TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Thursday, August 2, 2018

Tax Law And The Federal Law Of Property: Inheritance Disclaimers And Tenancy By The Entireties

David Gray Carlson (Cardozo), The Federal Law of Property: The Case of Inheritance Disclaimers and Tenancy by the Entireties, 75 Wash. & Lee L. Rev. 3 (2018):

The Supreme Court has issued two disturbing tax opinions which disrupt the notion that “property” (when used in federal statutes) refers to state-law notions. In Drye v. United States [528 US 49 (1999)], the Supreme Court pierced the Arkansas fiction that inheritance disclaimers are retrospective in effect. Thus the Internal Revenue could claim that a tax lien attached to the pre-disclaimer inheritance. Disclaimer could not defeat this lien. In United States v. Craft [535 US 274 (2002)], the Supreme Court pierced the Michigan fiction that a tenancy by the entireties does not belong to the individual spouses but, rather, the a corporate “marital” entity that is a separate legal person from the individual spouses. Thus, a tax lien encumbered an individual’s share of the entireties even though Michigan would aver that the individual spouse was not a property owner.

This article challenges the notion that tax cases are “special.”

Rather, the claim is that these disturbing holdings apply in other federal contexts, especially in bankruptcy cases. Thus, the article claims that there is a federal law of property which is obliterative of state-law notions. The article therefore proclaims that, in bankruptcy, Butner v. United States [440 U.S. 48 (1979)] (admonishing that state law provides the definition of property) is dead.

Scholarship, Tax | Permalink