United States v. Eileen McGrew
669 F. App'x 831
| 9th Cir. | 2016Background
- Eileen McGrew owned a residence that had been community property with her then-husband Kenneth McGrew.
- Kenneth failed to pay federal income taxes for tax years 2000–2005; assessments and notices of federal tax liens were recorded before the community property was divided.
- McGrew and Kenneth separated in February 2002; their marriage was dissolved in 2006 and the community property was divided in 2009.
- The government sued to foreclose federal tax liens on the residence to satisfy Kenneth’s assessed tax liabilities.
- The district court entered judgment and an order of sale; McGrew appealed, arguing the liens no longer encumber the residence and asking the court to exercise discretion to avoid foreclosure.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether federal tax liens still encumber the residence | McGrew: liens do not cover the residence now that community property was divided | U.S.: liens attached when assessed and recorded before division and continue to encumber property interests | Liens remain: 2000 tax debt encumbers entire community interest; 2001–2005 debts encumber Kenneth’s half interest, now held by McGrew |
| Whether the court should use equitable discretion to prevent foreclosure | McGrew: district court should decline foreclosure under Rodgers discretion and special circumstances | U.S.: foreclosure appropriate; discretion to deny is narrow and sparingly exercised | No abuse of discretion; court properly denied relief and allowed foreclosure |
| Whether division of community property extinguishes or affects federal tax liens | McGrew: division removed or affected the liens on the residence | U.S.: state-law division does not extinguish federal tax liens recorded earlier | Division does not affect liens; federal law and recorded liens survive property division |
| Whether McGrew could rely on innocent spouse relief as defense | McGrew: referenced innocent spouse relief under §6015 | U.S.: argument inadequately briefed and ineffective | Court found §6015 argument insufficiently briefed and not dispositive |
Key Cases Cited
- United States v. Voorhies, 658 F.2d 710 (9th Cir.) (discusses timing of tax liabilities and assessments)
- Pan Am. Van Lines v. United States, 607 F.2d 1299 (9th Cir.) (treatment of tax liabilities in community property contexts)
- Lezine v. Sec. Pac. Fin. Servs., Inc., 14 Cal.4th 56 (Cal. 1996) (California law: community estate liable for debts of either spouse)
- McIntyre v. United States (In re McIntyre), 222 F.3d 655 (9th Cir.) (community liability for debts incurred before separation)
- Drye v. United States, 528 U.S. 49 (U.S. 2000) (effect of tax assessments and liens on property interests)
- United States v. Rodgers, 461 U.S. 677 (U.S. 1983) (district court’s narrow equitable discretion to refuse foreclosure)
- Aquilino v. United States, 363 U.S. 509 (U.S. 1960) (federal tax liens survive state property changes)
- United States v. Bess, 357 U.S. 51 (U.S. 1958) (federal tax liens and their priority over state-law claims)