Opinion
No. 6965.
May 17, 1929.
George Donworth, Elmer E. Todd, Frank E. Holman, and Donworth, Todd Holman, all of Seattle, Wash., for plaintiff.
Anthony Savage, U.S. Atty., of Seattle, Wash., John T. McCutcheon, Asst. U.S. Atty., of Tacoma, Wash., C.M. Charest, Gen. Counsel, Bureau of Internal Revenue, George G. Witter, Sp. Atty., Bureau of Internal Revenue, and T.H. Lewis, Jr., Sp. Atty., Bureau of Internal Revenue, all of Washington, D.C., for defendant.
At Law. Action by H.G. Seaborn against Burns Poe, Collector of Internal Revenue. Judgment for plaintiff.
Plaintiff sues to recover from the collector an amount paid by him under protest on account of 1927 income taxes. Plaintiff and his wife having made separate returns and payments for that year, he was thereafter required to pay a sum sufficient, with the payments theretofore made by him and his wife, to equal the amount due, provided plaintiff should, instead of such separate returns, have reported the whole as his income. The case was tried to the court upon an agreed statement of facts. The following summary of such statement from plaintiff's brief shows with sufficient fullness and detail the question presented:
"The plaintiff, H.G. Seaborn, and Charlotte A. Seaborn were married at Seattle, Wash., December 11, 1902, and since said date have continuously maintained the marriage relationship, continuously lived in the state of Washington, and been citizens and residents of said state. Neither the plaintiff nor his said wife had any property at the date of their marriage, and neither has since acquired any property by gift, bequest, devise, descent, or inheritance; but they have accumulated a considerable amount of property in the state of Washington, consisting of real estate situated in said state, stocks, bonds, moneys, and other personal property, all of which was and is the community property of the plaintiff and his said wife, under the laws of the state of Washington.
"The entire income, in and for the year 1927, of the plaintiff and his wife, reported by them on their income tax returns filed for said year, was their community income under the laws of the state of Washington and was derived as follows:
1. Salary of plaintiff for the year 1927 as an officer and employee of the Skinner Eddy Corporation, a Washington corporation ................................ $15,000 00 2. Interest on bank deposits, notes, and corporation bonds .......................... 12,881 06 3. Dividends on stock of domestic corporations .. 8,834 57 4. Profit from sale of real estate, stocks, and bonds .................................. 606 59 5. Profit on sale of boat Sea Gypsy ............. 500 00 6. Profit on Cities Service joint venture ....... 625 95 __________ Total .................................... $38,448 17
"The plaintiff, H.G. Seaborn, and his said wife, Charlotte A. Seaborn, made separate returns, under the Revenue Act of 1926, for their incomes for the year 1927, each of said returns setting forth, as the income of the spouse making the same, one-half of the full community income of the spouses for said year. Both plaintiff and said wife, at the time required by law, paid an income tax for the 1927 income, computed on said returns separately considered. Thereafter the Commissioner of Internal Revenue assessed a tax for said year against the plaintiff, H.G. Seaborn, including a surtax, computing and assessing the same on the basis and theory that the entire community income was assessable and taxable to the husband alone. The defendant collector gave the plaintiff husband a credit on said new assessment for the sums already paid by the plaintiff and his said wife, and demanded payment of the unpaid balance, amounting, with interest, to the sum of $720.93. Plaintiff thereupon, under due protest, paid said additional tax so assessed, and after proper proceedings instituted this suit to recover the excess sum so paid by him over and above the amount of tax computed, assessed, and paid on the basis of separate returns, as hereinabove stated."
Plaintiff and defendant each moved for judgment upon the stated facts.
Plaintiff cites: Opinions of the Attorney General, Feb. 26, 1921 (32 Op. Attys. Gen. 435); Opinions of the Attorney General, Sept. 10, 1920 (32 Opp. Attys. Gen. 298); Opinions of the Attorney General, July 16, 1927 (35 Op. Attys. Gen. 265); United States v. Robbins, 269 U.S. 315, 46 S. Ct. 148, 70 L. Ed. 285; Revenue Act of 1926 ( 44 Stat. 9, pt. 2); Opinions of the Attorney General, Aug. 24, 1920 (32 Op. Atty. Gen. 298); Treasury Decisions, Sept. 18, 1920 (T.D. 3071); Treasury Decisions, March 3, 1921 (T.D. 3138); Revenue Act of 1921 (H.R. 8245 [ 42 Stat. 227]); Revenue Act of 1921, as reported by Finance Committee of Senate; United States v. G. Falk Bro., 204 U.S. 143, 27 S. Ct. 191, 51 L. Ed. 411; United States v. Cerecedo Hermanos y Compania, 209 U.S. 337, 28 S. Ct. 532, 52 L. Ed. 821; Smietanka v. First Trust Sav. Bank, 257 U.S. 602, 42 S. Ct. 223, 66 L. Ed. 391; Provost v. United States, 269 U.S. 443, 46 S. Ct. 152, 70 L. Ed. 352. Cf. Act 1861, U.S. Stat. 12, p. 309, Sess. 1, c. 45, § 49; Act 1862, U.S. Stat. 12, p. 473, Sess. 2, c. 119, § 90; Act 1864, U.S. Stat. 13, p. 281, Sess. 1, c. 173, § 116; Act 1894, U.S. Stat. 28, p. 553, Sess. 2, c. 349, § 27; Act 1913, 38 Stat. 114, § IIA.(1); Act 1916, 39 Stat. 756, tit. 1, pt. 1, § 1(a); Act 1917, 40 Stat. 300, tit. 1, § 1; Act 1918, 40 Stat. 1057, tit. 2, pt. 2, §§ 210 and 211; Act 1921, 42 Stat. 233, tit. 2, pt. 2, §§ 210 and 211; Act 1924, 43 Stat. 264, tit. 2, pt. 2, §§ 210 and 211 ( 26 USCA §§ 951, note, 952, note); Act 1926, 44 Stat. 21, tit. 2, pt. 2, §§ 210 and 211 ( 26 USCA § 952, note); Rensselaer S.R. Co. v. Irwin (C.C.A.) 249 F. 726, certiorari denied 246 U.S. 671, 38 S. Ct. 424, 62 L. Ed. 931; West End Street Ry. Co. v. Malley (C.C.A.) 246 F. 625, certiorari denied 246 U.S. 671, 38 S. Ct. 423, 62 L. Ed. 931; Northern Ry. Co. v. Lowe (C.C.A.) 250 F. 856; United States v. Western Union Telegraph Co. (D.C.) 19 F.2d 157; Towne v. Eisner (D.C.) 242 F. 702, 704; Mutual Benefit Life Insurance Co. v. Herold (D.C.) 198 F. 199, affirmed (C.C.A.) 201 F. 918; Amer. Net Twine Co. v. Worthington, 141 U.S. 468, 12 S. Ct. 55, 35 L. Ed. 821; Benziger v. United States, 192 U.S. 38, 24 S. Ct. 189, 48 L. Ed. 331; Eidman v. Martinez, 184 U.S. 578, 22 S. Ct. 515, 46 L. Ed. 697; Gould v. Gould, 245 U.S. 151, 38 S. Ct. 53, 62 L. Ed. 211; Shwab v. Doyle, 258 U.S. 529, 42 S. Ct. 391, 66 L. Ed. 747, 26 A.L.R. 1454; Reinecke v. Gardner, 277 U.S. 239, 48 S. Ct. 472, 72 L. Ed. 866; Crocker v. Malley, 249 U.S. 223, 39 S. Ct. 270, 63 L. Ed. 573, 2 A.L.R. 1601; Scott v. Western Pac. Co. (C.C.A.) 246 F. 545; United States v. Coulby (D.C.) 251 F. 982; Id. (C.C.A.) 258 F. 27; United States v. Field, 255 U.S. 257, 41 S. Ct. 256, 65 L. Ed. 617, 18 A.L.R. 1461; First Trust Sav. Bank v. Smietanka (C.C.A.) 268 F. 230; Bek v. Miller, 56 App. D.C. 36, 8 F.2d 797 at page 799; Bacon v. Hopkins (D.C.) 27 F.2d 140; Norman De Vaux v. Commissioner of Internal Revenue, U.S. Board of Tax Appeals, Docket No. 13574, decided by the Board on November 14, 1928; Hill v. Young, 7 Wn. 33, 34 P. 144; Holyoke v. Jackson, 3 Wn. Ter. 235, 3 P. 841; Mabie v. Whittaker, 10 Wn. 656, 39 P. 172; Warburton v. White, 176 U.S. 484, 20 S. Ct. 404, 44 L. Ed. 555; Ambrose v. Moore, 46 Wn. 463, 466, 90 P. 588, 11 L.R.A. (N.S.) 103; Schneider v. Biberger, 76 Wn. 504, 507, 136 P. 701, 6 A.L.R. 1056; James v. James, 51 Wn. 60, 97 P. 1113, 98 P. 1115; section 1342, Remington's Compiled Statutes of Washington 1922; Warburton v. White, 18 Wn. 511, 52 P. 233, 532; Ahern v. Ahern, 31 Wn. 334, 71 P. 1023, 96 Am. St. Rep. 912; Stewart v. Bank of Endicott, 82 Wn. 106, 143 P. 458; Remington's Compiled Statutes of Washington 1922, §§ 6892 and 6893; Crawford v. Morris, 92 Wn. 288, 158 P. 957; Schramm v. Steele, 97 Wn. 309, 166 P. 634; Olive Co. v. Meek, 103 Wn. 467, 175 P. 33; Snyder v. Stringer, 116 Wn. 131, 198 P. 733; Coles v. McNamara, 131 Wn. 691, 230 P. 430; Peterson v. Zimmerman, 142 Wn. 385, 253 P. 642; Spokane State Bank v. Tilton, 132 Wn. 641, 233 P. 15; Marston v. Rue, 92 Wn. 129, 159 P. 111; Parker v. Parker, 121 Wn. 24, 207 P. 1062; McDonough v. Craig, 10 Wn. 239, 38 P. 1034; Allen v. Chambers, 18 Wn. 341, 51 P. 478; Brotton v. Langert, 1 Wn. 73, 23 P. 688; Day v. Henry, 81 Wn. 61, 142 P. 439; Wilson v. Stone, 90 Wn. 365, 156 P. 12; Fielding v. Ketler, 86 Wn. 194, 149 P. 667; Spinning v. Allen, 10 Wn. 570, 39 P. 151; Hoover v. Chambers, 3 Wn. Ter. 26, 13 P. 547; Kaufman v. Perkins, 114 Wn. 40, 194 P. 802; Littell Smythe Mfg. Co. v. Miller, 3 Wn. 480, 28 P. 1035; article of the Constitution of the United States, §§ 2, 8, and 9; Fifth and Sixteenth Amendments to the Constitution of the United States; McKay on Community Property, § 1265; 30 Corpus Juris, 564, § 97; I.T. Bulletin, Jan. to June, 1924 (C.B. VII-I, p. 112); Arnett v. Reade, 220 U.S. 311, 31 S. Ct. 425, 55 L. Ed. 477, 36 L.R.A. (N.S.) 1040; Buchser v. Buchser, 231 U.S. 157, 34 S. Ct. 46, 58 L. Ed. 166; Remington's Compiled Statutes of Washington 1922, § 6906; Hector v. Hector, 51 Wn. 434, 99 P. 13; Kimble v. Kimble, 17 Wn. 75, 49 P. 216; State ex rel. Lloyd v. Superior Court, 55 Wn. 347, 104 P. 771, 25 L.R.A. (N.S.) 387; Revenue Act of 1926, § 1212 (26 USCA 964a); Calvin Phillips Co. v. Bergman, 130 Wn. 346, 227 P. 321; Calvin Phillips Co. v. Langlow, 55 Wn. 385, 104 P. 610; Horton v. Donohoe Kelly Banking Co., 15 Wn. 399, 46 P. 409, 47 P. 435; Shuey v. Holmes, 22 Wn. 193, 60 P. 402; Donohoe-Kelly Banking Co. v. Puget Sound Bank, 13 Wn. 407, 409, 43 P. 359, 942, 52 Am. St. Rep. 57; Rucker v. Blair (No. 5662, Ninth Circuit Court of Appeals, decided April 1, 1929) 32 F.2d 222.
Defendant cites: Revenue Act of 1926 ( 44 Stat. 9, pt. 2); United States v. Robbins, 269 U.S. 315, 46 S. Ct. 148, 70 L. Ed. 285; Civil Code of California, § 1401; Revised Laws of Nevada, § 2164; New Mexico Code of 1915, § 1840; Garrozi v. Gastas, 204 U.S. 64, 27 S. Ct. 224, 51 L. Ed. 369; Daniel v. Daniel, 106 Wn. 659, 181 P. 215; Merriam v. Patrick, 103 Wn. 442, 174 P. 641; Richmond Screw Anchor Co. v. United States, 275 U.S. 331, 48 S. Ct. 194, 72 L. Ed. 303; United States v. Title Insurance Trust Co., 265 U.S. 472, 486, 44 S. Ct. 621, 68 L. Ed. 1110; McKay on Community Property, § 1255; McAlpine v. Kohler Chase, 96 Wn. 146, 164 P. 755; Litzell v. Hart, 96 Wn. 471, 165 P. 393; Potter v. Couch, etc., 141 U.S. 296, 11 S. Ct. 1005, 35 L. Ed. 721; Shorett v. Signor, 58 Wn. 89, 107 P. 1033; Ostheller v. R. Co., 107 Wn. 678, 182 P. 630; Katz v. Judd, 108 Wn. 557, 185 P. 613; Holyoke v. Jackson, 3 Wn. Ter. 235, 3 P. 841; Marston v. Rue, 92 Wn. 129, 159 P. 111; Civil Code of California, §§ 162-164 and 167; Remington's Compiled Statutes of Washington 1922, §§ 6890-6893; Gage v. Gage, 78 Wn. 262, 138 P. 886; Remington's Compiled Statutes of Washington 1922, §§ 6895-6897; Civil Code of California §§ 168, 169, 172, and 173; Remington's Compiled Statutes of Washington 1922, §§ 7598, 10577; Schramm v. Steele, 97 Wn. 309, 166 P. 634; Farmers', etc., Bank v. Drew, 48 Cal.App. 442, 192 P. 105; Remington's Compiled Statutes of Washington 1922, §§ 1342 and 1419; Civil Code of California, §§ 1401 and 1402; Remington's Compiled Statutes of Washington, 1922, § 989; Civil Code of California, § 146; Ritzville First National Bank v. Cunningham, 72 Wn. 532, 130 P. 1148; Smietanka v. First Trust Savings Bank, 257 U.S. 602, 42 S. Ct. 223, 66 L. Ed. 391; Revenue Act of 1913 ( 38 Stat. 114); McKay on Community Property, §§ 835 to 840, inclusive; Rucker v. Blair (No. 5662, Ninth Circuit Court of Appeals, decided April 1, 1929) 32 F.2d 222; Allen v. Commissioner of Internal Revenue, U.S. Board of Tax Appeals, No. 19438; Revenue Act of 1928 ( 26 USCA § 2001 et seq.).
The case was submitted to the court before the decision of the Circuit Court of Appeals for this circuit in the cases of Rucker v. Blair. Since such decisions each party hereto has filed a further brief.
Section 210(a) of the Act of February 26, 1926 (44 Stat. pt. 2, p. 21) provides:
"Sec. 210. (a) In lieu of the tax imposed by section 210 of the Revenue Act of 1924, there shall be levied, collected, and paid for each taxable year upon the net income of every individual (except as provided in subdivision (b) of this section) a normal tax of 5 per centum of the amount of the net income in excess of the credits provided in section 216, except that in the case of a citizen or resident of the United States the rate, upon the first $4,000, of such excess amount shall be 1½ per centum, and upon the next $4,000 of such excess amount shall be 3 per centum. * * *" (Underscoring the court's.)
It is the defendant's contention that, under the laws of the state of Washington, in so far as property and income are concerned, the marital community is an "individual" within the meaning of the above-quoted section, in support of such contention citing Holyoke v. Jackson, 3 Wn. Ter. 235, 3 P. 841, and Marston v. Rue, 92 Wn. 129, 159 P. 111.
The Circuit Court of Appeals for this circuit, in the cases of Rucker v. Blair (5662 and 5663) 32 F.2d 222, 225, decided April 1, 1929, under the Revenue Act of 1918 (40 Stat. pt. 2, p. 1062), held that a separate return by the husband of his distributive share of community income for each of the years 1918 and 1919 was proper. In the opinion in the first of these cases the court said:
"* * * The partnership return for 1918 exhibited a total distributive income of $95,699.27, divided equally between the two partners. Petitioner had no other income (except his compensation for personal services to the firm which is not in issue), and made his individual tax return for one-half only of his distributive share, upon the assumption that it was community income, and that therefore the other half was returnable by his wife. Taking the view that the whole of his share was separate property, the Commissioner made an assessment on that basis, and by the order brought here for review, the Board of Tax Appeals affirmed the assessment.
"The question is whether such income was separate or community property. The pertinent state statutes are sections 6890, 6891, and 6892 of Remington's Compiled Statutes of Washington. * * *
"6. The wife has during coverture, as well as upon dissolution of the marriage, a vested and definite interest and title in community property equal in all respects to the interest and title of her husband therein. Marston v. Rue, 92 Wn. 129, 159 P. 111; Schramm v. Steele, 97 Wn. 309, 166 P. 634; Huyvaerts v. Roedtz, 105 Wn. 657, 178 P. 801. See, also, Op. Atty. Gen. March 3, 1921, T.D. 3138, 4 C.B. 238.
"And it is provided by section 1212 of the Revenue Act of 1926, 44 Stat. 9, 130 (26 USCA § 964a), that `income for any period before January 1, 1925, of a marital community 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.' * * *
"Our conclusion is that the petitioner's distributive share was community income, and was properly returned as such. The order appealed from is therefore reversed."
In the case brief filed for the defendant it is said of this case:
"In the case of Rucker v. Blair it was the position of the government itself that the income involved in that suit was properly returned, provided the court should determine that the income in fact was community income. No other tenable position was possible. In section 1212 Congress expressly provided that community income for periods prior to January 1, 1925, might be returned by husband and wife separately. The Circuit Court in the Rucker Case, reached the conclusion that the income WAS in fact, community income. This settled the entire controversy. There was no other issue." (Last italics the court's.)
The court, in Rucker v. Blair, not only reached the conclusion that the income in question was community income, but held that in Washington "* * * The wife has, during coverture, * * * a vested and definite interest and title in community property equal in all respects to the interest and title of her husband therein."
It inescapably follows that the wife has such interest and title in the community income, for the income upon its receipt is not different in any respect which touches the present question from other community property. If her interest and title vests during coverture, it vests upon receipt of the income, and she is, for the purposes of her share of such income, the "individual" of such statute.
The judgment will be for the plaintiff as prayed, to be settled upon notice.