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Drye v. United States

Brief Fact Summary. Appellant seeks to have the court find that when he disclaimed the inheritance from his mother’s estate it was effective to pass the inheritance on to his daughter free from the federal tax lien.

Synopsis of Rule of Law. Where one has the power to channel an estate’s assets, it warrants the conclusion that they hold property or a property right that is subject to government’s liens.

Points of Law - Legal Principles in this Case for Law Students.

In determining whether a federal taxpayer's state-law rights constitute property or rights to property, the important consideration is the breadth of the control the taxpayer could exercise over the property.

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Facts. Irma Deliah Drye, decedent, died intestate, leaving her son, Rohn F. Drye Jr., appellant, as the sole heir to her $233,000 estate. Prior to decedent’s death, appellant had an unpaid $325,000 tax bill, which caused the IRS to file tax liens against all of appellant’s “property and rights to property.” To prevent the IRS from taking his inheritance from decedent’s estate, appellant disclaimed his interest in the estate, which allowed the entire interest to pass to his daughter, Theresa, who was next in line under the intestacy scheme. Theresa then set up a trust under which appellant was a beneficiary.

Issue. Whether appellant’s disclaimer was effective to pass the property to his daughter free from the federal tax lien?

Held. The control rein appellant held under state law rendered the inheritance “property” or “rights to property” belonging to him within the meaning of federal law, and thus is subject to the federal tax liens.

Discussion. The disclaiming heir inevitably exercises dominion over the property, as they determine who will and will not receive the property.

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