A couple owns a house together. They also owe the IRS. The marriage ends, and the divorce decree says the wife gets all of the money when the house sells. The husband agrees to pay the IRS debt and keep her out of it. That seems like a clean split.
Then the house sells. The title company sends a big check to the IRS to clear the federal tax lien. The wife asks for innocent spouse relief, and she gets it. But the IRS only gives back half of the money. The wife wants all of the money the IRS was paid. Does she get all of it?
The divorce decree that gave her the proceeds. That is one view. Or the IRS lien that was already sitting on the property. that is another view. The difference is whether a divorce decree keep the IRS from taking the ex-spouse’s share of the house money.
The recent Hasznos v. Commissioner, T.C. Memo. 2026-100, case provides an opportunity to consider this issue.
Facts & Procedural History
The taxpayer and her husband married in 1998. They bought two homes in Florida. One of them was a beach property that they bought in 2013.
The couple filed a joint return for 2012. In 2014, the IRS assessed about $40,000 of additional tax for the 2012 tax year. And as it typically does, it added an accuracy-related penalty. The couple also had tax debts for 2013 through 2016.
The taxpayer-husband filed for divorce in 2017. In 2018, the couple signed a consent final judgment that ended the marriage. It said the beach property was “jointly” owned and would be listed for sale right away. It said the tapayer-wife would get the “entire net proceeds” from the sale. It said the taxpayer-husband would be solely responsible for all IRS debts through 2017 and would hold her harmless. And it said each spouse would hold the other harmless from any lien on the property attributable to that spouse. The judgment was recorded with the county in late 2018. What it did not do was transfer title.
In 2019, the IRS filed a notice of federal tax lien. The taxpayer-wife asked for a collection due process hearing and requested innocent spouse relief. The beach property sold in 2021 for about $1.2 million. The closing agent sent the IRS about $624,000 to clear the lien. The IRS split that into two equal payments of about $312,000.
The IRS ultimately granted the taxpayer-wife full equitable innocent spouse relief for 2012 through 2016. It refunded half of the lien payment plus interest. It kept the other half. The taxpayer-wife petitioned the U.S. Tax Court to get the rest. The taxpayer-husband had apparently left the country and could not be reached.
Innocent Spouse Relief Does Not Always Mean a Refund
When spouses file a joint return, each one is liable for the full tax. The IRS can collect all of it from either spouse. This is where innocent spouse comes in.
Innocent spouse relief under Section 6015 is the main way out. There are several versions of this type of relief, with equitable relief being the most common. Equitable relief under Section 6015(f) is the catch-all version. It applies when it would be unfair to hold the requesting spouse liable.
Getting relief from the debt going forward is one thing. Getting money back that the IRS already collected is another. Section 6015(g) allows a refund to the extent it is attributable to the relief. But the U.S. Tax Court has read this provision narrowly. The relieved spouse only gets a refund if she made an overpayment. That means she paid more than her own liability, and she paid it with her own money. If the money came from jointly owned property, she has to trace the payment to her separate share.
This is not a new rule. We have previously written about how the IRS allocates collections from a jointly owned home after relief is granted. The point is the same here. Innocent spouse relief protects your property. It does not reach your ex-spouse’s property even if the IRS collected it on a joint debt.
So the whole case came down to one question. Whose money was the second $312,000 that was paid to the IRS?
Who Owned the House After the Divorce?
Federal tax law does not decide who owns property. State law does. The federal tax code then decides what the IRS can do with it.
I am not a Florida attorney but the court case says that in Florida, real estate bought by a married couple is generally held as tenants by the entirety (“tenants by the entirety”). Each spouse owns the whole. Neither owns a separate share. When the couple divorces, Florida law apparently converts that into a tenancy in common (“tenancy in common”). Each former spouse then owns an equal, undivided half, unless something shows one should get more. This is a different setup from community property states–such as Texas and California.
In thish case, the taxpayer-wife argued that the consent judgment was that something. It gave her the entire net proceeds, and under Florida law, that right vested once the judgment was recorded. She argued that left her with 100% of the property.
The tax court disagreed. The judgment called the property “jointly” owned. It required both spouses to act in good faith in selling it. It said neither could sell or encumber “their interest” without the other’s written consent. It never required the husband to deed his interest to her, and it did not say the judgment itself would operate as a transfer. The court noted that the cases the taxpayer cited all involved decrees that actually moved title. This one did not.
So the taxpayer had a vested right to the net proceeds. That is a contract right. It is not a present ownership right. It is not the same as owning the whole house. So the reasoning goes that after the divorce, each spouse still held a 50% interest as tenants in common.
Does the IRS Lien Reach the Ex-Spouse’s Half?
Having considered the state property law issues, the question can turn to federal tax law. It starts with Section 6321 and the IRS’s lien.
Section 6321 puts a lien on all property and rights to property of a person who owes tax after the IRS makes demand and the person does not pay. Under Section 6322, the lien arises when the tax is assessed. The Supreme Court has said many times that this language is broad. Congress meant to reach every interest a taxpayer might have.
The timing matters here with this fact pattern. The 2012 tax was assessed in 2014. At that point the couple still held the beach property as tenants by the entirety. The lien attached then. The divorce came four years later. This is what the court had to sort out.
The taxpayer argued that the consent judgment stripped the husband of everything but bare legal title. He could not sell or encumber without her. He had no right of survivorship. A lien generally needs a beneficial interest, not just a name on a deed, so she argued.
The court did not buy it. The court concluded that the husband could still sell the property. In fact, the judgment required him to cooperate in selling it. He could also encumber it with her consent, just as she needed his. That is more than bare legal title. The court compared his position to a person who has the right to accept or disclaim an inheritance. The Supreme Court has held that kind of right is property the lien can reach. So the lien attached to the husband’s half and stayed there until closing.
Wasn’t She a Purchaser Who Came First?
The taxpayer-wife had one more argument. She argued that under Section 6323(a), a federal tax lien is not valid against a “purchaser” until the IRS files a notice of the lien. The facts are close on this one.
The couple’s divorce judgment was recorded in 2018. The IRS did not file its lien notice until 2019. If she was a purchaser, she would have priority.
A purchaser is someone who acquires an interest in property for “full and adequate consideration in money or money’s worth.” The regulations say the consideration has to bear a reasonable relationship to the true value of what was acquired. The taxpayer pointed to the division of assets. The husband got stock, a hunting trailer and cabin, and vehicles. He also took on the IRS debts. And the judgment said each side agreed to it for “good and valuable consideration.”
That was not enough according to the court. The court noted that a right to the net sale proceeds is not the same as acquiring an interest in the property itself. And general statements about who got what did not show that the husband’s share of the assets had any reasonable relationship to the value of his half of the house.
The court contrasted another case where an ex-wife forgave about $166,000 in unpaid support in exchange for her ex-husband’s 10% share of the net proceeds from real estate, a share worth about $148,000. That was adequate consideration because the numbers lined up and were in the record.
It is noteworthy that the purchaser argument did not fail because it is a bad argument. It failed on proof and on how the decree was written. A divorce decree that actually transfers title, recorded before the IRS files its lien notice, with a record showing what the other spouse gave up in exchange, would be a very different case. There are no guarantees here, but that is the position the decree could have been built around if this tax issue was considered at the time. It probably was not considered at the time.
Is the Ex-Spouse’s Promise to Pay the IRS Worth Anything?
The taxpayer-wife had another argument. Her last argument was tracing. The husband agreed to pay all IRS debts. The proceeds were hers once closing occurred. So the IRS was paid with her money.
The court rejected this too. According to the court, a separation agreement does not change a taxpayer’s liability to the IRS. The IRS is not a party to the divorce. The judgment’s own terms showed the parties expected liens could hit the proceeds. That is why the husband agreed to indemnify her from any lien attributable to him. So the net proceeds were always subject to the IRS lien on his half, even though she had a vested right to them.
Her right to be indemnified by her ex-husband is just that. It is a claim against him. It is not a right to get the money back from the IRS. The court acknowledged she would likely have trouble collecting from him since he had apparently left the United States. But the court said his indemnity was her only avenue. The court also said it could not award relief beyond her ownership interest, no matter how the equities looked. She was entitled to her half. She already had it.
The Takeaway
Divorce decrees divide property between spouses. They do not bind the IRS. A federal tax lien attaches when the tax is assessed, and it follows each spouse’s interest through the divorce. In this case, the decree gave the wife every dollar of the sale proceeds but left title alone. That left the husband with a 50% interest the lien could reach, and innocent spouse relief could only refund her half. If you are divorcing with IRS debt, have the decree actually transfer title, record it before the IRS files its lien notice, and document what each side gave up. An indemnity from an ex-spouse is only as good as their willingness to pay.
Watch Our Free On-Demand Webinar
In 40 minutes, we'll teach you how to survive an IRS audit.
We'll explain how the IRS conducts audits and how to manage and close the audit.