in marital assets, as permitted by Louisiana law. That state conferred on a married woman an interest in community property equivalent to that of her husband. This interest vested at the moment the property was acquired. The Supreme Court held that a renunciation under state law could not upset a federal tax lien that attached to property rights that vested before the renunciation. Id. at 203-04; accord United States v. Rodgers, 461 U.S. at 683.
Defendants seek to limit Mitchell to its facts, arguing that the divorced spouse in that case had actually owned and possessed her share of the community property, a fact not altered by her subsequent renunciation. United States v. Mitchell, 403 U.S. at 204. By contrast, they submit that they have never possessed any portion of the settlement proceeds here at issue. Indeed, the very purpose of New York's renunciation statute, with its fictional presumption, is to make it impossible for persons who would otherwise be distributees ever to be deemed in possession.
The argument is unpersuasive. As already noted, New York law is relevant to this court's analysis only in determining whether at the time of the jeopardy assessments the Comparatos possessed a property right to the settlement proceeds here at issue. For the reasons already stated, this court concludes that their interests in both the pain and suffering proceeds and the wrongful death proceeds had vested under New York law at the time of their son's death, such that federal tax liens attached to these assets when the assessments were filed. The fact that several years later the Comparatos sought to renounce their interests and that New York appears ready to honor these renunciations to the point of creating a legal fiction that the parents predeceased their son, is, at best, relevant "in connection with a tax or other obligation the collection of which is controlled by state law." United States v. Mitchell, 403 U.S. at 204. But such an exemption does not affect federal liens. "Federal law governs what is exempt from federal levy." Id. Indeed, in Mitchell, the Supreme Court noted that, once a property interest exists, the only exemptions from levy are those specified in 26 U.S.C. § 6334(a) (1988 & Supp. III 1991): "This language is specific and it is clear and there is no room in it for automatic exemption of property that happens to be exempt from state levy under state law." 403 U.S. at 205.
Defendants nevertheless urge this court to follow the holding in United States v. McCrackin, 189 F. Supp. 632 (S.D. Ohio 1960), a case in which a federal district court did hold that a taxpayer's renunciation of interest in a testamentary bequest meant that he possessed no property or rights to property to which a federal tax lien could attach. A similar result was reached in an unreported case, Stickell v. United States, No. 77 Civ. 1045, 78-1 U.S. Tax Cas. (CCH) P9328, 1978 WL 1185, at *2-4 (S.D. Ill. 1978). McCrackin, however, predates Mitchell, raising questions as to its continued viability. Although Stickell post-dates Mitchell, it does not cite the Supreme Court opinion, much less seek to distinguish it. This court finds that the holding in Mitchell cannot be reconciled with McCrackin or Stickell.
More persuasive is the reasoning in United States v. Solheim, No. 89 Civ. 80, 1990 WL 283589, at *2-3 (D. Neb. Feb. 13, 1990), wherein the court, relying on Mitchell, held that a son's renunciation of his interest in a trust established by his father could not relate back to defeat a federal tax lien that had already attached to his property interest in the trust. The Eighth Circuit later affirmed on other grounds. United States v. Solheim, 953 F.2d 379, 382 (8th Cir. 1992) (state court order had treated renunciation as effective on date executed, without the benefit of any relation-back theory).
Because this court finds that the Comparatos, as their son's statutory distributees, each acquired vested property rights at the time of his death to his estate, which included his pending malpractice action to recover damages for pain and suffering, and to an action for his wrongful death, it concludes that federal tax liens attached to these assets at the time jeopardy assessments were filed, which liens could not be displaced years later by the filing of state law renunciations.
III. Federal Fraudulent Conveyance Act
The United States contends that the Comparatos' renunciations of their interests in the settlement proceeds constitute fraudulent conveyances under the Federal Debt Collection Procedure Act of 1990 ("FDCPA"), 28 U.S.C. §§ 3001-3308 (Supp. III 1991), such as to provide a separate basis for granting judgment in the government's favor.
The court does not rely on this ground in entering judgment in favor of the United States since a number of issues relevant to the applicability of the FDCPA to this case would need further briefing before the court could rule.
For the reasons stated herein, the court finds that valid federal tax liens in the total amount of $ 676,534.99 as to Anthony Comparato and in the total amount of $ 215,515.22 as to Mildred Comparato have attached to these defendants' separate interests in the settlement proceeds of malpractice actions for their son's pain and suffering before his death and for his wrongful death. The Comparatos' subsequent attempt to renounce their interests in these proceeds cannot defeat the federal government's right to enforce its liens. Summary judgment is to be entered in favor of the United States and against Anthony and Mildred Comparato in the amount of the liens, plus such additions and interest as the parties agree have further accrued. The parties are to submit to the court a proposed order specifying this total agreed upon amount within ten days.
Dated: Brooklyn, New York
July 2, 1993
UNITED STATES DISTRICT JUDGE