Opinion ID: 799600
Heading Depth: 5
Heading Rank: 1

Heading: Prejudice to Government

Text: First, a court should consider the extent to which the Government's financial interests would be prejudiced if it were relegated to a forced sale of the partial interest [belonging to the party] actually liable for the delinquent taxes. Id. at 710, 103 S.Ct. 2132. The Court in Rodgers explained that there would be no reason to force a sale of the entire property if the value of the delinquent taxpayer's partial interest is likely to be equal to or greater than its value as a fraction of the total value of the entire property. Id. But, there is no question that Malcolm Winsper's partial contingent interest has minimal, if any, independent value. Also, there would be no prejudice to the government from disallowing forced sale of the entire property if the proceeds of a partial sale could be expected to fully satisfy the indebtedness; if the indebtedness could be satisfied out of other property owned solely by the delinquent taxpayer; or if the non-delinquent third party's interest could be expected to lapse in the relatively near future. Id. at n. 41. None of these circumstances are present in this case either. Finally, even when the partial interest would be worth less if sold separately, the possibility of prejudice to the Government can still be measured as a matter of degree. Id. That is, the higher the expected market price [of the partial interest], the less the prejudice, and the less weighty the Government's interest in going ahead with a sale of the entire property. Id. Given the minimal value of Malcolm Winsper's partial interest, the government has a greater interest in a forced sale of the entire property. Without finding to the contrary, the district court concluded that this factor does not weigh heavily for either side because the taxes have been due and owing for over a decade and the sale will result in collection of only a small portion of it. Neither of these considerations is mentioned in Rodgers, however, and the government persuasively argues that neither negates the prejudice to its financial interests that will result from being limited to a forced sale of the partial interest in this case. First, although the district court seems to have relied on the discussion in United States v. Reid, 127 F.Supp.2d 1361, 1385 (S.D.Ga.2000), it was not simply the passage of time in Reid, but also a finding that dilatory conduct by the government had contributed to its inability to collect the tax. Without deciding whether the government's conduct would be an appropriate consideration, Reid is not analogous to this case. Moreover, if the age of the assessment were to weigh against a finding of prejudice, it would penalize the government for pursuing other less-disruptive means of collection first, and it would encourage the institution of judicial foreclosure actions earlier in the ten-year period for collection of assessments under 26 U.S.C. § 6502(a)(1). The age of the assessment does not lessen the prejudice to the government's financial interests that would result from being limited to the sale of the delinquent taxpayer's partial interest. Second, although defendants argue that it is reasonable to consider what fraction or percentage of the tax liability might be satisfied, the only support for this view is the reference in Reid to the fact that any proceeds would satisfy only a tiny fraction of the tax liability. Reid, 127 F.Supp.2d at 1382 (Even if the Government levied on Reid's interest in the Flagler Road residence, which is subject to exemptions, prior security interests, and the rights of parties in possession, any proceeds would satisfy only a tiny fraction of Reid's tax liability, which may be as great as $500,000.). It is hardly clear from this reference that the court was making the distinction urged in this case consideration of the percentage of the debt that would be satisfied rather than the dollar amount that would be collected particularly when the rest of the discussion makes clear that there was no evidence at all in the record about the value of the property to be sold. Moreover, this is inconsistent with the focus in Rodgers on the amount that could be expected from the sale of the taxpayer's partial interest as compared to the sale of the entire property; not a comparison (percentage or otherwise) between the amount of the proceeds and the extent of the tax liability. To find an absence of prejudice because the percentage of the debt satisfied may be small would tend to favor delinquent taxpayers with the largest tax liability ( i.e., the greater the debt, the smaller the percentage of that debt would be satisfied in most cases by a forced sale under § 7403). The district court misapplied this factor in finding no prejudice to the government's financial interests if it were to be relegated to a forced sale of Malcolm Winsper's partial interest as a tenant by the entirety with his non-delinquent spouse.