Opinion ID: 782142
Heading Depth: 3
Heading Rank: 4

Heading: Right of the Government to Sell the Levied Property

Text: 31 The Hatchetts argue in the alternative that, even if the Government may levy the entireties property, the result in Craft does not compel the Government to sell the property. They briefly analogize their situation to that of a partnership, stating that while the Government's lien can attach to an individual partner's interest in a partnership, it does not attach to the partnership assets, and the Government cannot sell those partnership assets. Citing to Drye, the Hatchetts also assert that the Government may levy merely on Elbert's right of use and right of exclusion, subject to his wife's right of use and exclusion. These arguments are wholly without merit. 32 First, the majority in Craft specifically rejected the argument advanced in the dissents by Justices Scalia and Thomas that the conclusion that the husband possessed an interest in the entireties property to which the federal tax lien could attach is in conflict with the rules of tax liens relating to partnership property. Craft, 122 S.Ct. at 1424. The Court stated that [t]here is, however, a difference between the treatment of entireties property and partnership assets. Id. Accordingly, the Hatchetts' attempt to equate entireties property to partnership assets is an argument that already was considered and rejected by the Supreme Court. 33 Second, applying Craft to this case leads to the rule that, pursuant to § 6331, the Government may levy upon property held by a delinquent taxpayer as a tenancy by the entirety. Section 6331(b) specifically states that: 34 (b) Seizure and sale of property. — The term levy as used in this title includes the power of distraint and seizure by any means. Except as otherwise provided in subsection (e), a levy shall extend only to property possessed and obligations existing at the time thereof. In any case in which the Secretary may levy upon property or rights to property, he may seize and sell such property or rights to property (whether real or personal, tangible or intangible). 35 (emphasis added). Furthermore, § 6331( l ) states that [f]or proceedings applicable to sale of seized property, see section 6335. Title 26 U.S.C. § 6335(c) (2002) states that [i]f any property liable to levy is not divisible, so as to enable the Secretary by sale of a part thereof to raise the whole amount of tax and expenses, the whole of such property shall be sold. (emphasis added). 36 The language of the statutes is clear. The power to levy includes the power to seize and sell these properties as prescribed by § 6335; property that cannot be divided in order to satisfy the whole of taxes and expenses shall be sold in its entirety. Craft allows the Government to levy upon the West Hickory, Franklin Boulevard, and South Saginaw properties held by the Hatchetts as tenants by the entirety. In 1998, the taxable value of these properties was estimated as follows: (1) West Hickory at $544,400, (2) Franklin Boulevard at $19,720; and (3) South Saginaw at $60,480. Elbert's outstanding tax indebtedness in excess of $8,000,000 far exceeds the value of his interests in the entireties properties. Accordingly, the Government is entitled to sell the whole of the properties and collect a portion of the proceeds pursuant to § 6335(c). 37 The Hatchetts, relying on the Supreme Court's decision in Rodgers, also argue that even if the Government is entitled to sell the entireties property, we should remand the case to the district court for consideration by that court of whether the sale should be allowed to go forward. The Hatchetts' reliance on Rodgers is misplaced. The Court in Rodgers decided that a Texas homestead law did not prevent the Government from forcing the sale of a family house to satisfy tax indebtedness. 461 U.S. at 680, 103 S.Ct. 2132. The Government chose to pursue the taxpayer in Rodgers under 26 U.S.C. § 7403 (2002), which authorizes the Government to pursue a taxpayer by filing a civil action in a district court for the payment of delinquent taxes. In a proceeding under § 7403, the district court adjudicates all the matters involved, makes a final determination of the claims, and decrees a sale of the property if the Government's claim is established. § 7403(c). In explaining that a court in a § 7403 proceeding is charged with exercising its discretion regarding the sale of levied property, the Court in Rodgers held that several factors should be considered by the district court in deciding whether to authorize the forced sale. 461 U.S. at 710-11, 103 S.Ct. 2132. 38 As the Court explained in Rodgers, a § 7403 proceeding is wholly different from an administrative levy under 26 U.S.C. § 6331. 461 U.S. at 682, 103 S.Ct. 2132. An action under § 6331, the Court noted, is unlike the procedure described in § 7403, [and] does not require any judicial intervention, and it is up to the taxpayer... to go to court if he claims that the assessed amount is not legally owing. Id. at 682-83, 103 S.Ct. 2132. The action in this case is an administrative levy pursuant to § 6331 and therefore Rodgers has absolutely no application here. Accordingly, under Craft the Government is able to sell the Hatchetts' entireties properties and collect the mortgage payments.