Unfortunately, the Sixth Circuit has authorized the forced sale of a couple’s primary residence to satisfy the unpaid tax liability of the husband. In U.S. v. Davis, 815 F.3d 253 (2016), the IRS sought and won the ability to sell the primary residence over the objections of the non-liable wife. The wife argued that a forced sale of the residence would leave her undercompensated because it would assume that she and her husband have equal interests in the property. She claimed that due to life expectancy tables and her husband’s actual ill health it would be inappropriate for that property to be sold to satisfy the tax lien when her interests were predominant. A District Court has limited discretion not to order a forced sale of property in certain circumstances. U.S. v. Rodgers, 461 U.S. 677 (1983). The Rodgers factors include whether there would be likely prejudice to the innocent third party both in personal dislocation costs and because of under compensation and when comparing to the relative character and value of the non-liable and liable interests held in the property. Nevertheless, Mrs. Davis lost her Rodgers-based objections. Under local law (Michigan) spouses are entitled to equal interest in entireties property in several situations including divorce or consensual sale. The life expectancy differences do no result in different survivorship interests under local law. Maryland law is, of course, similar.
It remains to be seen whether foreclosing on tenants by the entirety property to satisfy a tax lien of one spouse will continue to be an unusual remedy seldom used by the IRS or, instead, part of the standard toolbox of the tax collector.