LUCAS, COMMISSIONER OF INTERNAL REVENUE,
v.
EARL
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The Supreme Court held that an individual who earned salary and attorney's fees under a valid community property agreement with his spouse, by which the earnings became joint property upon receipt, remained taxable on the entire income under the federal income tax statute. The Court established that income must be taxed to the person who earned it through personal service, regardless of contractual arrangements or anticipatory assignments designed to shift the tax liability to another party.
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Mr. Justice Holmes delivered the opinion of the Court.
This case presents the question whether the respondent, Earl, could be taxed for the whole of the salary and attorney’s fees earned by him in the years 1920 and 1921, or should be taxed for only a half of them in view of a contract with his wife which we shall mention. The Commissioner of Internal Revenue and the Board of Tax Appeals imposed a tax upon the whole, but their decision was reversed by the Circuit Court of Appeals, 30 F. (2d) 898. A writ of certiorari was granted by this Court.
By the contract, made in 1901, Earl and his wife agreed “ that any property either of us now has or may hereafter acquire ... in any way, either by earnings (including salaries, fees, etc.), or any rights by contract or otherwise, during the existence of our marriage, or which we or either of us may receive by gift, bequest, devise, or inheritance, and all the proceeds, issues, and profits of any and all such property shall be treated and considered and hereby is declared to be. received, held, taken, and owned by us as joint tenants, and not otherwise, with the right of survivorship.” The validity of the contract is not questioned, and we assume it to be unquestionable under the law of the State of California, in which the parties lived. ‘ Nevertheless we are of opinion that the Commissioner and Board of Tax Appeals were right.
The Revenue Act of 1918 approved February 24, 1919, c. 18, §§210, 211, 212 (a), 213 (a), 40 Stat. 1057,1062,1064, 1065, imposes a tax upon the net income of every individual including “ income derived from salaries, wages, or compensation for personal service ... of whatever kind and in whatever form paid,” § 213 (a). The provisions of the Revenue Act of 1921; c. 136, 42 Stat; 227, in sections bearing the same numbers are similar to those of the above. A very forcible argument is presented to the effect that the statute seeks to tax only income beneficially received, and that taking the question more technically the salary and fees became the joint property of Earl and his wife on the very first instant on which they were received. We well might hesitate upon the latter proposition, because however the matter might stand between husband and wife he was the only party to the contracts by which the salary and fees were earned, and it is somewhat hard to say that the last step in the performance of those contracts could be taken by anyone but himself alone. But this case is not to be decided by attenuated subtleties. It turns on the import and reasonable construction of the taxing act. There is no doubt that the statute could tax salaries to those who earned them and provide that the tax could not be escaped by anticipatory arrangements and contracts however skilfully devised to prevent the salary when paid from vesting even for a second in the man who earned it. That seems to us the import of the statute before us and we think that no distinction can be taken according to the motives leading to the arrangement by which the fruits are attributed to a different tree from that on which they grew.
Judgment reversed.
The Chief Justice took no part in this case.
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In re Interest ON Tr. Accounts, 402 So. 2d 389 (Fla. 1981)…e to IRS revolve around the federal income tax concept known to tax practitioners as the “assignment of income” doctrine. That doctrine, which is an outgrowth of a graduated, federal income tax rate structure, was first articulated in Lucas v. Earl, 281 U.S. 111, 50 S.Ct. 241, 74 L.Ed. 731 (1930). It evolved to prevent persons who generate income by their services or with their property from shifting that income to other persons in whose hands the income either would not be taxed or would be taxed at signif…
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Billings v. City OF Orlando, 287 So. 2d 316 (Fla. 1973)…come, and this does not give rise to any private property rights in the amounts so deducted. [*320] Money may constitute income for purposes of the federal income tax without being property of the taxpayer. Lucas v. Earl, 281 U.S. 111, 50 S.Ct. 241, 74 L.Ed. 731 (1930). And even if the sums in question were considered private property, we are satisfied as to the necessity and reasonableness of the procedure involved here, by which the 50% of contributions forfeited, in effect “paid for” the various benefits…
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Commissioner of Internal Revenue v. Sunnen, 333 U.S. 591 (U.S. 1948)…s accruing thereunder, such payments would clearly have been taxable income to him. It has long been established that the mere assignment of the right to receive income is not enough to insulate the assignor from income tax liability. Lucas v. Earl, 281 U. S. 111; Burnet v. Leininger, 285 U. S. 136. As long as the assignor actually earns the income or is otherwise the source of the right to receive and enjoy the income, he remains taxable. The problem here is whether any different result follows because the…
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- Earl v. Commissioner of Internal Revenue, 30 F.2d 898 (9th Cir. 1929)