Lucas v. Earl

Infobox SCOTUS case
Litigants = Lucas v. Earl
ArgueDate = March 3
ArgueYear = 1930
DecideDate = March 17
DecideYear = 1930
FullName = Robert H. Lucas, Commissioner of Internal Revenue
v.
Earl
USVol = 281
USPage = 111
Citation =
Prior =
Subsequent =
Holding = All of a husband's earnings are to be taxed to husband even though husband and wife had previously entered into an agreement under which all earnings of husband and wife “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.”
SCOTUS = 1930
Majority = Holmes
JoinMajority = "unanimous"
Concurrence =
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Concurrence2 =
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NotParticipating = Hughes
LawsApplied =

"Lucas v. Earl", 281 U.S. 111 (1930), [See [http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=281&invol=111 281 U.S. 111 at Findlaw] .] is a United States Supreme Court case concerning taxation, about a man who reported only half of his earnings for years 1920 and 1921. The case addresses the taxpayer's attempt at tax avoidance based on a contract with his wife. The contract specified that earnings were owned by the couple as joint tenants. Justice Oliver Wendell Holmes delivered the Court’s opinion which generally stands for the proposition that income from services is taxed to the party who performed the services. [281 U.S. 111, 115.] The case is used to support the proposition that the substance of the transaction, rather than the form, is controlling for tax purposes. [See [http://www.irs.gov/businesses/small/article/0,,id=106542,00.html] .]

Facts and procedural history

Earl, an attorney, entered into a contract with his wife where all property and earnings "shall be treated and considered . . . to be . . . owned by us [Earl and his wife] as joint tenants . . . with rights of survivorship." [281 U.S. 111, 113-14.] Earl intended to cut his tax liability in half. [Id. at 113.] The issue before the court centered on whether Earl alone or Earl and his wife should be taxed on salary and attorneys fees earned by Earl in 1920 and 1921. [Id.]

The Bureau of Internal Revenue (the predecessor to the Internal Revenue Service) determined, and the Board of Tax Appeals (predecessor to the United States Tax Court) ruled, that the tax imposed on Mr. Earl was imposed on his entire salary, including the portion assigned to his wife. [Id. at 111.] Earl appealed, and the decision was reversed by the Circuit Court of Appeals for the Ninth Circuit. [Id.]

=Holding: the Anticipatory Assignment of Income Doctrine=

The validity of Earl’s contract was not questioned. [Id. at 114.] However, the Court reversed the decision of the Ninth Circuit Court of Appeals and ruled in favor of the tax collector. The Court indicated there was "no doubt that the statute required salaries to be taxed by those who earned them and provided that the tax could not be escaped by anticipatory arrangements and contracts however skillfully devised to prevent the salary when paid from vesting even for a second in the man who earned it." [Id. at 114-15.] Holmes concludes his opinion with the classic metaphor: The fruits cannot be attributed to a different tree from that on which they grew. [ Id. at 115.]

ee also

*List of United States Supreme Court cases, volume 281
*"Poe v. Seaborn", ussc|282|101|1930

References

Further reading

*cite book |title=Tax stories: An in-depth look at ten leading federal income tax cases |chapter=The Story of "Earl": How Echoes (and Metaphors) from the Past Continue to Shape the Assignment of Income Doctrine |last=Cain |first=Patricia A. |authorlink= |editor=Caron, Paul L. (ed.) |year=2002 |publisher=Foundation Press |location=New York |isbn=1587784033 |pages=275–312