November 28, 2012
Federal Tax Liens and the Unrecorded Divorce Decree
J. David Beasley (J.D. 2012, Nebraska), Note, Federal Tax Liens and the Unrecorded Divorce Decree, 91 Neb. L. Rev. 214 (2012):
The following cases demonstrate the need for standardized treatment of the IRS in relation to a state's recording requirements, especially when dealing with an unrecorded divorce decree. While state law defines what interest a taxpayer retains after such conveyance, this Note suggests that future courts should adopt the majority approach when determining what interest the IRS acquires after issuance of a § 6321 tax lien on a taxpayer's real property. This Note begins, in Part II, by discussing the major cases in the circuit courts that have led to this dispute, along with the recent IRS General Counsel Memorandum which has reignited the conflict. Then in section III.A, this Note demonstrates that a § 6321 tax lien should only attach to the interests of the taxpayer and not to the interests of the taxpayer's creditors. In section III.B, this Note analyzes the application and purpose of state recording acts when integrated with a federal tax lien. Next, in section III.C, this Note argues against a court's treatment of the IRS as a creditor without notice. That section further discusses a possible undeveloped argument that a docketed divorce decree dividing interest in property should qualify as constructive or inquiry notice upon the IRS when a tax lien arises. The Note concludes, in section III.D, with suggestions of judicial and legislative solutions to standardize the treatment of the IRS in tax lien proceedings with regards to conveyances contained in unrecorded divorce decrees.
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