Taxes in your practice: Eighth circuit rejects claim by taxpayer’s spouse for home sale proceeds

Scott E. Vincent is the founding member of Vincent Law, LLC in Kansas City.

The 8th U.S. Circuit Court of Appeals recently affirmed a U.S. District Court decision that rejected a claim by the spouse of a taxpayer for a portion of home sale proceeds upon judicial sale to enforce federal tax liens. In U.S. v. Byers,¹ the 8th Circuit agreed with the district court, holding that the spouse lacked a sufficient property interest in the home and was not entitled to any portion of the sale proceeds. 

Background 

Ronald Byers owed the United States for unpaid federal income taxes, interest, and penalties. The government sued to enforce federal tax liens by judicial sale of Ronald Byers’ property, including a home in Wayzata, Minnesota. Ronald Byers had acquired the home individually, and the county classified the home as a homestead under Minnesota law. 

About two years after acquiring the home, Ronald Byers married Deanna Byers. After the marriage, they executed a mortgage on the home and contributed equally to the mortgage payments until the mortgage was satisfied. However, Ronald Byers was always the sole owner of the home. 

The government suit to enforce the liens by judicial foreclosure included the county as a defendant relating to property tax liens, which the government conceded were superior to the federal tax liens. The government also included Deanna Byers as a defendant. The Byers agreed that the government could force a sale of the home but argued that Deanna Byers was entitled to half of the proceeds of the sale. The Byers argued that Deanna Byers had a property interest in the home as a marital homestead under the Minnesota homestead statute.² 

The district court found that the Minnesota statute limited Ronald Byers’ ability to convey the home without approval of his spouse but did not create a property interest for Deanna Byers. The district court found that Code § 7403 permitted the government to sell the entire property and distribute the proceeds. Accordingly, the district court held that Deanna Byers was not entitled to proceeds from sale of the home, and the government could sell the home and apply the proceeds to Ronald Byers’ tax liabilities, subject only to the county’s lien priority interest.

Eighth Circuit analysis and decision 

On appeal to the 8th Circuit, the Byers reasserted their argument that Deanna Byers had a property interest in the home under the Minnesota homestead statute and that she was entitled to half of the proceeds from a judicial sale of the home. 

The 8th Circuit noted § 7403 authorizes judicial sale of property to satisfy indebtedness of delinquent taxpayers. Under a judicial sale pursuant to § 7403(c), the district court is required to determine the merits of all claims and liens on the property and distribute proceeds of the sale accordingly. 

The 8th Circuit further noted that § 7403 does not create property rights but does attach consequences to rights created under state law. The 8th Circuit then addressed the Minnesota homestead statute. Under Minnesota law, a homestead is the house and land occupied as a debtor’s dwelling place. The Minnesota statute provides that if a debtor is married, the homestead title may be vested in either spouse, and the exemption from seizure extends to the debts of either or both spouses. The statute also provides that if the owner of a homestead is married, no conveyance of the property is valid without the signature of both spouses. 

The Byers relied primarily on United States v. Rodgers,³ which concluded that the nature of a homestead estate in Texas gives a non-debtor spouse a property interest for which an innocent third party must be compensated under § 7403. However, the 8th Circuit cited several authorities for key differences between the homestead statutes, noting that the homestead interest in Texas is an estate in the property itself vesting at marriage, while the homestead interest under Minnesota law becomes a vested right in the property only upon the death of the owner. The 8th Circuit concluded that the Minnesota homestead laws afforded Deanna Byers protection of her rights and interest in the homestead property owned by Ronald Byers but did not vest Deanna Byers with a current property interest rising to the level recognized under Texas law in the Rodgers case. 

As a result, the 8th Circuit held that Deanna Byers’ homestead interest in the home was not in the nature of a current property right for which the government needed to compensate her in a forced sale under § 7403.

Conclusion 

Taxpayers and lawyers should carefully consider spousal property interests and tax debts of spouses under the statutory and case law framework outlined in Byers. The 8th Circuit decision highlights the potential impact of spousal and homestead considerations in government collection actions, including the need for a state-by-state analysis to determine whether a particular set of facts creates a compensable property interest for a non-debtor spouse in the context of a forced sale to collect tax liabilities.

Endnotes 
1 2025 PTC 120 (8th Cir. 2025). 
2 Minn. Stat. Sec. 507.02. 
3 461 U.S. 677, 698 (1983).