Argument of Speaker
Mr. Speaker: The opinion of the Court in No. 98-1101, Drye against United States will be announced by Justice Ginsburg.
Argument of Justice Ginsburg
Mr. Ginsburg: This case concerns the respective provinces of State and Federal Law in determining what is property for purposes of federal tax lien legislation.
The tax payer, Mr. Drye was insolvent, and owed the Federal Government some $325,000.00 on unpaid tax assessments for which notices of Federal Tax Liens had been filed.
His mother died intestate leaving an estate worth approximately $233,000.00 to which Drye was sole heir.
Some six months after his mother’s death, Drye disclaimed his entire interest in his mother’s estate.
By operation of Arkansas Law, the estate then passed to Drye’s daughter who set up a Spendthrift Trust under which she and her parents were beneficiaries.
In a contest between Drye and the Internal Revenue Service, the Federal District Court and the Court of Appeals for the Eighth Circuit held for the government.
Those courts concluded that despite the disclaimer, Drye’s interest in his mother’s estate qualified as a right to property, to which the government’s tax lien attached.
We agree that Drye’s disclaimer did not defeat the federal tax liens, and we affirm the Court of Appeals decision.
The Internal Revenue Code's prescriptions are most sensibly read to look to state law for delineation of the tax payer’s rights or interests, but to leave to federal law the determination whether those rights or interests rank as Property or rights to property within the meaning of the federal tax lien legislation.
Congress used the term ‘Property’ broadly in that legislation, it aimed to reach every legally protected right and property that one can keep or exchange for value.
Drye’s right as sole heir fit that description.
Relying on decisions of the Arkansas Supreme Court, the Court of Appeals concluded that under State Law, Drye had, at his mother’s death, a legally protected right to receive the property at issue, a Right he could transfer to others for money’s worth.
Drye takes a different view; he maintains that on the date of his mother’s death, he held nothing more than a personal non-transferable right to accept or reject a gift.
But Arkansas Law primarily gave Drye a right of considerable value; the unqualified right either to inherit or to channel the inheritance to a close family member, the next lineal descendent.
Thus, a disclaiming heir inevitably exercises dominion over the property, unlike a donee, who by declining a gift restores his status quo ante, leaving the donor what to do with the gift what she will.
Drye’s power to channel the estate’s assets to himself or to his daughter, the control rein he held under state law warrants the conclusion that under federal law he had a right to property, subject to the government’s tax liens.
The decision is unanimous.
