Tax Legal Services · Primary-source case analysis

Craft: Tenancy-by-the-Entirety Rights Can Support a Federal Tax Lien

By Aneeta Mishra and Timothy Chan

Published September 13, 2026

United States v. Craft explains how a federal tax lien can attach to a taxpayer spouse’s state-created rights even when state law prevents unilateral transfer of the entire property.

The spouses held Michigan entireties property

Don and Sandra Craft owned real estate as tenants by the entirety while federal tax liens arose against Don. They later transferred the property to Sandra, and the dispute concerned whether the liens had attached to Don’s interest before the transfer.

The Court examined the complete bundle of rights

Michigan law gave each spouse rights to use the property, exclude others, receive income, and survive to full ownership. Neither spouse could unilaterally alienate the whole estate, but together they could sell it. Those rights had significant economic value.

Federal law characterized the state-created interests

State law defined Don’s incidents of ownership; federal law determined whether they were property or rights to property under section 6321. The Court held that the bundle was sufficient for the federal lien to attach despite Michigan’s protection from separate creditors.

The case returned for valuation and consequences

The Court reversed and remanded without fixing the value of the taxpayer spouse’s interest or resolving every consequence of the later transfer. Attachment, valuation, priority, and enforcement remain analytically distinct steps.

Key takeaways

• Inventory each spouse’s state-law rights in the property.
• Apply federal law to determine whether the bundle is lienable.
• Separate lien attachment from valuation and enforcement.
• Review the lien dates before any transfer or refinancing.