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PETTENGILL v. UNITED STATES

April 25, 1962

Arthur G. PETTENGILL and Barbara S. Pettengill
v.
The UNITED STATES of America and Fulton D. Fields, District Director of Internal Revenue for the District of Vermont



The opinion of the court was delivered by: GIBSON

STATEMENT OF CASE AND FINDINGS OF FACT

Arthur and Barbara Pettengill brought this action for declaratory judgment, seeking to free certain property owned by them from the tax liens of the United States of America. After filing an answer to the petition, the United States and the petitioners set forth an agreed statement of facts which bind this Court, and are as follows:

 'Arthur G. Pettengill and Barbara S. Pettengill, husband and wife, petitioners, herein, are the owners by the entirety of a certain piece of land, with a dwelling house thereon, located in the Town of Waterbury, in the County of Washington and District aforesaid, which is the home place of the said petitioners, being the same land and premises as conveyed by Ernest C. Perkins, of Waterbury, aforesaid, to Arthur G. Pettengill and Barbara S. Pettengill, as tenants by the entirety, under date of August 24, 1953 and recorded September 2, 1953 in the office of the Town Clerk in said Waterbury in Book 54, Page 116 of the Waterbury Land Records.

 '2. Petitioner Arthur G. Pettengill, with one Robert P. Flannery, also of said Waterbury, were formerly engaged in business as co-partners doing business under the firm name and style of O'Clair Granite Works, with said business situated at said Waterbury, Vermont. Mrs. Barbara S. Pettengill, wife of the said Arthur G. Pettengill, was at no time connected with the said partnership in any manner and never had any interest therein.

 '3. There was executed by Arthur G. Pettengill under date of September 18, 1961 and acknowledged the same date before Gelsie J. Monti, Esq., a Notary Public, a cessation of partnership certificate indicating that the partnership of the said Arthur G. Pettengill and Robert P. Flannery, doing business as O'Clair Granite Works, had ceased to do business as of March 10, 1958 the reason for the cessation of partnership being that the business of the O'Clair Granite Works was dissolved by reason of bankruptcy. No petition in bankruptcy was filed however and no discharge was ever issued by the bankruptcy court. However the business was insolvent and had been subjected to foreclosure proceedings by the Lamoille County Savings Bank and Trust Company and action by the United States relative to tax liens. This Cessation Certificate was filed with the Commissioner of Taxes and with the Town Clerk in said Waterbury on or about September 18, 1961.

 '4. There is owing to the United States certain taxes, in the category of Withholding and Social Security Taxes accumulated and assessed during the time that the said Arthur G. Pettengill and Robert P. Flannery, co-partners doing business as O'Clair Granite Works, were engaged in said partnership and owing at the time that said partnership was dissolved. The amount of said taxes claimed due is in excess of $ 10,000.00 and it is agreed by and between the parties that the current amount of taxes due, together with interest and costs, is to be verified by the Internal Revenue Service and submitted to the Court with the least practicable delay.

 '5. The United States, in an attempt to collect said taxes, has filed notice of tax liens against all of the real estate of the said partnership of O'Clair Granite Works. These liens have been filed pursuant to the provisions of Sections §§ 6321, 6322, and 6323 of the Internal Revenue Code of 1954, 26 U.S.C.A. 6321, 6322, 6323, which in substance results in the creation of a lien in favor of the United States upon all property and rights to property belonging to the taxpayer and this lien is intended to cover both real and personal property. The question presented and at issue herein is whether, under the said recited provisions of the Internal Revenue Code of 1954, the interest of Arthur G. Pettengill, as a tenant by the entirety in and to the premises recited in Paragraph 1 of this stipulation, can be subjected to or impressed with such a lien.

 '6. On two separate occasions the petitioners have been approached by purchasers desiring to purchase their home place and sale to either one of these prospective purchasers has been prevented by the refusal of lending agencies to consider loans to prospective purchasers, secured by a mortgage on the property, until the question of the validity of the Federal tax liens as applied against the interest of Arthur G. Pettengill as tenant by the entirety has been resolved and adjudicated.'

 I find further that the first of the tax liens claimed by the United States was filed and recorded on August 15, 1956. Other liens ...


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