In the case of United States v. McGrew, et. al, CA9, 118 AFTR 2d ¶2016-5319, the Ninth Circuit looked at whether the IRS could foreclose liens on property that the taxpayer had previously owned as community property with her former husband. The liens were being forceclosed against the taxpayer’s former husband.
Ms. McGrew had received the residence in question as part of the division of community property at the termination of her marriage to Kenneth McGrew. Ms. McGrew argued that because the liens were against her former husband that the IRS did not have the right to foreclose the liens against the property that was now solely.
But the panel noted that tax liens come into existence once tax is assessed. The division of community property did not tax place until September 28, 2009, even though the couple had separated in February of 2002 and the marriage was dissolved in September 2006.
The income tax debt for 2000 was a joint debt which would attach to the entire interest in community property held by the couple, while the debts for 2001-2005 were solely Kenneth’s—but that still meant that the lien attached to ½ of the community property. As the Court concludes:
Division of the community estate (including the residence) did not eliminate or otherwise affect the tax liens, and, indeed, could not do so. As a result, the lien for tax year 2000 did and does encumber both interests in the residence, and the liens for tax years 2001 through 2005 did and do encumber what was Kenneth's half interest in the residence, even though McGrew now holds that half also. The United States was entitled to foreclose upon and sell the residence for the purpose of satisfying those liens. See 26 U.S.C. § 7403(c).