Opinion ID: 77627
Heading Depth: 2
Heading Rank: 2

Heading: The Refund Suit: The IRS May Levy Tenancy by the Entirety Property

Text: 32 The remaining issue concerns the lower court's dismissal of counts one through eight of the counterclaim and grant of summary judgment for the Government as to counts nine and ten of the counterclaim. We need not address whether the lower court was correct in its determination that it lacked subject matter jurisdiction over the first eight counts of the counterclaim upon determining that Mr. Ryals improperly filed the refund claims for the years 1992 through 1999. See e.g., Gustin v. United States, 876 F.2d 485, 489 (5th Cir. 1989) (Gustin did not file a valid informal claim for his third quarter taxes. The district court had no jurisdiction to consider Gustin's claim for a refund . . . .). Assuming Mr. Ryals' informal claims for the 1992 through 1999 tax years were sufficient, and considering the tax years of 2000 and 2001 raised in counts nine and ten of the counterclaim, we address the taxpayer's argument that the dividend income he and his wife received as tenants by the entirety was improperly construed as wages, salary or other income under 26 U.S.C. § 6334(d). 33 To be entitled to a refund of taxes, a taxpayer must show that the amount he paid to the IRS exceed[s] the amount which might have been properly assessed and demanded. Lewis v. Reynolds, 284 U.S. 281, 283, 52 S.Ct. 145, 76 L.Ed. 293 (1932). [T]he established law [is] that refunds are due only for overpayment of taxes. Cindy's Inc. v. United States, 740 F.2d 851, 854 (11th Cir.1984) (citing 26 U.S.C. § 6402(a)). Mr. Ryals does not claim that he paid any taxes in excess of the amount(s) properly due or that he does not owe the taxes on which the levy was based. Rather, the claim is that the IRS' levy was illegal because the dividend income Mr. Ryals and his wife received as tenants by the entirety was improperly construed as constituting wages, salary or other income under section 6334(d). 34 A 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) (citations omitted). The power to levy is designed to enable the government `promptly to secure its revenues' while competing claims are resolved. United States v. Ruff, 99 F.3d 1559, 1563 (11th Cir.1996) (quoting United States v. Nat'l Bank of Commerce, 472 U.S. 713, 721, 105 S.Ct. 2919, 86 L.Ed.2d 565 (1985)). Section 6334 provides that certain property is exempt from levy, and subsection 6334(d) exempts from levy an amount of the taxpayer's wages, salary or other income. 35 At issue for the tax years covered by the counterclaim are annual distributions of dividends Mr. Ryals received. Where a taxpayer has multiple sources of wages, salary or other income, the IRS may elect to levy on one or more of those sources while leaving other sources free from levy. Treas. Reg. § 301.6334-2(c)(1). Where the wages, salary or other income left free from levy equal or exceed the amount that qualifies for exemption from levy, the IRS may treat no amount of the taxpayer's wages, salary, or other income on which it elects to levy as exempt. Id. Mr. Ryals maintains that the dividend income he and his wife received during the years in question should be disregarded in determining whether or not he had other income. He insists that because the dividend income was received as tenants by the entirety property, it does not qualify as other income under the regulation. 36 Admittedly, Florida law recognizes that property held by husband and wife as tenants by the entirety is not subject to execution to satisfy the debts of one spouse. See Winters v. Parks, 91 So.2d 649, 651 (Fla.1956). However, the IRS's federal statutory powers to tax and attach liens to property trump[s] any state property rights afforded to a taxpayer who holds property by the entireties with her spouse. In re Sinnreich, 391 F.3d 1295, 1297-98 (11th Cir.2004) (discussing and limiting United States v. Craft, 535 U.S. 274, 122 S.Ct. 1414, 152 L.Ed.2d 437 (2002), to the unique powers granted to the IRS under federal law . . . to divide the property rights of tenancy by the entireties property). Because Mr. Ryals had income from sources other than the source levied upon, and the income from those sources exceeded the statutory exemption amount, he was not entitled to any exemption from levy for any amount of his wages.