Spouses

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United States of America , Appellee v. Francis Taylor, Defendant, Mary E. Taylor, Appellant.

U.S. Court of Appeals, 8th Circuit; 01-2874/3872, 338 F3d 947, July 31, 2003 .

Reversing and remanding an unreported DC Minn. decision; related opinion at DC Minn. 2002-1 USTC ¶50,198.

[ Code Secs. 6321 and 6323]

Tax liens: Priority: Conveyances made by taxpayer to ex-wife: Qualified domestic relations order: Employee plan proceeds: Relation back of interest in proceeds. --

A divorced wife became the owner of 90 percent of her former husband's interest in employee plan proceeds on the date when a state (Texas) court issued a domestic relations order (DRO), even though details of qualification remained to transform the DRO into a qualified domestic relations order (QDRO). Thus, as a judgment lien creditor, her interest in the proceeds had priority over an IRS tax lien against the husband that was filed subsequent to the entry of the DRO but before the order became a QDRO. On the date the DRO was granted, her identity was clear, the subject property was identified, the amount was fixed, and the husband no longer owned 90 percent of the plan proceeds at issue.

Before: Loken, Bye and Riley, Circuit Judges.

RILEY, Circuit Judge: This case arises out of an April 1996 Northwest Airlines (Northwest) interpleader of the United States and Mary Taylor (Mary) to determine whether the Internal Revenue Service (IRS) or Mary has priority and is entitled to the benefits of three Northwest sponsored employee benefits plans. On cross motions for summary judgment, the district court ruled generally for the IRS and against Mary, finding Mary's right to the plans under a Texas domestic relations order (DRO) was subject to a prior federal tax lien. We disagree and reverse.



I. BACKGROUND

As is often the case, the sequence of events is critical. Francis Taylor (Francis) worked as a pilot for Northwest from 1966 to 1994. During his employment, Francis participated in a retirement plan, a stock plan, and a savings plan admin istered by Northwest under ERISA. ¹ Francis retired from Northwest in September 1994, at which time he filed in a Texas state court for divorce from Mary, his wife of more than thirty years. The following month, in October 1994, a tax court concluded that Francis had not filed tax returns from 1981 through 1985. On May 1, 1995 , the IRS assessed deficiencies totaling approximately $984,310 (including penalties and interest) for those tax years. On July 28, 1995 , the Texas court entered a divorce decree and approved a marital settlement agreement. The agreement provided that "to settle all obligations of the marriage," Mary would receive a 90 percent interest in Francis's Northwest employee benefits proceeds (plan proceeds). Also in July, the court entered a purported qualified domestic relations order (QDRO), directing the plan admin istrator to distribute Mary's interest in the plan proceeds directly to her. The Texas court, in the July order, retained jurisdiction to amend or reform the order as necessary to conform with plan requirements and qualify as a QDRO.

In October 1995, Northwest informed Mary and Francis that the July DRO did not qualify as a QDRO. In December 1995, the IRS filed a lien against the plan proceeds in Texas , where Francis claimed he resided at the time of the divorce, and where the DRO issued. In October 1996, the IRS filed another lien in Minnesota , where the plans were admin istered. Meanwhile, Mary and Francis attempted to correct the DRO's identified deficiencies. Among other things, the order: (1) did not specify the period to which it applied; (2) did not address how to treat amounts accrued, but had not yet been credited to the account; and (3) would have required Northwest to make an extra payment. Twice the Texas court, at Mary's request, reformed the DRO to address Northwest's concerns. Northwest finally pronounced the DRO a QDRO in January 1997.

The district court dismissed Northwest from the interpleader action, and the IRS and Mary were left to determine who was entitled to the plan proceeds. The IRS claimed its interest in the plan proceeds was first in time, while Mary argued her interest had priority because she was both a "judgment lien creditor" and a "purchaser" under 26 U.S.C. §6323(a), ² a statute that in certain situations requires the IRS to file notice of its lien to obtain priority.

The district court concluded Mary was neither a purchaser nor a judgment lien creditor under section 6323(a). Specifically, the court determined Mary was not a purchaser because her consideration was not "adequate and full," as defined in 26 C.F.R. §301.6323(h)-1(f)(3) (2001) (consideration must have reasonable relationship to true value of interest in acquired property). Further, the district court found Mary was not a judgment lien creditor because there was no evidence she had perfected her lien by executing the judgment as required under Texas law. Because Mary was not entitled to the protections of section 6323, the district court held the IRS tax liens assessed on May 1, 1995, became effective against Mary as of that date and were first in time and entitled to priority.

On appeal, Mary argues: (1) the Texas divorce court had exclusive jurisdiction over this dispute; thus, there was no federal question and the interpleader action was not proper; (2) under Texas community property law, Mary had substantial property rights in the plan proceeds even before the divorce; (3) she was a purchaser under section 6323(a); and (4) she was a judgment lien creditor under section 6323(a).



II. DISCUSSION

This court reviews de novo the district court's grant of summary judgment. Mayberry v. United States [ 98-2 USTC ¶50,632], 151 F.3d 855, 858 (8th Cir. 1998). Initially, we reject Mary's first two arguments: (1) federal jurisdiction does exist, see 29 U.S.C. §1132(a)(3) (civil action may be brought by fiduciary to enjoin violations of ERISA plan, or to obtain appropriate equitable relief); and (2) Texas community property law does not vest her with an interest in the plan proceeds. See 29 U.S.C. §1144(a) (ERISA supersedes state law insofar as such law relates to ERISA-governed plans); Boggs v. Boggs, 520 U.S. 833, 850 (1997) (QDRO provisions define scope of nonparticipant spouse's community property interest in pension plans).

We turn next to whether Mary became a judgment lien creditor under section 6323(a) within sufficient time to have priority over the IRS. ³ An IRS lien attaches automatically on the date a penalty is assessed, 26 U.S.C. §6322 (lien arises at time of assessment), and is enforceable as of that date against creditors except any "purchaser," "holder of security interest," "mechanic's lienor," or "judgment lien creditor," within the meaning of section 6323(a). If the creditor falls into one of these categories, then the IRS must provide adequate notice to establish the priority of its lien. See 26 U.S.C. §6323(a); Rodeck v. United States [ 89-2 USTC ¶9401], 697 F.Supp. 1508, 1511 (D. Minn. 1988) (as to §6323(a) creditors, tax lien will have priority only if notice has been filed in accordance with §6323(f)).

A Treasury Regulation defines "judgment lien creditor" as follows:

... a person who has obtained a valid judgment, in a court of record and of competent jurisdiction, for the recovery of specifically designated property or for a certain sum of money. In the case of a judgment for the recovery of a certain sum of money, a judgment lien creditor is a person who has perfected a lien under the judgment on the property involved. A judgment lien is not perfected until the identity of the lienor, the property subject to the lien, and the amount of the lien are established. Accordingly, a judgment lien does not include an attachment or garnishment lien until the lien has ripened into judgment, even though under local law the lien of the judgment relates back to an earlier date.

 

...

 

If under local law levy or seizure is necessary before a judgment lien becomes effective against third parties acquiring liens on personal property, then a judgment lien under such local law is not perfected until levy or seizure of the personal property involved.

26 C.F.R. §301.6323(h)-1(g).

A state law created lien's priority depends on when it attaches and becomes choate, and federal law will determine when the lien has acquired sufficient substance and becomes so perfected as to defeat a later federal tax lien. United States v. Pioneer Am. Ins. Co. [ 63-2 USTC ¶9532], 374 U.S. 84, 88 (1963). Liens are perfected, under the federal rule, when there is nothing more to be done to have a choate lien, that is, "when the identity of the lienowner, the property subject to the lien, and the amount of the lien are established." Id. at 89 (citations omitted). Here, Mary obtained a valid judgment from a Texas divorce court for 90 percent of Francis's plan proceeds creating an exclusive property interest in the plan proceeds for Mary. On the date the Texas court granted the DRO, Mary's identity was clear, the subject property was identified, and the amount (90 percent) was fixed.

Mary was not required to comply with any state law requirements for purposes of establishing lien priority over the IRS's interest in the plan proceeds. ERISA provides a mechanism for enforcing QDROs, and this mechanism supersedes any contrary state law. See U.S. Constitution art. VI, cl. 2, Heart of Am. Grain Inspection Serv., Inc. v. Mo. Dep't of Agric., 123 F.3d 1098, 1103 (8th Cir. 1997) (under Supremacy Clause, federal laws are supreme law of land and may preempt state law); cf. Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843-44 (1984) (agencies may elucidate, through regulations, specific provisions of statutes that agencies admin ister). Specifically, 29 U.S.C. §1056(d) provides for alienation of pension plan benefits in accordance with a QDRO, and gives plan admin istrators or courts eighteen months to determine whether a DRO qualifies as a QDRO, directing the plan admin istrator to segregate the amounts in question during that period. See 29 U.S.C. §1056(d)(3)(H). ⁴

In this case, Northwest determined, within eighteen months of the date the first payment would have been made under the DRO, that the DRO, as modified, was a QDRO. Thus, Mary satisfied ERISA's requirements for alienating pension plan proceeds. Requiring Mary to satisfy state law perfection requirements would conflict with ERISA's policy of ensuring that plan sponsors are subject to a uniform body of law. See Egelhoff v. Egelhoff, 532 U.S. 141, 148 (2001) (principal goal of ERISA is to establish uniform scheme with standard procedures; uniformity is impossible if plans are subject to different legal obligations in different states); Minnesota Chapter of Associated Builders & Contractors, Inc. v. Minn. Dep't of Pub. Safety, 267 F.3d 807, 810-11 (8th Cir. 2001) (ERISA's goal is to minimize admin istrative and financial burden of complying with conflicting state directives, and to prevent potential for conflicts in substantive law requiring tailoring of plans to peculiarities of multiple local laws), cert. denied, 122 S.Ct. 2292 (2002); Compagnoni [ 2001-2 USTC ¶50,626], 162 F.Supp.2d at 710 (imposing state law perfection requirements would create choice-of-law difficulties, frustrating objective of ensuring uniformity of ERISA admin istration).

We further conclude that Mary's interest in the plan proceeds relates back to the date of the initial DRO. See Nelson v. Ramette, 322 F.3d 541, 544 (8th Cir. 2003) ("A person awarded a lump-sum distribution from an ERISA plan pursuant to a divorce decree has a direct interest in plan funds while the plan reviews the DRO to determine whether it constitutes a QDRO."); Gendreau v. Gendreau, 122 F.3d 815, 818 (9th Cir. 1997) (wife's interest in pension plans was established at time of divorce decree; husband's interest was concomitantly limited at that time, or subject to being limited at any time wife obtained QDRO, much like property owner's rights may be subject to divestment by contingent interest); Compagnoni [ 2001-2 USTC ¶50,626], 162 F.Supp.2d at 711-12 (wife had possessory interest in benefits once first DRO had been entered although interest was unenforceable until QDRO was obtained); cf. 29 U.S.C. §1056(d)(3)(H) (any determination made within eighteen months of the order, or modification of the order, will be applied prospectively). Mary had eighteen months pursuant to section 1056(d)(3)(H)(ii) to qualify her DRO, and "[i]f within the 18-month period ... the order (or modification thereof) is determined to be a qualified domestic relations order, the plan admin istrator shall pay the segregated amounts ... to the person...." (Emphasis added). The plan admin istrator, by plan procedures, cannot shorten this eighteen month qualification period.

Because the DRO preceded the IRS's notice of tax lien, and Northwest determined within the requisite eighteen months that the DRO qualified as a QDRO, see 29 U.S.C. §1056(d)(3)(H)(v) (computation of time), Mary was a judgment lien creditor with priority as of July 1995, when the DRO was entered. She is thus entitled to the plan proceeds free of the IRS lien.

One other related issue should be addressed regarding the finality of the July 1995 Texas DRO. The Texas judge signed an order prepared and approved by the parties which stated:

The Court retains jurisdiction to amend this Order so that it will constitute a qualified domestic relations order under the Plan even though all other matters incident to this action or proceeding have been fully and finally adjudicated. If the Plan determines at any time that changes in the law, the admin istration of the Plan, or any other circumstances make it impossible to calculate the portion of a distribution awarded to Alternative Payee by this Order and so notifies the parties, either or both parties shall immediately petition the Court for reformation of this Order.

The intent of the July 1995 DRO, to qualify under the applicable Northwest plans, is clear. The parties and the court recognized the order may need changes to qualify. Northwest did require certain changes to qualify. Mary asked the Texas court twice to reform the DRO before Northwest accepted the DRO as a QDRO. This process is anticipated by the law, which provides for segregation of the funds by the plan admin istrator for up to eighteen months to qualify the DRO as a QDRO. See 29 U.S.C. §1056(d)(3)(H). Our holdings in Nelson and here, recognizing the DRO establishes a "direct interest in plan funds," and upon qualification, the interest relates back to the initial DRO date, further the statutory scheme to protect employee retirement benefits for beneficiaries of the plans, including divorced spouses.

As a legal matter, when the DRO issued, Francis was no longer the owner of 90 percent of the Northwest ERISA plans. Mary was awarded this share as part of the divorce. Mary, the property, and the amount were identified clearly, only the details of qualification remained to transform the DRO into a QDRO.



III. CONCLUSION

Since we conclude Mary was a judgment lien creditor, we do not address whether she was also a purchaser under section 6323(a). Accordingly, we reverse the summary judgment with regard to Mary Taylor, and remand with instructions to enter judgment in conformity with this opinion.

Dissenting Opinion

LOKEN, Circuit Judge, dissenting: The lien priority issue in this case involves the interplay of two federal statutory regimes, ERISA and the Internal Revenue Code. The Code provides that a judgment lien, when perfected, has priority over an existing federal tax lien unless notice of the tax lien has been filed in accordance with state law. See 26 U.S.C. §6323(a), (f). ERISA provides that a former spouse may acquire an enforceable right to a participant's pension plan benefits pursuant to the provisions of a "qualified domestic relations order" (QDRO). ⁵ Here, the IRS more or less concedes that the Texas divorce court's domestic relations order granted Mary Taylor a judgment lien on Francis Taylor's ERISA plan benefits. The issue, then, is whether her lien on those plan benefits is entitled to priority over the IRS's tax liens under §6323(a).

Federal law governs whether a judgment lien created by state law is perfected for purposes of §6323(a). The federal rule is that a lien is perfected, or choate, "when the identity of the lienor, the property subject to the lien, and the amount of the lien are established." United States v. Pioneer Am. Ins. Co. [ 63-2 USTC ¶9532], 374 U.S. 84, 89 (1963) (quotation omitted). A Treasury Regulation now codifies this principle. 26 C.F.R. §301.6323(h)-1(g). Though Mary Taylor's judgment lien was created by state law, ERISA provides that, to be perfected --that is, enforceable against Francis Taylor's plan benefits --the state court order must be a QDRO. And Congress's definition of a QDRO incorporates the substance of the federal law definition of a perfected lien: a domestic relations order qualifies as a QDRO if it clearly specifies the plan participant, the alternative payee (the lienholder), each plan to which the order applies, the amount or percentage of the benefits to be paid to the alternate payee, and the number of payments or period to which the order applies. 26 U.S.C. §414(p)(2).

Given this overlap between the judicially developed federal rule of perfection, and the statutory elements of a QDRO, I agree with the court that a QDRO is a perfected judgment lien for purposes of the priority rules of §6323(a). Like the court, I reject the IRS's argument that, to be perfected under §6323(a), the judgment lien created by a QDRO must also satisfy any levy or seizure requirements generally applicable to liens created by the laws of that State. Congress codified the perfection requirements for a QDRO in another section of the Internal Revenue Code, and ERISA would preempt any local law that interfered with its anti-alienation provisions. In the absence of a Treasury Regulation specifically addressing the relationship between Code §§6323(a) and 414(p)(2), I decline to apply a general reference to local law in a pre-existing Treasury Regulation, 26 C.F.R. §301.6323(h)-l(g), in a manner inconsistent with the QDRO perfection provisions of ERISA.

There remains the question whether Mary's judgment lien was perfected (acquired QDRO status) prior to the IRS filing notice of its tax liens in Dallas County , Texas , in late December 1995. Mary's judgment lien arose on July 28, 1995 , when the Texas divorce court entered a domestic relations order awarding her a 90% interest in Francis Taylor's ERISA plan benefits. Northwest Airlines as plan admin istrator determined that amended versions of that order qualified as QDROs, long after the tax liens were filed in December 1995. The court nonetheless concludes that Mary's QDRO-perfected lien has priority because "Mary's interest in the plan proceeds relates back to the date of the initial [divorce court order]." Ante at 7. I disagree.

ERISA provides that, when a domestic relations order is submitted for a QDRO determination, the plan admin istrator must make the determination "within a reasonable period after receipt of such order," 26 U.S.C. §414(p)(6)(A)(ii), and must segregate plan benefits that would be payable to the alternate payee (here, Mary Taylor) for up to eighteen months while it makes that determination, §414(p)(7). See Hogan v. Raytheon, Co., 302 F.3d 854, 857 (8th Cir. 2002). If the admin istrator determines within the eighteen-month approval period that the submitted order or a "modification" of that order is a QDRO, it must pay the segregated amounts to the alternate payee. 26 U.S.C. §414(p)(7)(B); see Trustees of the Dirs. Guild of Am.-Producer Pension Benefits Plans v. Tise, 255 F.3d 661, 2000 U.S. App. LEXIS 38507, at **16 (9th Cir. 2000). In that situation, although the issue is not free from doubt, I do not take issue with the court's conclusion that QDRO status should "relate back" to the entry of the initial domestic relations order for purposes of §6323(a) lien priority because ERISA has conferred a direct interest in the segregated plan funds at that earlier date. ⁶ Cf. Nelson v. Ramette, 322 F.3d 541, 544 (8th Cir. 2003) (for bankruptcy purposes, alternative payee acquires QDRO interest in plan funds on the date the domestic relations order is first entered); Gendreau v. Gendreau, 122 F.3d 815, 818 (9th Cir. 1997) (same), cert. denied, 523 U.S. 1005 (1998).

But assuming the court has adopted a correct relation-back principle, it has misapplied that principle to the facts of this case. Unlike the plan admin istrator in Cooper Indus., Inc. v. Compagnoni [ 2001-2 USTC ¶50,626], 162 F.Supp.2d 702 (S.D. Tex. 2001), Northwest Airlines did not invite Mary and Francis Taylor to submit a modified domestic relations order to cure defects in the July 28, 1995, order. Rather, Northwest Airlines as plan admin istrator issued three letters between October 16 and November 3, 1995, initially determining that the July 28, 1995, domestic relations order did not qualify as a QDRO with respect to any of the three plans, and advising the Taylors that these initial determinations would become final at the conclusion of the sixty-day appeal period provided for in the three plans. When the Taylors did not appeal, Northwest Airlines issued three final negative determinations. At that point, ERISA expressly provides that Mary as alternate payee had no further interest in any segregated plan benefits. 26 U.S.C. §414(p)(7)(C). Consistent with the statute, Northwest Airlines then paid the segregated benefits for the months from July 1995 to January 1996 to Francis Taylor. At that point, though the eighteen-month period had not expired, Mary's claim to a perfected judgment lien as of July 28, 1995 , was finally rejected. ⁷

As the court notes, the Texas court entered a modified domestic relations order on January 8, 1996 , after the plan admin istrator's final negative determinations. The Taylors submitted that order to Northwest Airlines as plan admin istrator. Northwest Airlines again issued three notices that it had received a domestic relations order (one notice for each plan), which is the first step in the QDRO-determination process. See 26 U.S.C. §414(p)(6)(A)(i). In June 1996, Northwest Airlines finally determined that the January 8, 1996, order qualified as a QDRO with respect to Francis Taylor's savings plan and stock plan benefits. However, on April 15, 1996 , Northwest Airlines initially determined that the January 8 order did not qualify as a QDRO with respect to Francis Taylor's retirement plan benefits. Again, the Taylors failed to appeal within the plan's sixty-day appeal period, and that determination became final. Again, after the appeal period expired, the Taylors submitted another modified domestic relations order, entered by the Texas court on August 29, 1996 , which Northwest Airlines finally determined to be a QDRO on January 7, 1997 .

On this undisputed record, I conclude that the plan admin istrator's QDRO determinations did not grant Mary Taylor a perfected judgment lien interest in Francis Taylor's plan benefits prior to January 8, 1996 . As the IRS properly filed notice of its liens in late December 1995, the federal tax liens have priority over Mary's judgment lien under §6323(a). Accordingly, I respectfully dissent.

¹ Employee Retirement Income Security Act of 1974 (ERISA), as amended, 29 U.S.C. §§1001-1461 (2000).

² 26 U.S.C. §6323(a) states: "Purchasers, holders of security interests, mechanic's lienors, and judgment lien creditors. The lien imposed by section 6321 shall not be valid as against any purchaser, holder of a security interest, mechanic's lienor, or judgment lien creditor until notice thereof which meets the requirements of subsection (f) has been filed by the Secretary [of the Treasury]."

³ The IRS has authority to proceed against Francis's interest in any ERISA plan benefits and "is not constrained by ERISA's anti-alienation provision." United States v. McIntyre [ 2000-2 USTC ¶50,613], 222 F.3d 655, 660 (9th Cir. 2000). After the DRO, Francis effectively no longer has any ownership interest in Mary's 90 percent share of the Northwest ERISA plans.

⁴ Pension benefit plans are distinguishable from welfare benefit plans, which do not provide an enforcement mechanism. See Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 831-33 (1988); Cooper Indus., Inc. v. Compagnoni [ 2001-2 USTC ¶50,626], 162 F.Supp.2d 702, 709-10 (S.D. Tex. 2001).

⁵ Significantly, the QDRO provisions of ERISA appear in both the Internal Revenue Code and the Title 29 labor laws. See 29 U.S.C. §1056(d); 26 U.S.C. §414(p). I will cite to the Code provisions in this dissent.

⁶ My doubt stems from the fact that the initial domestic relations order, if seriously deficient, may not satisfy the QDRO requirements in §414(p)(2) that correspond to the elements that make a judgment lien choate under federal common law. Here, for example, the July 28, 1995, order did not identify to which of the three Northwest Airlines plans it applied and thus did not clearly define the 90% interest that Mary was awarded. In such a case, for purposes of priority against a federal tax lien, I am not sure whether QDRO status should only relate back to the date the deficient domestic relations order was modified, or all the way back to the entry of the initial, non-choate domestic relations order. I need not resolve that question here.

⁷ The court has no support for its assertion that "[t]he plan admin istrator, by plan procedures, cannot shorten [the] eighteen month qualification period." Ante at 7. The assertion is contrary to the plain language of the statute, which requires a QDRO determination "within a reasonable period," provides that affected benefits must be segregated while the determination is made, but places an eighteen-month limit on the plan admin istrator's duty to segregate. The assertion is also contrary to the Department of Labor's interpretation of the QDRO provisions: "the `18-month period' during which a plan admin istrator must preserve the `segregated' amounts ... is not the measure of the reasonable period for determining the qualified status of an order and in most cases would be an unreasonably long period of time to take to review an order." U.S. Dep't of Labor, Employee Benefits Sec. Admin., QDROs --The Division of Pensions Through Qualified Domestic Relations Orders, Question 2-12 at p.19, available online at <http://www.dol.gov/ebsa/Publications/qdros.html>.

 

[2002-2 USTC ¶50,493] Linda Carter, Plaintiff v. United States of America , Defendant

U.S. District Court, West. Dist. Tenn. , West. Div., 01-2304 G/A, 5/20/2002

[Code Secs. 6323 and 7426 ]

Civil suit: Liens and levies: Priority: Judgment lien creditor: Divorce: State law: Tennessee: Perfected interest.--The government's levy on a mutual fund account formerly held by an individual's bankrupt ex-husband was wrongful. She qualified as a judgment lien creditor and was awarded the fair market value of the account immediately prior to the levy, plus interest accruing from the date of liquidation. She was not required to register her divorce judgment to attach it to the account. Under state ( Tennessee ) law, all marital property is eligible for divestiture in satisfaction of a judgment. No formal execution was required, as the account was liable at law. Her interest was perfected upon issuance of the divorce agreement.

[Code Sec. 7433 ]

Civil suit: Liens and levies: Damages: Interest: Fair market value: Consequential damages: Exhaustion of admin istrative remedies.--The government's levy on a mutual fund account formerly held by an individual's bankrupt ex-husband was wrongful. However, she was not entitled to consequential damages because she failed to show that she exhausted admin istrative remedies. Nor did she prove the IRS's disregard for the tax code or that she suffered economic damages proximately caused by the IRS's actions. Moreover, she failed to mitigate her alleged damages.

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

GIBBONS, District Judge:

Before the court are plaintiff's motion for summary judgment, filed on March 12, 2002 , and defendant's motion for summary judgment, filed on March 18, 2002 . Based on the following discussion, the former motion is granted in part and denied in part, and the latter motion is denied.

This case arises from a tax assessment against Todd F. Brooks, the former husband of plaintiff Linda Carter. (1st Carter Aff. ¶3.) On June 19, 1995 , while Brooks and Carter were married, the Internal Revenue Service ("IRS") assessed $516,924.15 in unpaid federal income taxes against Brooks--$229,434.45 for 1992 and $287,489.70 for 1993. (Answers to First Set of Pl.'s Interrog. at 5.) During their marriage, including 1992 and 1993, Carter and Brooks filed separate tax returns. Id. at 10-11.

Brooks initiated divorce proceedings in April or May 1996. Id. at 13. Carter learned of Brooks' federal tax liability during those proceedings. (Carter Dep. at 12-13.) On August 6, 1997 , the Circuit Court for Shelby County issued a judgment divorcing Carter and Brooks. Brooks v. Carter, No. 152550-3 R.D., at 1 (Circuit Court of Tennessee Aug. 6, 1997) (Final Judgment of Divorce). The judgment stated, in part, that ITT Hartford Mutual Fund Account No. 68901 ("Account No. 68901"), with a then-existing value of $247,045.04, "shall be the sole and separate property of [Carter], and [Brooks] is divested of all rights to ownership of said property." Id. at 6. The divorce judgment also stated that "any liability and/or debt that [Brooks] owes to the Internal Revenue Service is his separate property." Id. at 8. The judgment has not been filed with the Shelby County Register of Deeds. (Carter Dep. at 31-32.)

On March 30, 1998 , the IRS filed a Notice of Federal Tax Lien against Brooks with the Shelby County Register of Deeds. (Answers to First Set of Pl.'s Interrog. at 10.) The lien, amounting to $516,924.15, consisted of Brooks' federal income tax liability for 1992 and 1993, plus statutory additions. Id. at 5; Def.'s Mot. for Summ. J. Ex. 3. Carter did not become aware of the lien until 1999 or 2000. (1st Carter Aff. ¶5.)

On June 19, 1998 , the IRS served a levy on Hartford Life Insurance Company ("Hartford Life"), attaching all property or rights to property belonging to Brooks. (Answers to First Set of Pl.'s Interrog. No. 7.) By letter dated July 9, 1998 , Hartford Life advised the IRS that the levy, which lacked the required approval of the IRS District Director, would not be honored. (Def.'s Mot. for Summ. J. Ex. 7.) On June 16, 1999 , the IRS served Hartford Life with a levy which reflected the approval of the District Director. Id. Ex. 8. In response, on August 4, 1999 , Hartford Life issued two checks to the IRS totaling $527,261.00, including $350,403.12 from Account No. 68901. (Answers to First Set of Pl.'s Interrog. No. 6; Def.'s Mot. for Summ. J. Ex. 10.) The $350,403.12 consisted of the then-existing value of Account No. 68901, $390,958.24, less surrender charges of $1,621.44 and a tax withholding of $38,933.68. (Def.'s Mot. for Summ. J. Ex. 10.)

Carter filed the complaint in this case on April 18, 2001 . The sole claim advanced by Carter is that defendant United States of America ("the government") wrongfully levied upon and seized the contents of Account No. 68901. Pursuant to 28 U.S.C. §7426, Carter seeks a judgment in the amount of $390,958.24, plus interest and compensatory damages.

Both parties have filed motions for summary judgment. Carter argues in her motion that the government's levy was wrongful for two reasons. First, she contends that it was placed on property in which Brooks had no interest. Second, Carter claims that she qualifies as a judgment lien creditor pursuant to 26 U.S.C. §6323, making her interest in Account No. 68901 superior to the government's lien. In its motion for summary judgment, the government asserts that its levy was not wrongful because its lien on Account No. 68901 is superior to Carter's interest. Alternatively, in the event that the levy was wrongful, the government argues that Carter is only entitled to recover $350,403.12, the amount it received from Account No. 68901.

Under Federal Rule of Civil Procedure 56(c), summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). So long as the movant has met its initial burden of "demonstrat[ing] the absence of a genuine issue of material fact," Celotex, 477 U.S. at 323, and the nonmoving party is unable to make such a showing, summary judgment is appropriate, Emmons v. McLaughlin, 874 F.2d 351, 353 (6th Cir. 1989). In considering a motion for summary judgment, "the evidence as well as all inferences drawn therefrom must be read in a light most favorable to the party opposing the motion." Kochins v. Linden-Alimak, Inc., 799 F.2d 1128, 1133 (6th Cir. 1986); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

When confronted with a properly-supported motion for summary judgment, the nonmoving party "must set forth specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(e); Abeita v. TransAmerica Mailings, Inc., 159 F.3d 246, 250 (6th Cir. 1998). A genuine issue of material fact exists for trial "if the evidence [presented by the nonmoving party] is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In essence, the inquiry is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Id. at 251-52.

Section 6321 of the Internal Revenue Code ("the Code") provides:

If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount . . . shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.

26 U.S.C. §6321. The lien generally arises when an assessment is made and continues until the taxpayer's liability "is satisfied or becomes unenforceable by reason of lapse of time." Id. §6322. Since a federal tax lien is not self-executing, the Code provides the government with two options for the collection of unpaid taxes. The first option, irrelevant to the matter at hand, is a lien-foreclosure suit. 26 U.S.C. §7403(a). The second option is the admin istrative levy, a provisional remedy which typically "does not require any judicial intervention." Id. §6331(a); United States v. Rodgers [83-1 USTC ¶9374] , 461 U.S. 677, 680-82 (1983).

Elaborating on the second option, in the event that a taxpayer's property is held by another, it is customary to serve notice of the levy upon the custodian. 26 U.S.C. §6332(a). Such notice gives the IRS the right to all property levied upon and creates a custodial relationship between the person holding the property and the IRS, bringing the property into the constructive possession of the government. United States v. Nat'l Bank of Commerce [85-2 USTC ¶9482] , 472 U.S. 713, 720 (1985). The levy, however, does not determine whether the government's rights to the seized property are superior to those of other claimants. Id. at 721. Its purpose is to allow the government to promptly secure revenues. Phillips v. Commissioner [2 USTC ¶743] , 283 U.S. 589, 596 (1931).

Carter brings her wrongful levy claim pursuant to 28 U.S.C. §7426, which states:

(a) Actions permitted.--

(1) Wrongful levy.--If a levy has been made on property or property has been sold pursuant to a levy, any person (other than the person against whom is assessed the tax out of which such levy arose) who claims an interest in or lien on such property and that such property was wrongfully levied upon may bring a civil action against the United States.

. . .

(c) Validity of assessment.--For the purposes of an adjudication under this section, the assessment of tax upon which the interest or lien of the United States is based shall be conclusively presumed to be valid.

Id. The Sixth Circuit has stated that a levy is wrongful if:

(1) it is placed on property exempt under §6334; (2) it is placed on property in which the delinquent taxpayer had no interest [at the time the lien arose or thereafter]; (3) it is invalid under §§6323 or 6324(a)(2) or (b); or (4) the plaintiff's interest in the property is senior to the federal tax lien and will be destroyed by the levy.

McGinness v. United State of America [96-2 USTC ¶50,434] , 90 F.3d 143, 147 (6th Cir. 1996) (citing 26 C.F.R. §301.7426-1(b)). Pursuant to §6323, a federal tax lien is not valid against a judgment lien creditor until notice of that lien has been properly filed. 26 U.S.C. §6323. ¹

Carter advances two bases for her assertion that the government's levy was wrongful. First, Carter claims that the levy was placed on property in which Brooks had no interest. Second, she contends that pursuant to §6323, she qualified as a judgment lien creditor before the government filed notice of its tax lien.

Carter's first argument misconstrues the law. Pursuant to 26 C.F.R. §301.7426-1(b), the critical consideration is whether the taxpayer had an interest in the levied property at the time the tax lien arose or thereafter, not whether the interest existed at the time the levy was issued. ² Id. Therefore, the court rejects Carter's first argument that the government's levy was wrongful.

Carter's second argument requires a more elaborate analysis. In adjudicating the priority of competing liens, federal common law prescribes that "the first in time is the first in right." United States v. City of New Britain [54-1 USTC ¶9191] , 347 U.S. 81, 85 (1954). However, this principle is modified by §6323, under which a federal tax lien has priority over a competing judgment lien only if the IRS serves proper notice of its lien before the judgment lien is perfected and attached. United States v. Estate of Romani [98-1 USTC ¶50,368 ; 98-1 USTC ¶60,311 ], 523 U.S. 517, 524 (1998).

The court is faced with the issue of whether, by virtue of the divorce judgment, Carter qualifies as a perfected and attached judgment lien creditor of Account No. 68901. Although the government's lien on Account No. 68901 arose on June 19, 1995 , notice of the lien was not filed until March 30, 1998 . (Answers to First Set of Pl.'s Interrog. at 5, 10.) The record reflects that on August 6, 1997 , Carter obtained an interest in Account No. 68901 upon the entry of the divorce judgment but took no further action to perfect this interest. ³ (2nd Carter Aff. ¶5.) If the divorce judgment made Carter a perfected and attached judgment lien creditor of Account No. 68901, the government's levy was wrongful pursuant to §6323 because the judgment was entered before the government filed notice of its tax lien. Otherwise, the government's levy was not wrongful.

Regulations promulgated by the IRS define "judgment lien creditor" as follows:

The term "judgment lien creditor" means a person who has obtained a valid judgment, in a court of record and of competent jurisdiction, for the recovery of specifically designated property or for a certain sum of money. . . . A judgment lien is not perfected until the identity of the lienor, the property subject to the lien, and the amount of the lien are established. . . . If under local law levy or seizure is necessary before a judgment lien becomes effective against third parties acquiring liens on personal property, then a judgment lien under such local law is not perfected until levy or seizure of the personal property involved.

26 C.F.R. 301.6323(h)-1(g). To create a state lien, a judgment creditor must first do what is required under state law to cause a judgment to attach to property. Redondo Constr. Co. v. United States [98-2 USTC ¶50,841] , 157 F.3d 1060, 1063 n.4 (6th Cir. 1998) (citing United States v. Pioneer Am. Ins. Co. [63-2 USTC ¶9532] , 374 U.S. 84, 89 (1963); City of New Britain, 347 U.S. at 84; S&S Gasket Co. v. United States [81-1 USTC ¶9115] , 635 F.2d 568, 570 (6th Cir. 1980)). However, federal law governs the issue of when a state-created lien is considered perfected or "choate" such that it will defeat a federal tax lien. Id.

Carter qualifies as a judgment lien creditor. A Final Judgment of Divorce was entered by the Circuit Court of Tennessee for the Thirteenth Judicial District at Memphis on August 6, 1997 . Brooks v. Carter, No. 152550-3 R.D., at 1 (Circuit Court of Tennessee Aug. 6, 1997) (Final Judgment of Divorce). The authority to decree divorce is vested in both the circuit and chancery courts of Tennessee . Tenn. Code Ann. §36-4-105. The judgment declared Account No. 68901, specifically designated personal property, to be "the sole and separate property of [Carter], and [Brooks] relinquishes and is divested of all rights to ownership. . . ." Brooks v. Carter, No. 152550-3 R.D., at 8 (Circuit Court of Tennessee Aug. 6, 1997) (Final Judgment of Divorce).

The government asserts, however, that Carter did not properly attach the judgment of divorce to Account No. 68901. It contends that Carter failed to register the judgment in Shelby County , as required by Tenn. Code Ann. §25-5-103. Carter asserts that §25-5-103 is inapplicable and that registration is not required to enforce the judgment's division of personal property.

Section 25-5-103 of the Tennessee Code states:

An execution thereon shall not bind the debtor's legal or equitable interest in stock, choses in action, or other personal property, not liable at law, unless a similar abstract or memorandum is registered within sixty (60) days from rendition of the judgment or decree, in the county where the debtor resides, if the debtor lives in this state, or, if not, then in the county in which the property is located.

Tenn. Code Ann. §25-5-103. ⁴ Execution is a process by which the sheriff or another officer satisfies a judgment by levying upon and selling the debtor's property. Alexander E. Conlyn, Enforcing Money Judgments in Tennessee , 4 Mem. St. Law Rev. 65, 67 (1973); Black's Law Dictionary 568 (6th ed. 1990). The process begins with a writ of execution, the typical vehicle for enforcing money judgments, which is an order directing an officer to levy upon and sell the judgment debtor's property identified in the writ. Tenn. Code Ann. §§26-1-103 to 26-1-104. A levy of execution is the officer's act of appropriating the debtor's property for satisfaction of the debt, resulting in the divestiture of the judgment debtor's title. Keep Fresh Filters, Inc. v. Reguli, 888 S.W.2d 437, 443 (Tenn. Ct. App. 1994).

Section 25-5-103 is inapposite in this case because a formal execution has not occurred. There is no evidence in the record indicating that a writ of execution was issued in connection with the divorce judgment. It appears that instead of transferring title to Account No. 68901 by means of execution, the circuit court used its statutory authority to award title to Carter in the divorce judgment. Tenn. Code Ann. §36-4-121(a); Thompson v. Thompson, 797 S.W.2d 599, 604 (Tenn. Ct. App. 1990). Therefore, Carter was not bound by the registration requirement in §25-5-103.

Assuming, arguendo, that the divorce judgment qualifies as an execution, an issue arises as to whether Account No. 68901 is property "liable at law." Two cases have addressed the meaning of this phrase. In Smith v. United States Ins. Co., the Supreme Court of Tennessee found that a corporation's choses in action were "liable at law" because §4765 of Shannon's Code provided that "an execution against a corporation may be levied of its choses in action as well as on goods and chattles," modifying the common law rule that an execution did not impose a lien upon a debtor's choses in action. 150 S.W. 97, 99 ( Tenn. 1912). More recently, a bankruptcy court held that choses in action are "liable at law" under Tenn. Code Ann. §26-2-202, which states that "[a]ll property, debts and effects of the defendant in the possession of the garnishee, or under his control, shall be liable to satisfy the plaintiff's judgment." Rob by's Pancake House of Florida v. R.K. Walker, 24 B.R. 989, 998 n.11 (Bankr. W.D. Tenn. 1982). The court reasoned that "property" encompassed choses in action. Id.

In light of these cases, the court finds that Tenn. Code Ann. §36-4-121(a) makes Account No. 68901 "liable at law." Section 36-4-121 states:

(a)(1) In all actions for divorce or legal separation, the court having jurisdiction thereof may, upon request of either party, and prior to any determination as to whether it is appropriate to order the support and maintenance of one (1) party by the other, equitably divide, distribute or assign the marital property between the parties without regard to marital fault in proportions as the court deems just.

. . .

(3) To this end, the court shall be empowered to effectuate its decree by divesting and reinvesting title to such property and, where deemed necessary, to order a sale of such property and to order the proceeds divided between the parties.

Tenn. Code Ann. §§36-4-121(a)(1), (3). To the extent that a divorce judgment qualifies as an execution for the purposes of §25-5-103, §36-4-121(a) makes all marital property, ⁵ including Account No. 68901, "liable at law" by explicitly identifying such property as eligible for divestiture in satisfaction of a judgment. The registration requirement in §25-5-103 appears to apply only to personal property which is not made expressly subject to divestiture by a separate provision of law. Thus, Carter was not required to register the divorce judgment to attach it to Account No. 68901.

The government also claims that Carter is not a perfected judgment lien creditor. It acknowledges that the divorce judgment reported the value of Account No. 68901 as $247,048.04. Brooks v. Carter, No. 152550-3 R.D., at 6 (Circuit Court of Tennessee Aug. 6, 1997) (Final Judgment of Divorce). Nevertheless, the government contends that since Account No. 68901 was comprised of mutual fund shares which fluctuated in value, it was impossible for the court to "establish" the value of the lien, as required by 26 C.F.R. 301.6323(h)-1(g). Carter contends that there is no legal support for the government's position, which, she argues, would have the practical effect of preventing anyone from obtaining a judgment lien under 26 C.F.R. 301.6323(h)-1(g) on personal property other than money.

Although sparse, there is some legal guidance regarding the conditions under which the amount of a lien is "established." The Sixth Circuit has held that this element of perfection is satisfied by a judgment in a court of record for a definite amount of money. S&S Gasket [81-1 USTC ¶9115] , 635 F.2d at 571. It has also indicated, in dictum, that a lien is perfected when "the underlying amount is fixed," "although the total balance of the lien may fluctuate." Hensley v. Harbin [99-2 USTC ¶50,961] , 196 F.3d 613, 616 (6th Cir. 1999). The Tenth Circuit determined that a bank possessed a perfected lien on a customer's accounts, despite their fluctuation in value, because the amount owed was a definite amount plus interest at a set rate and the bank monitored the accounts to assure the presence of funds which covered the obligation. Jefferson Bank and Trust v. United States [90-1 USTC ¶50,078] , 894 F.2d 1241, 1244 (10th Cir. 1990).

Applying this guidance to the case at hand, the court finds Carter's position more persuasive. The divorce judgment adequately identified Account No. 68901 and specified its value as of August 6, 1997 . Brooks v. Carter, No. 152550-3 R.D., at 6 (Circuit Court of Tennessee Aug. 6, 1997) (Final Judgment of Divorce). The foregoing cases indicate that perfection of a lien is not inhibited by fluctuation in the lien's value so long as the value can be easily calculated from a fixed underlying amount. The value of Account No. 68901, until it was levied upon by the government, was easily determined by multiplying the total number of mutual fund shares in Account No. 68901 by the then-existing value of each share, which was fixed by a well-defined market. Moreover, the government's position is contrary to the plain language of 26 C.F.R. 301.6323(h)-1(g), which clearly contemplates judgment liens on personal property other than money, despite the fact that such property often fluctuates in value. Therefore, in addition to identifying the lienor and property subject to the lien, the divorce judgment "established" the value of the lien and, thus, perfected it for the purposes of 26 C.F.R. 301.6323(h)-1(g).

To summarize, the court finds that pursuant to 26 C.F.R. 301.6323(h)-1(g), Carter is a judgment lien creditor of Account No. 68901. Moreover, Carter's interest in Account No. 68901 became perfected and attached upon the issuance of the divorce judgment on August 6, 1997. Consequently, pursuant to 26 C.F.R. §301.7426-1(b) and 26 U.S.C. §6323, the government's levy on Account No. 68901 was wrongful. ⁶

The court must now determine the relief to which Carter is entitled for the government's wrongful levy. Carter contends that pursuant to 26 U.S.C. §7426(g), her judgment should include the amount of $390,958.24 plus interest. In addition, she seeks consequential damages amounting to the costs of this action, including attorney's fees. The government claims that Carter is only entitled to an award of $350,403.24, the amount collected by the IRS from Account No. 68901, plus interest. The government also avers that Carter has not satisfied the statutory prerequisites for the recovery of consequential damages.

The first issue concerning relief is whether the judgment will include the value of Account No. 68901 on August 4, 1999 , $390,958.24, or the portion thereof transferred to the government by Hartford Life, $350,403.24. The only statutory guidance on this matter is 26 U.S.C. §7426(b), which states:

(b) Adjudication.--The district court shall have jurisdiction to grant only such of the following forms of relief as may be appropriate in the circumstances:

. . .

(2) Recovery of Property.--If the court determines that such property has been wrongfully levied upon, the court may--

(A) order the return of specific property if the United States is in possession of such property;

(B) grant a judgment for the amount of money levied upon; or

(C) if such property was sold, grant a judgment for an amount not exceeding the greater of--

(i) the amount received by the United States from the sale of such property, or

(ii) the fair market value of such property immediately before the levy.

Id.

Subsection (b)(2)(C) sets forth the remedies available to Carter. The record indicates that after receiving the government's second levy, Hartford Life sold the mutual fund shares in Account No. 68901 and transferred a portion of the proceeds to the government. (Answers to First Set of Pl.'s Interrog. No. 6; Def.'s Mot. for Summ. J. Ex. 8, 10.) Of the three options, subsection (b)(2)(C) is the only one which addresses the situation in which property is sold to satisfy an IRS tax levy. ⁷ Consequently, the court must award relief in accordance with this subsection.

On this issue, the court finds Carter's position more persuasive. Pursuant to subsection (b)(2)(C), the court has discretion over the award, bounded only by the requirement that the amount not exceed the greater of the funds received by the government, $350,403.12, or the fair market value of Account No. 68901 immediately before the levy, $390,958.24. In determining an appropriate figure, the court is guided by §7426(b)(2), which clearly evinces an intent to return a person whose property has been wrongfully levied upon to the financial position occupied before the levy. If adopted, the government's position would render Carter $40,555.12 poorer than she was before the wrongful levy because she presumably cannot recover the amounts retained by Hartford Life for the payment of taxes and surrender charges. Therefore, Carter's award will include the amount of $390,958.24.

The second matter concerning relief is interest. The court is permitted to award interest on the $390,958.24 in accordance with 26 U.S.C. §7426(g), which states:

(g) Interest.--Interest shall be allowed at the overpayment rate established under section 6621--

. . .

(2) in the case of a judgment pursuant to subsection (b)(2)(C), from the date of the sale of the property wrongfully levied upon to the date of the payment of such judgment.

Id. Section 6621 states that the overpayment rate shall be the sum of "(A) the federal short-term rate determined under subsection (b), plus (B) 2 percentage points." 26 U.S.C. §6621. Therefore, in addition to $390,958.24, Carter is entitled to interest calculated pursuant to §6621, accruing from the date on which Hartford Life sold the mutual fund shares in Account No. 68901 until the date on which the government satisfies the forthcoming judgment of this court.

The final matter concerning relief is the recovery of consequential damages. Carter claims that she is entitled to such damages pursuant to 26 U.S.C. §7426(h), which states in pertinent part:

(h) Recovery of damages permitted in certain cases.--

(1) In general.--Notwithstanding subsection (b), if, in any action brought under this section, there is a finding that any officer or employee of the Internal Revenue Service recklessly or intentionally, or by reason of negligence, disregarded any provision of this title the defendant shall be liable to the plaintiff in an amount equal to the lesser of $1,000,000 ($100,000 in the case of negligence) or the sum of--

(A) actual, direct economic damages sustained by the plaintiff as a proximate result of the reckless or intentional or negligent disregard of any provision of this title by the officer or employee (reduced by any amount of such damages awarded under subsection (b)); and

(B) the costs of this action.

(2) Requirement that admin istrative remedies be exhausted; mitigation; period.--The rules of section 7433(d) shall apply for the purposes of this subsection.

Id. Section 7433(d) states:

(d) Limitations.--

(1) Requirement that admin istrative remedies be exhausted.--A judgment for damages shall not be awarded under subsection (b) unless the court determines that the plaintiff has exhausted the admin istrative remedies available to such plaintiff within the Internal Revenue Service.

(2) Mitigation of damages.--The amount of damages awarded under subsection (b)(1) shall be reduced by the amount of such damages which could have been mitigated by the plaintiff.

(3) Period for brining action.--Notwithstanding any other provision of law, an action to enforce liability created under this section may be brought without regard to the amount in controversy and may be brought only within 2 years after the date the right of action accrues.

26 U.S.C. §7433(d).

The government argues that Carter is not entitled to consequential damages for four reasons. First, the government claims that the record is devoid of any evidence that Carter exhausted her admin istrative remedies. Second, it contends that Carter has not presented sufficient evidence of the IRS's intentional, reckless or negligent disregard of Title 26 of the United States Code. Third, the government asserts that Carter has not established that she suffered economic damages proximately caused by the IRS's actions. Finally, it avers that Carter has failed to mitigate any of her alleged damages.

The exhaustion of admin istrative remedies is addressed by 26 C.F.R. §7433-1. In pertinent part, this regulation states:

(d) No civil action in federal district court prior to filing an admin istrative claim--(1) Except as provided in paragraph (d)(2) of this section, no action under paragraph (a) of this section shall be maintained in any federal district court before the earlier of the following dates:

(i) The date the decision is rendered on a claim filed in accordance with paragraph (e) of this section; or

(ii) The date six months after the date an admin istrative claim is filed in accordance with paragraph (e) of this section.

(2) If an admin istrative claim is filed in accordance with paragraph (e) of this section during the last six months of the period of limitations described in paragraph (g) of this section, the taxpayer may file an action in federal district court any time after the admin istrative claim is filed and before the expiration of the period of limitations.

(e) Procedures for an admin istrative claim--(1) Manner. An admin istrative claim for the lesser of $100,000 or actual, direct economic damages as defined in paragraph (b) of this section shall be sent in writing to the district director (marked for the attention of the Chief, Special Procedures Function) of the district in which the taxpayer currently resides.

(2) Form. The admin istrative claim shall include:

(i) The name, current address, current home and work telephone numbers and any convenient times to be contacted, and taxpayer identification number of the taxpayer making the claim;

(ii) The grounds, in reasonable detail, for the claim (include copies of any available substantiating documentation or correspondence with the Internal Revenue Service);

(iii) A description of the injuries incurred by the taxpayer filing the claim (include copies of any available substantiating documentation or evidence);

(iv) The dollar amount of the claim, including any damages that have not yet been incurred but which are reasonably foreseeable (include copies of any available substantiating documentation or evidence); and

(v) The signature of the taxpayer or duly authorized representative. For purposes of this paragraph, a duly authorized representative is any attorney, certified public accountant, enrolled actuary, or any other person permitted to represent the taxpayer before the Internal Revenue Service who is not disbarred or suspended from practice before the Internal Revenue Service and who has a written power of attorney executed by the taxpayer.

26 C.F.R. §7433-1.

There is evidence in the record that Carter pursued admin istrative remedies before filing this lawsuit. Carter contends that she contacted the IRS in an effort to recover the funds on October 28, 1999 , and again on November 17, 1999 , at which time she was referred to the Taxpayer Advocate Office. ⁸ (2nd Carter Aff. ¶8.) On November 24, 1999 , Carter faxed documentation regarding her claim to the Taxpayer Advocate Office in Nashville , Tennessee , and learned that her claim was assigned to Patricia Debnam. Id. On January 7, 2000 , pursuant to her request, Debnam was faxed copies of court opinions in Carter's divorce proceeding. Id. On October 18, 2000 , Carter was notified that the IRS had rejected her claim. Id.

There is no evidence, however, which indicates that Carter complied with the detailed procedures set forth in 26 C.F.R. §7433-1(e). Carter has not established that she presented her admin istrative claim to the funds from Account No. 68901 in a writing sent to the district director (marked for the attention of the Chief, Special Procedures Function) of the district which encompasses Memphis . Moreover, there is no indication that Carter submitted her claim in the proper format. Therefore, since Carter has not demonstrated that she exhausted her admin istrative remedies before filing this suit as required by 26 U.S.C. §7426(h), she is not entitled to consequential damages, su