Howard D. Popky; Sheila A. Popky v. UNITED STATES OF AMERICA On Appeal from the United States District Court for the…

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 04-2798
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HOWARD D. POPKY;
SHEILA A. POPKY,
Appellants
v.
UNITED STATES OF AMERICA
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On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 03-cv-01487)
District Judge: Honorable Thomas N. O’Neill, Jr.
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Submitted Under Third Circuit LAR 34.1(a)
May 12, 2005
Before: SLOVITER, FISHER and ALDISERT, Circuit Judges.
(Filed: May 17, 2005)

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John R. Crayton
33 West Second Street
Moorestown, NJ 08057
Attorney for Appellants
Joan I. Oppenheimer
Jonathan S. Cohen
United States Department of Justice
Tax Division
P.O. Box 502
Washington, DC 20044
Attorneys for Appellee
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OPINION OF THE COURT
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FISHER, Circuit Judge.
Appellants Howard and Sheila Popky, husband and wife,
appeal from the District Court’s grant of summary judgment in the
government’s favor in connection with their attempt to recover
monies obtained by the government in satisfaction of a tax lien.
Appellants contend that the federal tax lien could not attach to Sheila
Popky’s interest in property owned by her and her husband as tenants
by the entireties. Appellants also argue that even if the tax lien could
attach to Sheila Popky’s interest, the District Court erred in valuing
her interest at fifty percent of the property. We disagree with
Appellants on both points and will therefore affirm the judgment of
the District Court.

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I.
Sheila Popky had failed to pay employment taxes that were
required to be withheld from the wages of the employees of Sheila’s
EMS, Inc., a business which she owned. The Internal Revenue
Service (“IRS”) assessed taxes of $42,799.20 against Sheila Popky
attributable to these unpaid taxes, and in September 2002, filed a
notice of tax lien against her in Montgomery County, Pennsylvania,
for the same amount plus accruals. Shortly after the filing of the lien
notice, the Popkys sold real property located in Narbeth,
Pennsylvania, which they owned as tenants by the entireties. The title
insurance company held $48,000 of the sale proceeds in escrow due
to the outstanding federal tax lien, and eventually issued a check to
the government for $43,324.43 to satisfy the lien. The Popkys
initiated this quiet title action to recover the proceeds paid to the IRS,
and the government counterclaimed seeking unpaid employment
taxes and unpaid income taxes. The District Court granted summary
judgment to the government and entered an order awarding the
government $43,324.43 on the Popkys’ claim and $15,814.47 on the
government’s counterclaim. The Popkys filed this timely appeal.
II.
The District Court had jurisdiction under 28 U.S.C. §§ 1331,
1340 and 1345. We have jurisdiction under 28 U.S.C. § 1291, and
apply plenary review to the District Court’s grant of summary
judgment. Bonneville Int’l Corp. v. Peters, 347 F.3d 485, 490 (3d
Cir. 2003). The primary issue in this appeal is whether the District
Court erred in concluding that the federal tax lien here could attach
to Sheila Popky’s interest in the Narbeth property owned by her and
her husband as tenants by the entireties. The nature of Sheila Popky’s
interest in the Narbeth property is crucial because federal tax liens
attach to “all property and rights to property” of any taxpayer who

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While Michigan law did not give each tenant the power to1
unilaterally alienate entireties property, the Court in Craft rejected the
contention that such a power was essential to the category of
“property” for purposes of § 6321. Craft, 535 U.S. at 284 (noting that
in prior cases it had “already stated that federal tax liens may attach
to property that cannot be unilaterally alienated.”) (discussing cases).
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neglects or refuses to pay taxes after demand. 26 U.S.C. § 6321. The
Supreme Court has made clear that whether a taxpayer’s interest in
property “held as a tenant by the entirety constitutes ‘property and
rights to property’ for the purposes of the federal tax lien statute, 26
U.S.C. § 6321, is ultimately a question of federal law.” United States
v. Craft, 535 U.S. 274, 278 (2002). However, this federal question
“largely depends upon state law.” Id. See also United States v. Bess,
357 U.S. 51, 55 (1958) (stating that federal tax lien statute “creates no
property rights but merely attaches consequences, federally defined,
to rights created under state law.”).
In Craft, the Supreme Court, looking to Michigan law, held
that a federal tax lien resulting from unpaid taxes attributable to one
tenant by the entireties could attach to that tenant’s interest in
entireties property. The Court found that Michigan’s law of tenancy
by the entireties conferred “some of the most essential property
rights” on each tenant: “the right to use the property, to receive
income produced by it, and to exclude others from it.” Craft, 535
U.S. at 283 (citations omitted). It also noted that Michigan law gave
tenants the right to alienate or otherwise encumber the property with
the consent of the other tenant, as well as the right of survivorship.
Id. The Court concluded that such essential rights in property
enjoyed by tenants by the entireties under Michigan law were “rights
to property” under the federal tax lien statute, and therefore that the
federal tax lien there properly attached to the responsible tenant’s
interest in the entireties property.1

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The Popkys emphasize that a tenant in Pennsylvania cannot2
alienate the entireties property without the other tenant’s consent.
This is true but unavailing given the Court’s clear statement in Craft
that the right of unilateral alienation is not “essential to the category
of ‘property’ [under § 6321].” Craft, 535 U.S. at 284.
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The Craft analysis requires us to look to the law of the state
where the subject property is located, here, Pennsylvania. Because
Pennsylvania’s law of tenancy by the entireties is materially similar
to Michigan’s, we are compelled to reach the same result reached by
the Court in Craft. As in Michigan, tenants by the entireties in
Pennsylvania have the right to possess and use the property, see
United States v. Parcel of Property Known as 1500 Lincoln Ave., 949
F.2d 73, 77 (3d Cir. 1991), the right to receive a share of income
produced by the property, see Wylie v. Zimmer, 98 F. Supp. 298, 300
(E.D. Pa. 1951) (“The rents, issues and profits from real property held
by entireties are received and owned in a like manner.”); Johns v.
Johns, 52 Pa. D. & C. 2d 99 (Pa. Com. Pl. 1971) (each tenant can
collect and keep rental income), and rights of survivorship.
Clingerman v. Sadowski, 519 A.2d 378, 381 (Pa. 1986). These rights
are sufficient to bring this case within Craft. We therefore conclude
that Sheila Popky had “rights to the [Narbeth] property” owned by her
and her husband as tenants by the entireties to which the federal tax
lien here could attach.2
Appellants contend that even if the federal tax lien properly
attached to Sheila Popky’s interest in the proceeds from the sale of
the Narbeth property, the District Court erred in valuing her interest
at fifty percent of the property. In Craft, the Supreme Court left open
the question of how to value the respective tenants’ interests in
entireties property in these circumstances. See Craft, 535 U.S. at 289
(“We express no view as to the proper valuation of respondent’s
husband’s interest in the entireties property”). The Popkys argue that

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the valuation should be based on some variation of their life
expectancies. Some courts have adopted or endorsed the use of life
expectancies derived from actuarial tables in determining the value
of a tenant’s interest in entireties property in this context. See, e.g.,
In re Murray, 318 B.R. 211, 214 (Bankr. M.D. Fla. 2004); In re
Basher, 291 B.R. 357, 364 (Bankr. E.D. Pa. 2003).
The District Court properly rejected this approach. Valuing
the interests of tenants by the entireties equally accords with the
longstanding Pennsylvania common law definition of tenancies by the
entirety. See In re Estate of Brose, 206 A.2d 301, 304-05 (Pa. 1965)
(in a tenancy by the entireties, “each of the tenants holds the entire
estate by the half and by the whole.”); Lindenfelser v. Lindenfelser,
153 A.2d 901, 905 (Pa. 1959) (noting that each spouse in a tenancy
by the entireties “is entitled to equal use, enjoyment, and possession”
and “entitled equally to the usufruct of the properties.”). As the
District Court correctly observed, “the equal division of assets
between spouses ... parallels the distribution of entireties property
when an entireties estate is severed because of a sale with consent of
both tenants, divorce or other reasons.” 326 F. Supp. 2d at 602; see
also Reifschneider v. Reifschneider, 196 A.2d 324 (Pa. 1964)
(holding that wife was entitled to fifty percent share of proceeds from
husband’s sale of bonds); In re Prichard, 59 A.2d 101, 102 (Pa.
1948) (observing that when tenants by the entireties agree to
terminate the tenancy and sell the property, the sale proceeds are
divided equally between them). Sound policy reinforces the District
Court’s approach to valuation, as an equal valuation is far simpler and
less speculative than the valuation contemplated by the Popkys.
Thus, we agree with the District Court’s valuation of Sheila Popky’s

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The Popkys also contend that the government obtained the3
escrowed funds from the title company improperly, and that they
should have been permitted to retain and use the $43,324.43 subject
to the tax lien. We see no merit in either argument.
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interest in the proceeds from the sale of the Narbeth property at fifty
percent.3
Accordingly, we will affirm the judgment of the District
Court.

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