When a taxpayer failed to pay his federal income taxes, the IRS issued a levy against him. Among his possessions was a block of 16 season tickets for a professional sports team. He also had paid a deposit per seat as a “personal seat license,” on top of the cost for the season tickets themselves each year.
The IRS wanted to seize and sell the season ticket renewal right, treating it as a form of “property or rights to property” under federal law. The sports team objected, but did say that if it received a levy it would pay out the taxpayer’s deposit for the personal seat licenses. The team’s policies provided that the right to renew season tickets was not transferable and that, if a ticket holder did not renew, the tickets would pass to the next person on a very long waiting list for people seeking season tickets.
In issuing an Advisory Opinion in favor of the sports team’s position, the IRS found no precedents on the precise issue, but it borrowed from bankruptcy cases in which the bankruptcy trustee sold the taxpayer’s season ticket renewals as property of the estate. In that context, the decisive factor was the team’s policy—if the team treated a right to renew as transferable, it was “property,” but if, as in the case at hand, it did not allow transfers, the right to renew was not a property right that could be sold.
As a result, the IRS could not touch the taxpayer’s right to renew his tickets to satisfy the taxes owed, but it could go after the personal seat licenses for which the taxpayer had paid a deposit. A tax lien would attach to them, putting the IRS into the taxpayer’s shoes and allowing the IRS to terminate the season tickets and receive a refund of the personal seat licenses deposit. The people next in line on the waiting list were no doubt very pleased.