen someone other than the taxpayer claims an interest in property
or rights to property which the United States has levied upon, his
exclusive remedy against the United States is a wrongful levy action
under I.R.C. Section 7426." United Sand & Gravel Contractors, Inc.,
624 F.2d at 739.  /26/ The court below erred in concluding that the
validity of such third-party claims must be finally resolved --
indeed, that the mere possibility of their arising must be anticipated
and eliminated -- before compliance with a levy can be required.  In
effect, the court created a third defense for failure to honor a levy,
a defense not authorized by the language or policy of Section 6332.

   Similarly, there is no merit to the court of appeals' suggestion
(Pet. App. 14a-16a) that the bank could refuse to comply with the levy
because to comply "might expose (it) to double liability." To begin
with, the statute admits of no such defense.  /27/ And even if the
statute did permit such a defense, the bank could not qualify for it
here.  As noted above (at 14), a person who honors an IRS levy is
"discharged from any obligation or liability to the delinquent
taxpayer with respect to (the) property or rights to property"
surrendered (I.R.C. Section 6332(d)).  Although no provision of the
Code would explicitly immunize the bank from suits by Roy's
co-depositors, the Code does provide a federal administrative remedy
(I.R.C. Section 6343(b)) and a federal judicial remedy (I.R.C. Section
7426) to third parties who believe that their property has been
wrongfully seized for another's taxes.  See pages 32-34, supra.  Since
federal remedies would be available to Ruby and Neva, it is highly
questionable whether the bank, consistently with established
preemption principles, could be held liable under state law in an
action by Roy's co-depositors for complying with an IRS levy, if (as
here) the state would not have imposed liability on the bank for
permitting Roy himself to withdraw the funds.  Cf. Nash v. Florida
Industrial Comm'n, 389 U.S. 235 (1967).

   In any event, the bank would have a complete defense under state
law to any such action by Roy's co-depositors.  Arkansas law provides
that a bank's payment to any one depositor constitutes "a valid and
sufficient release and discharge of said bank" from co-depositors'
claims, absent written notice from them not to pay.  /28/ Ark. Stat.
Ann. Sections 67-521, 67-552(h) (1980) (reprinted in Pet. App.
37a-38a).  Since the government stands in the shoes of the delinquent
taxpayer when levying on a joint bank account, the bank's payment to
the IRS in effect would be a constructive payment to Roy, and hence
would likewise insulate the bank from actions by Ruby or Neva.  See,
e.g., United States v. Bowery Savings Bank, 297 F.2d 380 (2d Cir.
1961);  DiEdwardo v. First National Bank, 442 F. Supp. at 499-500;
Sebel v. Lytton Savings & Loan Ass'n, 65-1 U.S. Tax Cas. (CCH)
Paragraph 9343 (S.D. Cal. 1965);  Determan v. Jenkins, 111 F. Supp. at
605;  Wechsler v. Home Savings & Loan Ass'n, 57 Cal. App. 3d 563, 129
Cal. Rptr. 380 (1976).

   3. As a final justification for refusing to impose personal
liability on the bank, the court of appeals theorized that an IRS levy
"is not normally intended for use as against property in which third
parties have an interest" or "as against property bearing on its face
the names of third parties" (Pet. App. 17a).  The court appeared to
recognize that Congress's enactment of Section 7426 -- which permits
wrongful-levy actions by "any person ** who claims an interest in"
seized property -- tended to undermine this theory.  But the court
suggested that the Section 7426 remedy is designed to protect only
those third parties "whose property has been seized 'inadvertently'"
(Pet. App. 17a).  Here, the court noted, the joint bank accounts bore
on their face the names of Roy's co-depositors, so that the
government's attempt to seize their property, in the court of appeals'
view, was "not at all inadvertent" (ibid.).

   This rationale, too, is erroneous.  To start with, the collection
provisions of the Code plainly contemplate that a taxpayer's interest
in property may be less than fee ownership.  The federal tax lien
attaches, not only to the taxpayer's "property," but also to his
"rights to property," and the lien may be enforced by levy against
such "rights." I.R.C. Sections 6321, 6331.  Thus, the fact that a
taxpayer is not the sole owner of property does not insulate his
interest, however limited, from federal tax collection procedures.  In
enacting Section 7426, moreover, Congress said that the wrongful-levy
remedy was intended to be available whenever the IRS levies "on
property which, in part at least, a third person considers to be his"
(S. Rep. 1708, supra, at 29 (emphasis added)).  This language makes
clear that Congress envisioned levies on jointly-owned or co-owned
property.

   Nor is there merit to the Eighth Circuit's notion that the Section
7426 remedy is confined to situations where the IRS acts
"inadvertently," by which the court seemed to mean "without notice
that potentially competing claims exist." The wording of Section 7426
-- which permits suit by "any person" who claims an interest in seized
property -- surely provides no basis for distinguishing among various
species of third-party claimants.  The legislative history of the
Section likewise provides no basis for such a distinction, for it
defines a "wrongful levy" quite simply as "a proceeding against
property which is not the taxpayer's" (S. Rep. 1708, supra, at 30).
And the result produced by the Eighth Circuit's suggested reading
would be anomalous, for it would leave third-party claimants without
recourse where the seizure is "advertent," that is, where the IRS
arguably has notice of their potentially competing claims.  Indeed, if
the bank in this case had honored the levy, Ruby and Neva on the court
of appeals' theory would be unable to vindicate in court whatever
interest they might have in the funds on deposit.  Surely Congress did
not intend that Section 7426, a remedial statute, should be construed
in so whimsical a manner, or that the government should be able "with
impunity (to) seize property of innocent third parties by levy
procedures" provided only that it knows about their claims ahead of
time.  Al-Kim, Inc. v. United States, 610 F.2d 576, 580 (9th Cir.
1979).

   This Court's decision in United States v. Rodgers, supra, contrary
to the court of appeals' conclusion (Pet. App. 16a-17a), does not
support its reasoning on this score.  The question in Rodgers was
whether Section 7403 -- which authorizes the government (see page 13,
supra) to bring plenary judicial actions to foreclose its tax liens --
empowers a district court to order the sale of a family home in which
a delinquent taxpayer has an interest, but in which the taxpayer's
nondelinquent spouse also has a homestead interest under state law.
This Court held that sale of the entire property, and not merely of
the delinquent taxpayer's interest in the property, is permitted,
provided that the non-delinquent spouse is compensated out of the sale
proceeds for his or her homestead stake (461 U.S. at 698-700).  In so
ruling, the Court compared Section 7403's operation with that of
Section 6331, noting (461 U.S. at 696) that "Section 6331, unlike
Section 7403, does not require notice and hearing for third parties,
because no rights of third parties are intended to be implicated by
Section 6331."

   The court of appeals below read this passage from Rodgers to
"impl(y) that levy is not normally intended for use * * * against
property bearing on its face the names of third parties, and in which
those parties likely have a property interest" (Pet. App. 17a).  But
the Rodgers opinion contains no such implication.  The Court in
Rodgers correctly pointed out that Section 6331 does not "implicate
the rights of third parties" because an administrative levy, unlike a
judicial lien-foreclosure action, does not determine ultimate
ownership rights where such rights are in dispute.  See pages 15-16 &
32, supra.  Rather, Congress has provided that third parties'
competing claims to property levied upon will be resolved after the
levy is made, in a post-seizure administrative or judicial hearing.
See Rodgers, 461 U.S. at 696 (citing I.R.C. Sections 6343(b) and
7426);  pages 32-34, supra.  Nothing in Rodgers suggests that this
Court would invalidate an IRS levy on a bank account -- where (as
here) the delinquent taxpayer has the unrestricted right to obtain the
full outstanding balance at any time without notice to his
co-depositors -- merely because the account "bear(s) on its face the
names of third parties."

   Indeed, in G.M. Leasing Corp., supra, this Court specifically
upheld the validity of an IRS levy on property bearing on its face the
name of a third party -- a straw man found to be the delinquent
taxpayer's alter ego (429 U.S. at 350-351).  The lower courts have
repeatedly sustained levies in a variety of similar circumstances.
See, e.g., Valley Finance, Inc., 629 F.2d at 165 (alter ego of
taxpayer);  Babb v. Schmidt, 496 F.2d at 958-960 (co-depositor of
taxpayer);  James E. Edwards Family Trust v. United States, 572 F.
Supp. 22 (E.D.N.M. 1983) (trust found to be a nullity);  DiEdwardo v.
First National Bank, 442 F. Supp. at 499-500 (nominee of taxpayer);
United States v. Equitable Trust Co., 49 A.F.T.R.2D (P-H) Paragraph
82-428 (D. Md. 1982) (co-depositor of taxpayer);  Sebel, 65-1 U.S. Tax
Cas. (CCH) Paragraph 9343 (same).  As explained more fully below (see
pages 40-44, infra), the IRS serves several hundred thousand notices
of levy on joint bank accounts every year, and it has levied on
various types of jointly-held property for many decades.  This
consistent pattern of administrative interpretation is entitled to
considerable deference, and it points up the fallacy of the court of
appeals' notion that levies are "not normally intended for use" (Pet.
App. 17a) against such property.

 D. The Court of Appeals' Decision Would Pose a Serious Threat to the
Federal Tax Collection Process

   In holding that a bank may refuse to honor an IRS levy on accounts
in which third parties have an interest, the decision below would
seriously impair the government's ability to collect taxes.  It would
impose burdens of staggering dimension not only on the IRS and the
federal courts, but on the banking system and taxpayers themselves.
Indeed, the Eighth Circuit's ruling would effectively preclude
administrative levies whenever a taxpayer's property is titled in
joint names.

   Administrative levies are the Commissioner's primary tool for the
collection of delinquent taxes.  During the past three and a half
years, the IRS has served nearly five million notices of levy,
principally on employers and banks.  /29/ The chief advantage of
administrative levies is their nonjudicial nature, a characteristic
that renders the collection process both expeditious and inexpensive.
See page 16, supra.  Although a levy does not determine ultimate
ownership rights where such rights are in dispute, it does protect the
government "against diversion, loss, or concealment of the property"
in the interim.  4 Bittker, supra, Paragraph 111.5.5, at 111-108.

   It is common knowledge that American taxpayers frequently hold
financial assets, particularly bank accounts, in joint names.  Indeed,
during the past three and a half years, the IRS has served notices of
levy on some 800,000 joint bank accounts.  /30/ The IRS estimates
that, in about half these cases, the account was held in the names of
a delinquent taxpayer and a "third party" -- i.e., a party who did not
share liability for the tax delinquency -- the levy being predicated
on the delinquent taxpayer's right unilaterally to withdraw the entire
balance.  Very few of these cases resulted in litigation, be it an
enforcement action by the Commissioner or a wrongful levy action by
the co-depositor.  Rather, the bank simply paid the funds to the IRS,
the taxpayer acquiesced, the co-depositor raised no objection, and no
one ever went to court.

   On the court of appeals' theory, however, a bank can refuse with
impunity to honor a levy on a joint account unless the IRS proves to
the bank's satisfaction the proportionate "ownership interests" of the
delinquent taxpayer and his various co-depositors.  This would make
administrative levies so burdensome as to be impractical whenever a
delinquent taxpayer's property is titled in more than one name.  The
task of sorting out the potential claims inter sese of joint tenants
is "an impossible burden to cast upon a party not privy to the
confidential relationship normally existing between such co-owners."
Plumb, supra, 77 Yale L.J. at 629.  Under Arkansas law, for example,
as the Eighth Circuit observed below, "(t)he rights of the co-owners
inter sese * * * depend on the intention of whoever deposited the
money, or on whatever agreement, if any, might have been made among
them" (Pet. App. 6a-7a).  Differentiating joint depositors' respective
ownership interests "involves one of the murkiest areas of property
law" (Plumb, 77 Yale L.J. at 629), typically entailing "(a) long
series of deposits which cannot be traced to their source, and a
similar series of withdrawals which cannot be traced to their
destination." Park Enterprises, Inc. v. Trach, 233 Minn. 467, 471-472,
47 N.W.2D 194, 197 (1951).  The decision below would invite
self-serving affidavits by delinquent taxpayers and their
co-depositors, all of whom will typically be related, if not by blood,
by friendship or commercial ties.  Quite obviously, proving the
respective "ownership interests" of such co-depositors is a burden
that the IRS, at the administrative levy stage, would not find easy --
indeed, would typically find impossible -- to bear.  /31/

   Faced with the difficulty of resolving ownership disputes
administratively, the IRS, if it wished to pursue a delinquent
taxpayer's interest in a joint bank account, would have no practical
alternative but to follow the Eighth Circuit's suggestion (Pet. App.
17a) and bring a lien-foreclosure suit under Section 7403, joining all
co-depositors as defendants.  But this would place an enormous burden
on the Commissioner and on the courts.  As noted above, the IRS in the
past three and a half years has served notices of levy on some 400,000
joint bank accounts titled in the names of a delinquent taxpayer and a
"third party." The Service estimates that slightly more than half of
these cases -- 200,000 or more -- would have involved sufficient tax
liabilities to justify the time and expense of litigation.  This
number of additional cases would cost the government tens of millions
of dollars to litigate and would impose a tremendous strain on the
federal courts, not to mention the Nation's banks.  The fiscal impact
would be aggravated by the delay in collecting hundreds of millions of
dollars in revenues while the litigation was pending, as well as by
the risk that the bank accounts would be depleted in the interim.
/32/

   Given the prohibitive cost of litigating over levies on joint bank
accounts, the Commissioner would be forced by the decision below to
consider other collection measures, such as seizures of delinquent
taxpayers' houses, cars, and other tangible property.  At present, the
IRS generally tries to collect unpaid taxes by levies on intangible
assets rather than by seizure of tangible property -- a preference
explained by the fact that seizure and sale of tangible property
involve a slow and drawn-out process, often burdensome to the
taxpayer, invariably costly for the IRS, and usually unpleasant for
all concerned.  /33/ Under the decision below, however, the
Commissioner would have no alternative but to take more collection
action against physical property.

   Finally, the decision below would provide tax protestors and other
tax evaders with a new and effective means to delay or defeat
collection of the tax.  Some 37,000 illegal protest returns were filed
in fiscal 1983, a six-fold increase over the comparable figure for
1978.  Tax protestors could take advantage of the Eighth Circuit's
decision simply by adding extra names -- accommodating relatives, or
other tax protestors -- to their bank accounts.  This might be all
that would be necessary to immunize relatively small accounts from
enforced collection, since the IRS would not likely find it profitable
to litigate such cases.  Alternatively, a taxpayer with a delinquent
tax liability might attempt to "launder" deposits to a joint account
through a "third party" co-depositor, hoping that the Commissioner
would be unable to prove which money was whose.  Although such schemes
can be exposed, the attendant costs are large.  And, significantly,
tax protestors might well rely on the decision below to bring suits
against banks that continue to honor -- correctly, in our view -- IRS
levies on joint accounts of the sort involved here.  Although banks
would almost certainly have valid defenses to such suits (see pages
35-36, supra), the expense of litigating even frivolous cases could be
substantial.

   In Bull v. United States, 295 U.S. 247, 259 (1935), this Court
declared that "taxes are the life-blood of government, and their
prompt and certain availability an imperious need." The administrative
levy system is a time-honored, congressionally-authorized collection
technique designed to ensure that this need is equitably met.  The
decision below constitutes an unprecedented, unwarranted, and wholly
impractical limitation on the right of the United States to collect
its taxes in that way.

                              CONCLUSION

   The judgment of the court of appeals should be reversed.

   Respectfully submitted.

   REX E. LEE

      Solicitor General

   GLENN L. ARCHER, JR.

      Assistant Attorney General

   ALBERT G. LAUBER, JR.

      Assistant to the Solicitor General

   WILLIAM S. ESTABROOK

   JOHN A. DUDECK, JR.

      Attorneys

   FEBRUARY 1985

   /1/ Although the record does not reveal how the three co-depositors
are related to one another, we understand that Neva is Roy's wife and
that Ruby is his mother.

   /2/ Unless otherwise noted, all statutory references are to the
Internal Revenue Code of 1954 (26 U.S.C.), as amended (the Code or
I.R.C.).

   /3/ In its original complaint J.A. 7), the government also sought
to collect a penalty from the bank in the amount of $428 under Section
6332(c)(2).  That Section provides that, where a person's refusal to
surrender property in response to a levy is "without reasonable
cause," he shall be liable, not only for the amount recoverable under
Section 6332(c)(1), but also for a penalty "equal to 50 percent of
(that) amount." The government eventually agreed to waive any claim to
the Section 6332(c)(2) penalty in this case (J.A. 13), and the
complaint was amended accordingly (id. at 15).  Thus, no question
concerning the Section 6332(c)(2) penalty is presented here.

   /4/ The bank's motion to dismiss was based on the theory that Roy's
co-depositors were "indispensable parties" in the action seeking to
hold it personally liable for refusing to honor the levy;  the
government's failure to join Ruby and Neva, the bank argued, thus
mandated dismissal under Fed. R. Civ. P. 19(b) (Pet. App. 19a;  J.A.
18).  The bank suggested that joinder of Roy's co-depositors was
required by analogy with Code Section 7403(b), which provides that, in
a plenary action to foreclose an IRS tax lien, "(a)ll persons having
liens upon or claiming any interest in the property * * * shall be
made parties" (J.A. 23;  Br. in Support of Motion to Dismiss 1-2).
Alternatively, the bank suggested that joinder of Ruby and Neva was
mandated by the provisions of Arkansas garnishment law, which the
State's courts had interpreted to require that co-depositors be joined
in an action or garnishment against a bank account (J.A. 23-24;  Br.
in Support of Motion to Dismiss 2-4).  The district court did not
specifically address the bank's Rule 19(b) argument.

   /5/ The district court held that a bank, upon receiving a notice of
levy, should freeze the assets in the account and provide the IRS with
the names of all co-depositors (Pet. App. 24a-25a).  The IRS would
then be required to notify the co-depositors and give them a
reasonable time period "in which to respond both to the government and
the bank by affidavit or other appropriate means, specifically setting
out any ownership interest (claimed) in the joint account" and the
ground of their claim (id. at 25a).  If the bank, on the basis of the
affidavits, "believe(d) that a genuine dispute exist(ed) as to the
legality of any ownership claim" made by the co-depositors, "it
(might) refuse to surrender any portion of the funds so claimed" (id.
at 29a).  The IRS would then be forced to bring suit to enforce the
levy, at which point "due process would require that the government *
* * name the co-depositors as co-defendants with the bank" (id. at
25a).

   /6/ The court of appeals recited that the district court had "held
for the bank on summary judgment" (Pet. App. 2a) and based its
affirmance on a conclusion that "the summary judgment entered for the
bank was proper" (id. at 17a).  The district court, however, had not
entered summary judgment for the bank, but rather had granted the
bank's motion to dismiss the complaint (id. at 29a).

   /7/ The court observed that "(t)he rights of (bank co-depositors)
inter sese are not determined by the cited Arkansas (banking)
statutes," but rather "depend on the intention of whoever deposited
the money, or on whatever agreement, if any, might have been made
among the co-owners" (Pet. App. 6a-7a).

   /8/ Section 6332(c)(1) has its roots in Section 1114(e) of the
Revenue Act of 1926, ch. 27, 44 Stat. 117.  Congress explained that
earlier enactment (S. Rep. 52, 69th Cong., 1st Sess. 38 (1926)) as
follows:

      The existing law permits distraint upon personal property of a
      delinquent taxpayer even though in possession of another person.
       The committee amendment specifically makes it the duty of the
      possessor to surrender the property upon which a levy is made,
      and imposes upon him * * * a civil liability, if he fails to do
      so, equal to the value of the property, but not exceeding the
      amount of tax, a liability similar to that of an executor who
      pays debts before he pays a debt due to the United States.

We have found no other legislative history discussing this provision.
In order to make clear that the government is not entitled to recover
against both the custodian and the tax delinquent, Congress amended
Section 6332(c)(1) in 1966 to provide explicitly that "(a)ny amount
(other than costs) recovered under this paragraph shall be credited
against the tax liability for the collection of which such levy was
made." Federal Tax Lien Act of 1966, Pub. L. No. 89-719, Section
104(b)(4), 80 Stat. 1136.

   /9/ Technically, of course, a bank account establishes a
debtor-creditor relationship between the bank and its depositor.
Section 6332(a) takes care of this technicality by providing that the
IRS may serve a notice of levy upon anyone "in possession of (or
obligated with respect to) property or rights to property," and by
requiring that such person "surrender such property (or discharge such
obligation) to the Secretary."

   /10/ Section 6334 enumerates nine classes of property that, while
not exempt from the incidence of the federal tax lien, are exempt from
administrative levy.  Such items include wearing apparel and school
books, furniture and personal effects, tools of a trade or profession,
unemployment benefits, undelivered mail, certain pension and annuity
payments, workmen's compensation, judgments in support of minor
children, and a minimum amount of wages or salary (I.R.C. Section
6334(a)(1) through (9)).  These exemptions are exclusive.  Section
6334(c) provides that, "(n)otwithstanding any other law of the United
States, no property or rights to property shall be exempt from levy
other than the property specifically made exempt by" Section 6334(a).
And Congress in enacting that Section made clear that "(p)rovisions of
State law cannot grant an exemption from levy." S. Rep. 1622, 83d
Cong., 2d Sess. 578 (1954).  Accord, United States v. Mitchell, 403
U.S. 190, 205 (1971).

   /11/ Although the question in Bess concerned attachment of the
federal tax lien (I.R.C. Section 6321) rather than exercise of the
Commissioner's power of administrative levy (I.R.C. Section 6331), the
formula set forth in the Code is the same under both Sections.  In
each case, the IRS may reach all "property and rights to property * *
* belonging to" the delinquent taxpayer.  See pages 12-15, supra.  The
same principles apply in determining the meaning of the words
"property" and "rights to property" as used in each Section.  See,
e.g., 4 Bittker, supra, Paragraph 111.5.4, at 111-101.

   /12/ E.g., St. Louis Union Trust Co., 617 F.2d at 1302 (levy on
bank that had "a fixed contractual obligation to pay (trust) income"
to taxpayer).  See Plumb, Federal Liens and Priorities -- Agenda for
the Next Decade II, 77 Yale L.J. 605, 618-621 (1968) (collecting cases
and concluding that IRS levy should be able to "reach during a
taxpayer's lifetime any income or corpus (whether in trust or a legal
interest) which the taxpayer could reach by the exercise of a power of
revocation, appointment or invasion for his own benefit").

   /13/ E.g., United Sand & Gravel Contractors, Inc. v. United States,
624 F.2d 733, 737 (5th Cir. 1980) (levy on contractor that was
"obligated to deliver" money to taxpayer).

   /14/ E.g., Bess, 357 U.S. at 56-57.  In 1966, Congress amended
Section 6332, consistently with this Court's decision in Bess, to make
clear that the IRS can levy on the cash surrender value of a life
insurance policy.  Federal Tax Lien Act of 1966, Pub. L. No. 89-719,
Section 104(b), 80 Stat. 1135 (currently codified in I.R.C. Section
6332(b)).  See S. Rep. 1708, 89th Cong., 2d Sess. 17-19 (1966).

   /15/ The relevant Arkansas statutes provide that, if a checking or
savings account is opened in the names of two or more persons, whether
as joint tenants, tenants by the entirety, tenants in common or
otherwise, all monies deposited become the property of such persons as
joint tenants, each person having the unrestricted right to withdraw
the entire sum.  See Ark. Stat. Ann. Sections 67-521, 67-552 (1980)
(reprinted in Pet. App. 37a-38a).  (Effective March 25, 1983 -- well
after the issuance of the notice of levy in the present case -- the
relevant Arkansas banking statutes were recodified without substantial
change.  See Pet. App. 4a-5a & n.3.)

   /16/ The relevant Arkansas statutes provide that "a banking
institution shall pay withdrawal requests * * * and otherwise deal in
any manner with the account * * * upon the direction of any one (1) of
the persons named therein * * * unless one (1) of such persons named
therein shall by written instructions delivered to the banking
institution designate that the signature of more than one (1) person
shall be required".  Ark. Stat. Ann. Section 67-552(d) (1980).  The
bank has never suggested that such "written instructions" existed
here.

   /17/ See United States v. Citizens & Southern National Bank, 538
F.2d at 1105-1107 (delinquent taxpayer had "property (or) rights to
property" in bank account where bank's right of setoff was unexercised
and the taxpayer "was permitted to withdraw from his account");
Citizens & Peoples National Bank v. United States, 570 F.2d 1279,
1282-1284 (5th Cir. 1978) (same, where bank had received checks drawn
on delinquent taxpayer's account but had not yet decided whether to
pay them).

   /18/ See Babb v. Schmidt, 496 F.2d 957, 958-960 (9th Cir. 1974)
(delinquent taxpayer had "property (or) rights to property" up to full
value of joint bank accounts under state community property law);
Bank of Nevada v. United States, 251 F.2d 820, 824-826 (9th Cir.
1957), cert. denied, 356 U.S. 938 (1958) (delinquent taxpayer had
"property (or) rights to property" in bank account where bank's right
of setoff was "inchoate" and "contingent");  United States v. First
National Bank, 348 F. Supp. 388, 389 (D. Ariz. 1970), aff'd per
curiam, 458 F.2d 513 (9th Cir. 1972) (same, where bank's right of
setoff was unexercised and the taxpayer was "free to withdraw from his
account").

   /19/ See United States v. Equitable Trust Co., 49 A.F.T.R.2D (P-H)
Paragraph 82-428 (D. Md. 1982) (delinquent taxpayer had "property (or)
rights to property" up to full value of joint checking account where
he had "the absolute right to use or withdraw the entire fund");
Sebel v. Lytton Savings & Loan Ass'n, 65-1 U.S. Tax Cas. (CCH)
Paragraph 9343 (S.D. Cal. 1965) (delinquent taxpayer had "property
(or) rights to property" up to full value of joint savings account
where each co-depositor "was entitled to the whole of said account");
Tyson v. United States, 63-1 U.S. Tax Cas. (CCH) Paragraph 9300 (D.
Mass. 1962) (same, where "either depositor could withdraw all of the
funds in the account");  United States v. Third National Bank & Trust
Co., 111 F. Supp. 152, 155-156 (M.D. Pa. 1953) (same).

   /20/ E.g., Rev. Rul, 79-38, 1979-1 C.B. 406, 407 (delinquent
taxpayer has "property (or) rights to property" in uncollected funds
where, "by custom or agreement between the bank and the customer, the
customer has a legal, fixed right to draw against (such) funds").

   /21/ See, e.g., St. Louis Union Trust Co., 617 F.2d at 1302 ("The
IRS acquired the same right to receive and spend the entire amount of
the (trust) income that (the taxpayer) had at the time the tax lien
arose");  S. Rep. 1708, 89th Cong., 2d Sess. 19 (1966) ("(T)he effect
of honoring the levy is the same as honoring a demand of the
taxpayer.").

   /22/ As noted in our petition (at 18 n.12), the only appellate
authority even arguably supporting the court of appeals' result is
United States v. Stock Yards Bank, 231 F.2d 628 (6th Cir. 1956).  The
Sixth Circuit there ruled that the IRS could not levy on United States
savings bonds held in the names of a husband and wife to satisfy the
former's tax liability, reasoning that "(p)roof of the actual value of
the taxpayer's interest was an essential element of the government's
case" (231 F.2d at 631).  The Stock Yards Bank decision, however,
involved a significantly different legal and factual environment than
that involved in this case.  The Sixth Circuit emphasized that the
form of co-ownership in which the United States savings bonds were
held was not a joint tenancy but "rather (was) an estate the
limitations and conditions of which are delineated by the terms of the
contract and by federal law" (id. at 630).  The applicable federal
regulations provided that "if a debtor * * * is not the sole owner of
the bond, payment will be made only to the extent of his interest
therein, which must be determined by the court or otherwise validly
established" (31 C.F.R. 315.13 (1955) (quoted in 231 F.2d at 631)
(emphasis added by the court of appeals)).  In Stock Yards Bank,
therefore, other, more particularized provisions of federal law placed
a gloss on the term "property (or) rights to property" as generally
used in Section 6331(a);  the provisions of Arkansas garnishment law,
obviously, can impose no such gloss on that term here.  As the court
below recognized (Pet. App. 10a n.6), moreover, Stock Yards Bank was
decided before the enactment (in 1966) of Code Section 7426, which
permits third parties claiming an interest in seized property to bring
"wrongful levy" actions against the government.  See pages 32-34,
37-38, infra.  In sum, while we think that the Sixth Circuit reached
the right result on the facts presented in Stock Yards Bank, we
disagree with much of that court's reasoning and believe that the case
should be confined to the narrow situation there involved.

   /23/ The Court in Bess observed that state creditors' rights laws
"are not laws for the United States * * * unless they have been made
such by Congress itself" and that "(t)he provisions of the Internal
Revenue Act creating liens upon taxpayer's property for unpaid taxes *
* * do not specifically provide for recognition of such state laws"
(357 U.S. at 57 (original quotation marks omitted)).  Congress has
similarly provided that the Code's exemptions from the levy power are
exclusive (I.R.C. Section 6334(c)) and that "(p)rovisions of State law
cannot grant an exemption from levy." S. Rep. 1622, supra, at 578.
These well-established propositions reflect the more general principle
that "(t)he exertion of (the federal taxing) power is not subject to
state control" and that "(s)tate law may control only when the federal
taxing act, by express language or necessary implication, makes its
own operation dependent upon state law." Burnet v. Harmel, 287 U.S.
103, 110 (1932).  See Springer v. United States, 102 U.S. 586, 594
(1881).

   /24/ See, e.g., J.A. Wynne Co., 641 F.2d at 207 (general contractor
required to honor levy on funds due subcontractor notwithstanding
"possible claims (to the funds) by * * * sub-subcontractors");  United
States v. Sterling National Bank, 494 F.2d at 921 (bank required to
honor levy on funds due depositor notwithstanding bank's claimed right
of setoff);  DiEdwardo v. First National Bank, 442 F. Supp. 499, 500
(E.D. Pa. 1977) (bank required to honor levy on funds due alleged
nominee of taxpayer notwithstanding former's possible claim to the
funds);  Determan v. Jenkins, 111 F. Supp. 604, 605 (N.D. Ga. 1953)
(police chief required to honor levy on currency taken from decedent
"even though (he) knew at the time that (another party) was claiming
the same").  It is accordingly well established that the IRS "has no
duty to give notice to possible third party claimants or to search for
them as a condition to enforcement of the levy." Dieckman v. United
States, 550 F.2d 622, 624 (10th Cir. 1977) (per curiam).  Accord,
e.g., Douglas v. United States, 562 F. Supp. 593, 596-597 (S.D. Ga.
1983), aff'd, 723 F.2d 919 (11th Cir. 1983).

   /25/ Section 7426(a) provides that any person (other than the
taxpayer himself) who claims an interest in or lien on property and
who claims "that such property was wrongfully levied upon may bring a
civil action against the United States in a (federal) district court."
The word "wrongful" as used in Section 7426(a) refers not to
intentional wrongdoing on the government's part, but rather "refers to
a proceeding against property which is not the taxpayer's." S. Rep.
1708, supra, at 30.  If the taxpayer himself seeks relief from an
allegedly wrongful levy, his proper avenue of redress is to file a
refund suit under Section 7422.

   /26/ Accord, e.g., Valley Finance, Inc. v. United States, 629 F.2d
162, 170-171 (D.C. Cir. 1980), cert. denied, 451 U.S. 1018 (1981)
("(a)s a third party challenging the government's (levy, the
plaintiff's) proper avenue of redress is in the District Court under
section 7426");  Douglas v. United States, 562 F. Supp. at 594 (where
"(t)he essence of the plaintiff's case is that the IRS wrongfully
levied upon her property in order to satisfy (someone else's) tax
liability * * * the claimant's exclusive remedy is a wrongful-levy
action under (I.R.C.) Section 7426");  DiEdwardo v. First National
Bank, 442 F. Supp. at 500 (holding that competing claimants' proper
course was a Section 7426 suit in which they "may contest their
designation as nominees and all other questions may be resolved").

   /27/ See, e.g., United States v. Capital Savings Ass'n, 576 F.
Supp. 790 (N.D. Ind. 1983), on appeal, No. 84-2961 (7th Cir. 1984);
United States v. Third National Bank, 111 F. Supp. at 156.

   /28/ The bank has never suggested that such written instructions
from Roy's co-depositors existed here (see pages 22-23 & note 16,
supra).  In circumstances where a bank had received such instructions
before the notice of levy was served, it could file an interpleader
action under 28 U.S.C. 2410.  That Section permits the United States
to "be named a party in any civil action * * * of interpleader * * *
with respect to * * property on which the United States has or claims
a * * * lien."

   /29/ The IRS has provided us with the following breakdown of levies
served during fiscal 1981-1984:

                 Total Levies    Levies On Banks
      FY 1981      740,103        308,622
      FY 1982    1,058,452        441,374
      FY 1983    1,390,900        580,005
      FY 1984    1,484,000        600,000

   /30/ Statistics referred to in this brief are derived from IRS
records and were provided to us by the Service

   /31/ Even in state garnishment proceedings, the courts have
recognized the virtual impossibility of requiring a creditor to prove
how much of a joint bank account is "owned" by one of the
co-depositors.  In Park Enterprises, Inc., supra, for example, the
Minnesota Supreme Court held that a creditor could garnish the full
amount on deposit in a joint account for the individual debt of one
co-depositor, reasoning that "courts should not encourage parties to
do their bookkeeping in court when, by virtue of their private
contract, they have virtually declared that they do not wish to be
inconvenienced by strict accountability as between themselves" (233
Minn. at 471-472, 47 N.W.2d at 197).  Similarly, in a decision relied
on by the Eighth Circuit below (Pet. App. 7a), the Arkansas Supreme
Court held that all the funds in a joint account "are prima facie
subject to garnishment," with the burden being placed on the
nondelinquent co-depositor "to show what portion of the funds he or
she actually owned." Hayden v. Gardner, 238 Ark, 351, 354, 381 S.W. 2d
752, 754 (1964).  The Arkansas court reasoned that the co-depositor
should bear the burden of proof because he would be "in a much better
position than the judgment creditor to know the pertinent facts" (238
Ark. at 354, 381 S.W. 2d at 754).  Ironically, if the Eighth Circuit
below had strictly followed the rationale of Hayden, it would have
placed the burden of proof, not on the IRS, but on the bank, which was
indirectly asserting Ruby's and Neva's claims.  See Flores v. United
States, 551 F.2d 1169, 1174 (9th Cir. 1977) (reasoning that it is
appropriate for the person in possession of property "to carry the
burden of showing non-ownership by the taxpayer as a defense because
the purpose of the statute is a coercive one which seeks to foster
swift tender of property which has been levied upon").  Accord, United
States v. Montchanin Mills, Inc., 512 F. Supp. 1192, 1195 (D. Del.
1981);  Rev. Rul. 55-187, 1955-1 C.B. 97.  The more practical
solution, however, is the one that Congress in fact adopted:  the
immediate securing of the funds by IRS levy, with a subsequent
opportunity for competing claimants to assert and prove their claims
in a post-seizure administrative or judicial hearing.  See pages
32-34, supra.

   /32/ In these and other respects, as a leading commentator has
noted, "the Government has a very real stake in preventing its less
expensive and (less) time-consuming administrative remedy from being
rendered impotent by its too-frequent abandonment in the face of what
it believes to be frivolous competing claims." W. Plumb, Federal Tax
Liens, supra, at 256.

   /33/ During fiscal 1983, for example, the IRS served 1,390,900
notices of levy and executed only 15,554 seizures -- a ratio of about
100 to one.  Seizures are far more expensive because they entail,
e.g., courthouse searches for prior liens, expenses of appraising and
advertising the property, and costs of execution.