## Facts

- Charles J. Barr accrued more than $300,000 in unpaid federal income taxes, interest, and statutory additions.
- Charles and his wife, Carolyn C. Barr, owned their Detroit, Michigan marital residence as tenants by the entirety under Michigan law.
- A federal tax lien attached to Charles’s rights in the entireties property.
- The United States sued under 26 U.S.C. § 7403 to foreclose the lien and sell the home.
- Charles did not appear, and the district court entered a default judgment on the tax liability.
- The district court granted summary judgment authorizing foreclosure and ordered a judicial sale, directing that net proceeds be split equally between Charles’s interest (satisfied through the government’s lien) and Carolyn’s interest.
- Carolyn opposed the sale as inequitable and argued she should receive more than 50% of the proceeds because she was not liable for the taxes, she expected to outlive Charles (making her survivorship interest more valuable), and she could block a voluntary sale by Charles alone.

## Issues

1. When Michigan property held by spouses as tenants by the entirety is sold to satisfy one spouse’s federal tax liability, must net sale proceeds be divided equally, or may the non-liable spouse receive more than half based on survivorship expectations or a unilateral-sale “veto” right?
2. Did the district court abuse its limited equitable discretion under *United States v. Rodgers* in ordering foreclosure and sale of the marital home?

## Decision

- The Sixth Circuit affirmed.
- The court held that Michigan law provides for equal division of proceeds upon sale of entireties property, and that an equal (50/50) division was proper in the tax-lien foreclosure sale.
- The court rejected Carolyn’s arguments that survivorship valuation or her ability to block a voluntary sale justified awarding her more than half of the proceeds.
- Applying the *Rodgers* factors, the court held the district court did not abuse its discretion in authorizing a forced sale to satisfy a substantial federal tax debt while ensuring Carolyn received half of the net proceeds.

## Legal Principles

- A federal tax lien attaches to the taxpayer’s individual rights in property held as tenants by the entirety, even if the other spouse is not liable.
- Under 26 U.S.C. § 7403, a court may order foreclosure and sale of property encumbered by a federal tax lien, including a home jointly owned with a non-liable spouse.
- The decision to order a forced sale is subject to limited equitable discretion guided by the *Rodgers* factors, including government prejudice if denied sale, hardship to the non-liable spouse, reasonable expectations about immunity from forced sale, and the character/value of the non-liable spouse’s interest.
- Under Michigan law, spouses holding property as tenants by the entirety are entitled to equal distribution of net proceeds upon sale; actuarial life expectancy and a spouse’s ability to block a voluntary unilateral conveyance do not create a larger divisible share upon a court-ordered sale.

## Conclusion

The Sixth Circuit held that the United States could foreclose a federal tax lien on a Michigan marital home held as tenants by the entirety to satisfy the husband’s tax debt, that the district court properly ordered a forced sale under *Rodgers*, and that Michigan law required an equal division of the net sale proceeds between the spouses.


United States v. Barr, 617 F.3d 370 (6th Cir. 2010)