Miss Cramer, federal tax liens against one joint tenant's undivided interest in joint tenancy property work the same way as tenancy by the entirety, I think.
If the lienee joint tenant dies and the non-lienee receives decedent's interest, IRS takes the position that the tax lien departs along with the decedent's soul...
(At least the IRS's writ doesn't run in either Heaven or Hell!  Where decedent can own no earthly property anyway. :-)

26 U.S.C. section 6321 imposes a lien upon all property belonging to the taxpayer.
But what "property" interests he may hold are defined by state law.  Aquilino v. United States, 363 U.S. 509, 512–13 (1960). 
Such state-law property interests include joint tenancy interests.

Here is the Internal Revenue Service manual dealing with the subject:
https://www.irs.gov/irm/part5/irm_05-017-002.html#d0e411

****For general rule that the lien dies along with the lienee joint-tenant taxpayer see below: the first line of 5.17.2.5.2.2.4.


5.17.2.5  (03-27-2012)
Property to Which the Tax Lien Attaches 

1. The federal tax lien attaches to all property and rights to property of the taxpayer. This is a very broad concept and includes not only items which are typically thought of as property, e.g., tangible items and "things," but also intangible items and "rights" which a taxpayer may have, but are not necessarily marketable. The only exception is that the lien does not attach to any interest of an Indian in restricted land held by the United States. Treas. Reg. § 301.6321-1. 

2. The courts have interpreted this very broad language to include property of greatly varying natures, as well as future interests, contingent interests, and executory contracts. 

  *Future interests. The fact that a taxpayer’s enjoyment of a "right to property" may be postponed does not prevent attachment. If a taxpayer has an unqualified fixed right, under trust or a contract, to receive periodic payments or distributions of property, a lien attaches to the taxpayer’s entire right regardless of when the payments or distributions will be made. Rev. Rul. 55-210, 1955-1 C.B. 544. 
  *Contingent interests. These are interests which a party will receive only if certain circumstances or events occur. SeeFouts v. United States, 107 F.Supp.2d 815, 817 (W.D. Mich. 2000) (under state law an expectant beneficiary of an inter vivos trust has a present interest in property that is attachable). ButseeDominion Trust Co. of Tennessee v. United States, 7 F.3d 233 (unpublished table decision) (6th Cir. 1993) (under state law a contingent remainder person did not have an interest in property). An inter vivos trust is sometimes referred to as a "living trust" . 
  *Executory contracts. A lien may attach before performance under a contract. SeeSeaboard Surety Co. v. United States, 306 F.2d 855, 859 (9th Cir.1962) (a lien attached to the taxpayer's rights under an executory contract which the taxpayer had assigned and, when the taxpayer performed under the contract, the government had a lien on the proceeds). SeealsoRandall, Sr. v. H. Nakashima & Co., 542 F.2d 270, 274 (5th Cir. 1976) (contract rights under a partially executed contract constituted a right to property because they had a realizable value). 

3. Once the lien has come into existence, it attaches immediately to any property acquired by the taxpayer during the existence of the lien. In other words, unlike a typical mortgage, the federal tax lien attaches to a taxpayer’s after-acquired property. 

4. If the Service files a NFTL, the tax lien will generally have priority to a taxpayer’s after-acquired property. In United States v. McDermott, 507 U.S. 447 (1993), the Supreme Court held that the federal tax lien had priority over a judgment lien on the taxpayer’s after-acquired property, to which the judgment lien and the federal tax lien attached simultaneously, even though the judgment lien was filed ahead of the NFTL. 

5.17.2.5.1  (01-08-2016)
State Law 

1. State law is very significant when considering the property and rights to property to which the federal tax lien attaches. The Government looks to state law to determine a taxpayer's rights in a particular piece of property, but federal law determines whether such interests qualify as property or rights to property. "[One] look[s] to state law to determine what rights the taxpayer has in the property the Government seeks to reach, then to federal law to determine whether the taxpayer’s state-delineated rights qualify as ‘property’ or ‘rights to property’ within the compass of federal tax lien legislation." United States v. Craft , 535 U.S. 274 (2002); Drye v. United States, 528 U.S. 49, 58 (1999). 

2. State law does not determine whether something is property under the Internal Revenue Code. For example, in many states a liquor license is not property. Under the Internal Revenue Code, however, the question is whether the taxpayer has rights under state law. Because the taxpayer does have rights under state law, the liquor license is property under the Internal Revenue Code. See Drye, 528 U.S. at 58-59. 

3. The Government must look to state law to determine whether a taxpayer has rights in property by virtue of a civil union, domestic partnership, or similar relationship.
 
5.17.2.5.2  (03-27-2012)
Real Property 

1. Federal tax lien questions relating to the joint ownership of property generally arise when other parties claim an interest in real property otherwise subject to the federal tax lien. This issue typically arises when the Service asserts a tax lien against only one of the parties having an interest in real property which, depending on state law, is held in one of the following forms: 
   *Community property,
   *Joint tenancy,
   *Tenancy in common , or
   *Tenancy by the entirety.
...

5.17.2.5.2.2  (03-27-2012)
Joint Tenancy 

1. A joint tenancy may be created when the following conditions are met:
  *Two or more persons become the owners of property in equal and undivided shares. 
  *The interest of each tenant is created in the same conveyance at the same time and the interests must be equal. 

2. Joint tenants generally have a right of survivorship. Under the right of survivorship, when a joint tenant dies, the surviving joint tenants automatically own a greater portion of the property. 

Example: Assume A, B, and C own Whiteacre in a joint tenancy. If A dies, B and C automatically own Whiteacre. If B then dies, C automatically is the sole owner. 

Note:
By statute, some states have abolished the survivorship feature of joint tenancy.

3. Generally, where only one of the joint tenants owes taxes, the lien attaches to the taxpayer’s property interest and the entire property may be sold pursuant to judicial sale under IRC § 7403, although the non-liable joint tenant must be compensated from the sale proceeds. If the Service enforces the tax lien against a taxpayer’s interest in a joint tenancy and sells it, the purchaser acquires the taxpayer’s partial interest in property, but most states then treat the joint tenancy as having been converted to a tenancy in common (discussed below). See generally, United States v. Rodgers, 461 U.S. 677 (1983). 

4. In most states, if the individual, against whose property a federal tax lien attaches, dies before any of the other joint tenants, then the lien ceases to attach to the property. However, if the same individual is the last survivor of the joint tenants, the tax lien then attaches to the entire property. In a few states, however, this is not the rule. Wisconsin is an exception to the general rule: if the federal tax lien has attached to the interest of one joint tenant who then dies, the surviving joint tenant takes the property encumbered with the federal tax lien. United States v. Librizzi , 108 F.3d 136 (7th Cir. 1997). Connecticut is also an exception to the general rule. Conn. Gen. Stat. 47-14f. See also Paternoster v. United States, 640 F.Supp.2d 983 (S.D. Ohio 2009). Accordingly, state law should always be consulted to determine whether there is an exception to the general rule. 

First line of Paragraph 4 above constitutes the 2014 holding of the Federal District Court of the Virgin Islands. 
NPA Associates, LLC v. Estate of Dennis A. Cunning et al. (DC VI 10/17/2014) 114 AFTR 2d ¶ 2014-5364 
Decision apparently not published in the Federal Supplement.  
I found abstracts of the decision at several locations.  See:  
http://www.ncpefellowship.com/Members/media/court_cases_2014_10/14_tenant.pdf
https://www.lavelletaxlaw.com/joint-tenants-death-extinguished-tax-lien-on-property

Cannot find that any other court has specifically passed on this issue.

Here is an interesting on-line manual for underwriting title insurance, that holds the same position:
http://www.vuwriter.com/en/underwriting-manuals/2006-2/UMTX00000180.html#subtopic_6
http://www.virtualunderwriter.com/en/underwriting-manuals/2005-9/UM00000265.html#subtopic_7

As big money can be involved over clouded titles, I figure the insurers will get the lien law right...


6.08.3
Property Subject To The Lien Of A Federal Tax   

Joint Tenancies 

A federal tax lien attaches to the delinquent taxpayer’s interest and can be enforced either by a sale of all interests with distribution of the proceeds to the others in interest or by a sale of the interest owned by the delinquent taxpayer.

The federal tax lien is extinguished upon the death of the taxpayer-tenant and does not transfer to the survivor joint tenant(s) any interest in the property, UNLESS, under state law, a lien against a joint tenant automatically effects a severance of the joint tenancy in regard to the interest held by the delinquent taxpayer-tenant.

10.00.8
Federal Tax Liens Against Joint Tenants   

A federal tax lien against one joint tenant, like any other kind of lien or claim, is a lien only upon that joint tenant's undivided interest; and, if enforcement is not instituted during the lifetime of the joint tenant, the lien will expire upon the joint tenant's death.

However, in the area of enforcement, there is a fundamental difference between a federal tax lien and any other kind of lien or claim.

Several federal court decisions have permitted the enforcement of a federal tax lien against one tenant by an involuntary sale of the entire land, thereby divesting the ownership of all of the joint tenants and requiring the other joint tenants to accept their proportionate part of the sale proceeds. Obviously, this differs from the enforcement of the lien of a state court judgment against the interest of only one joint tenant where the delivery of the sheriff's deed will sever the joint tenancy but will not divest the ownership of the other tenants.

When insuring joint tenancy property, if a federal tax lien is found as affecting the interest of a joint tenant, in addition to the showing of the regular federal tax lien, the title commitment or policy must except the right of the federal government to subject the entire fee simple estate in the land to sale upon foreclosure of its lien upon the interest of the joint tenant.



Here's hoping the above material aids you Miss Cramer.

David Hanson
Hofmeyer & Hanson PC
Fayette, Iowa




----- Original Message -----
From: "Valerie Cramer" <realestate@iabar.org>
To: realestate@iabar.org, taxation-owner@iabar.org
Sent: Tuesday, May 23, 2017 6:26:10 PM
Subject: [ISBA RealEstate]  Tax lien on Joint property

Dear List mates,  Currently I have two cases with the same problem. House
was in joint tenancy with a married couple.  Husband gets tax lien,
Husband dies.  I went to apply to abate the lien with a form number etc.,
And an IRS agent calls me and says there is a case United States v. Craft,
515 U.S. 274 (2002).  IF the property is held by tenancy in the entirety
the lien is lost when the lien ridden joint tenant dies. There is an IRS
notice 2003-60, 2003-39 that addresses this however we have joint tenancy
not tenancy in entirety.  Any guidance is welcome.

 

Sincerely,

Valerie Cramer

Cramer Law PLC

1163 24th Street

Des Moines, IA 50311

515-255-1444

Fax:  515-255-2502

 

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