U.S. Supreme Court POE v. SEABORN, 282 U.S. 101 (1930)

[Page 282 U.S. 101, 109]

property. While the real estate stood in his name alone, it is undisputed that all of the property real and personal constituted community property and that neither owned any separate property or had any separate income.

The income comprised Seaborn's salary, interest on bank deposits and on bonds, dividends, and profits on sales of real and personal property. He and his wife each returned one-half the total community income as gross income and each deducted one-half of the community expenses to arrive at the net income returned.

The Commissioner of Internal Revenue determined that all of the income should have been reported in the husband's return, and made an additional assessment against him. Seaborn paid under protest, claimed a refund, and on its rejection, brought this suit.

The District Court rendered judgment for the plaintiff (32 F.(2d) 916 ); the Collector appealed, and the Circuit Court of Appeals certified to us the question whether the husband was bound to report for income tax the entire income, or whether the spouses were entitled each to return one- half thereof. This Court ordered the whole record to be sent up. 281 U.S. 704, 50 S. Ct. 459

The case requires us to construe sections 210(a) and 211(a) of the Revenue Act of 1926 (44 Stat. 21, USCA tit. 26, 951 note and 952 note), and apply them, as construed, to the interests of husband and wife in community property under the law of Washington. These sections lay a tax upon the net income of every individual. [Footnote 1] The Act goes no farther, and furnishes no other standard or definition of what constitutes an individual's income. The use of the word 'of' denotes ownership. It would be a strained construction, which, in the absence of further definition by Congress, should impute a broader significance to the phrase.

[Page 282 U.S. 101, 114]

the community income in California, but accorded that privilege to residents of such other states. [Footnote 4]

He relies further upon the fact that Congress has thrice,5 since these Decisions and Regulations were promulgated, re-enacted the income tax law without change of the verbiage found in sections 210(a) and 211(a), thus giving legislative sanction to the executive construction. He stands also on the fact that twice the Treasury has suggested the insertion of a provision,6 which would impose the tax on the husband in respect of the whole community income, and that Congress has not seen fit to adopt the suggestion.

On the other hand the Commissioner says that, granted the truth of these assertions, a different situation has been created as respects 1926 and subsequent years. For in the 1926 Act there was inserted a section which plainly indicated an intent to leave this question open for the future in States other than California, while closing it for past years. The section is copied in the margin. [Footnote 7]

[Page 282 U.S. 101, 115]

We attribute no such intent to the section as is ascribed to it by the Commissioner. We think that although Congress had twice refused to change the wording of the Act, so as to tax community income to the husband in Washington and certain other states, in view of our decision in United States v. Robbins, 269 U.S. 315, 46 S. Ct. 148, it felt we might overturn the executive construction and assimilate the situation in Washington to that we had determined existed in California. Section 1212 therefore was merely inserted to prevent the serious situation as to resettlements, additional assessments and refunds which would follow such a decision.

The same comments apply to the Joint Resolution No. 88, 71st Congress, on which the Commissioner relies. [Footnote 8]

[Page 282 U.S. 101, 118]

designated by Congress as taxable, may not be read into the Revenue Act to spell out a lack of uniformity. Florida v. Mellon, 273 U.S. 12, 47 S. Ct. 265.

The District Court was right in holding that the husband and wife were entitled to file separate returns, each treating one-half of the community income as his or her respective incomes, and its judgment is affirmed.

The CHIEF JUSTICE and Mr. Justice STONE took no part in the consideration or decision of this case. Footnotes

Footnote 1 The language has been the same in each act since that of February 24, 1919, 40 Stat. 1057.

Footnote 2 Remington's Compiled Statutes, 1922, Sections 181, 182, 570, 989, 1145, 1342, 1419, 6890 to 6896, inc., 6900 to 6906, 6908, 7348, 7598, 10572, 10575, 10577 and 10578.

Footnote 3 Opinion of Attorney General Palmer, September 10, 1920 (32 Op. Attys. Gen. 298); Opinion of Attorney General Palmer, February 26, 1921 ( 32 Op. Attys. Gen. 435).

The Opinion of Attorney General Stone, of October 9, 1924 (34 Op. Attys. Gen. 395), and his letter of January 27, 1925, referring thereto ( see T. D. 3670) deal only with estate tax, and express no opinion on the question here involved.

See Opinion of Acting Attorney General Mitchell of July 16, 1927, as a result of which this and other suits were initiated (35 Op. Attys. Gen. 265).

Footnote 4 O. D. 426, April 1920; T. D. 3071, August 24, 1920; T. D. 3138, March 3, 1921; Regulations 62, Art. 31, 1921 Revenue Act.

Footnote 5 Act of November 23, 1921, 42 Stat. 227; Act of June 2, 1924, 43 Stat. 253; Act of February 26, 1926, 44 Stat. 9.

Footnote 6 The provision desired by the Treasury was as follows: 'Income received by any community shall be included in the gross income of the spouse having management and control of the community property.' This clause was in the 1921 Act as passed by the House. It was stricken out in the Senate. When the 1924 Act was introduced it contained the same provision, which was stricken out by the Ways and Means Committee and not reinserted.

Footnote 7 Sec. 1212. 'Income from any period before January 1, 1925, of a marital commnit y in the income of which the wife has a vested interest as distinguished from an expectancy, shall be held to be correctly returned if returned by the spouse to whom the income belonged under the State law applicable to such marital community for such period. Any spouse who elected so to return such income shall not be entitled to any credit or refund on the ground that such income should have been returned by the other spouse.' (U. S. C. Supp. II, title 26, 964a).

Footnote 8 That the three-year period of limitation provided in section 277 of the Revenue Act of 1926 upon the assessment of income taxes imposed by that Act for the taxable year 1927, and the three-year period of limitation provided in section 284 of the Revenue Act of 1926 in respect of refunds and credits of income taxes imposed by that Act for the taxable year 1927 shall be extended for a period of one year in the case of any married individual where such individual or his or her spouse filed a separate income-tax return for such taxable year and included therein income which under the laws of the State upon receipt became community property.

Sec. 2. The two-year period of limitation provided in section 275 of the Revenue Act of 1928 upon the assessment of income taxes imposed by Title I of that Act for the taxable year 1928, and the two-year period of limitation provided in section 322 of the Revenue Act of 1928 in respect of refunds and credits of income taxes imposed by that Act for the taxable year 1928 shall be extended for a period of one year in the case of any married individual where such individual or his or her spouse filed a separate income-tax return for such taxable year and included therein income which under the laws of the State upon receipt became community property.

Sec. 3. The periods of limitations extended by this joint resolution shall, as so extended, be considered to be provided in sections 277 and 284 of the Revenue Act of 1926 and sections 275 and 322 of the Revenue Act of 1928, respectively.

Sec. 4. Nothing herein shall be construed as extending any period of limitation which has expired before the enactment of this joint resolution.