The titleholder owned a homestead, which he jointly lived in with his spouse in Minnesota. The homestead was solely in the titleholder's name. The titleholder's spouse moved in after marriage, and together they executed a new mortgage on the property (fully paying off the existing mortgage), but the titleholder remained the sole titleholder. The titleholder had significant unpaid federal tax liabilities, which resulted in federal tax liens attaching to the homestead. The IRS filed suit seeking to enforce its federal tax liens through judicial sale of the homestead. The couple argued that, under Minn. Stat. § 500.19, the spouse held a vested property interest in the property “as the marital homestead” under § 507.02, which entitled her to half of the sale proceeds. The IRS and the couple both filed for summary judgment. The court granted summary judgment for the IRS, authorizing the sale of the home and applying all net proceeds (after a superior lien) to the titleholder’s tax liabilities. The district court rejected the spouse’s claim, finding the statute does not create a present property right in a non-owner spouse; instead, § 507.02 merely restricts a titleholder’s already held property interest by prohibiting a unilateral conveyance of a marital homestead. Therefore, the spouse failed to hold an interest in the homestead that is “‘the sort of property interest for whose loss an innocent third-party must be compensated.’” United States v. Rodgers, 461 U.S. 677, 698 (1983).
In United States v. Byers, 133 F.4th 824 (8th Cir. 2025), the Eighth Circuit affirmed the district court’s holding. The court noted that, under § 7403, a district court may “order a sale of property in which a delinquent taxpayer has an interest in order to satisfy the taxpayer’s debt…even though an innocent third party also has an interest in the property, so long as the third party receive[s] compensation.” United States v. Bierbrauer, 936 F.2d 373 (8th Cir. 1991). However, compensation is only required “when that interest rises to the level of a property right.” Rodgers, 461 U.S. at 696. The court looked to state law to determine whether a non-titleholder spouse has any property interest in a marital homestead. The court first noted that the titleholder held the property in fee simple and had not transferred any interest in the property to his spouse. The couple argued that the spouse’s property interest existed by virtue of the marriage and Minnesota law. However, the court found that, unlike Texas law, which grants spouses a vested property right in the homestead at marriage, Minnesota law grants only a contingent property interest that vests only upon the death of the owner. Because the spouse never acquired an interest in the property and her homestead interest did not rise to a vested property right under Minnesota law, the court affirmed the district court’s finding that the spouse was not entitled to compensation from the judicial sale. Accordingly, the IRS’s lien enforcement and sale order were upheld.
By Daphne Williams [email protected]
Edited By Jace Brown [email protected]
Edited By Kristin Meurer [email protected]
Edited By Hayden Mariott [email protected]