Rev. Rul. 79-399

ISSUE

Does a federal tax lien arising prior to the death of a taxpayer have priority over a surviving spouse's dower or curtesy interest or statutory right?

FACTS

A and B, residents of state X, were married in January 1977. A died in September 1978 leaving an estate composed solely of real property acquired prior to the marriage that was of insufficient value to pay taxes owed the Internal Revenue Service and other debts of the estate. The taxes involved are unpaid 1976 federal income taxes of the decedent for which a lien arose in May 1977, when the assessed taxes were unpaid after notice and demand.

Under the laws of state X, a spouse's dower or curtesy interest or statutory right cannot be defeated by the other spouse's conveyances or alienations after the marriage or by a lien in favor of the other spouse's creditors that becomes effective after the marriage.

LAW AND ANALYSIS

Section 6321 of the Internal Revenue Code provides that if any person liable for any tax neglects or refuses to pay any tax after demand, a lien arises in favor of the United States on all real and personal property owned by such person.

In state X, a spouse's dower or curtesy interest or statutory right is a right existing from the date of marriage, even though it does not ripen into full enjoyment until the time of the other spouse's death. If the marriage occurred prior to the time the federal tax lien arose, the spouse's dower or curtesy interest will be given priority over the federal tax lien, provided that such dower or curtesy interest cannot be defeated by the other spouse or that spouse's creditors. If the marriage occurred after the federal tax lien arose, the tax lien will take priority over the dower or curtesy interest.

HOLDING

A federal tax lien arising before the death of a taxpayer is not superior to a competing claim by a surviving spouse for a dower or curtesy interest or statutory right if the marriage occurred before the federal tax lien arose and if, under state law, such dower or curtesy interest cannot be defeated by the other spouse or by that spouse's creditors prior to death.

The holding of this revenue ruling would be the same under section 3466 of the Revised Statutes (31 U.S.C. 191, 1970) regarding priority of payments in situations where the federal government's claim against the decedent for unpaid taxes was not secured by a lien.