Lucas v. Earl

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In the case of Lucas v. Earl, 281 US 111 (1930), the U.S. Supreme Court stated unambiguously that;

"The claim that salaries, wages and compensation for personal services are to be taxed as an entirety and therefore must be returned by the individual who has performed the services which produced the gain is without support either in the language of the Act or in the decisions of the courts construing it. Not only this, but it is directly opposed to provisions of the Act and to regulations of the U.S. Treasury Dept. which either prescribe or permit that compensation for personal services be not taxed as an entirety and be not returned by the individual performing the services. It is to be noted that by the language of the Act it is not salaries, wages or compensation for personal services that are to be included in gross income. That which is to be included is gains, profits and income DERIVED from salaries, wages or compensation for personal service."

Lucas v. Earl
No. 99
Argued March 3, 1930
Decided March 17, 1930
281 U.S. 111



Under the Revenue Act of 1918, which taxes the income of every individual, including "income derived from salaries, wages, or compensation for personal service . . . of whatever kind and in whatever form paid," the income of a husband by way of salary and attorney's fees is taxable to him notwithstanding that, by a contract between him and his wife, assumed to be valid in California where they reside, all their several earnings, including salaries and fees, are to be received, held, and owned by both as joint tenants.

30 F.2d 898 reversed.

Certiorari, 280 U.S. 538, to review a judgment of the circuit court of appeals which reversed a decision of the Board of Tax Appeals upholding a tax upon the respondent's income. [281 U.S. 113]

HOLMES, J., lead opinion

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 [281 U.S. 114] 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 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, 233, 237, 238, 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 [281 U.S. 115] provide 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.  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.

Cases citing this case . . .

The following 23 case(s) in the USSC+ database cite this case:

  • Hillsboro Nat'l Bank v. Commissioner, 460 U.S. 370 (1983)
  • United States v. Consumer Life Ins. Co., 430 U.S. 725 (1977)
  • United States v. Basye, 410 U.S. 441 (1973)
  • Commissioner v. First Security Bank of Utah, 405 U.S. 394 (1972)
  • James v. United States, 366 U.S. 213 (1961)
  • Commissioner v. Culbertson, 337 U.S. 733 (1949)
  • National Carbide Corp. v. Commissioner, 336 U.S. 422 (1949)
  • Commissioner v. Sunnen, 333 U.S. 591 (1948)
  • United States v. Silk, 331 U.S. 704 (1947)
  • Lusthaus v. Commissioner, 327 U.S. 293 (1946)
  • Commissioner v. Tower, 327 U.S. 280 (1946)
  • Commissioner v. Harmon, 323 U.S. 44 (1944)
  • United States v. Joliet & Chicago R. Co., 315 U.S. 44 (1942)
  • Harrison v. Schaffner, 312 U.S. 579 (1941)
  • Helvering v. Horst, 311 U.S. 112 (1940)
  • Helvering v. Clifford, 309 U.S. 331 (1940)
  • Higgins v. Smith, 308 U.S. 473 (1940)
  • Griffiths v. Commissioner, 308 U.S. 355 (1939)
  • Blair v. Commissioner, 300 U.S. 5 (1937)
  • Burnet v. Wells, 289 U.S. 670 (1933)
  • Reinecke v. Smith, 289 U.S. 172 (1933)
  • Burnet v. Leininger, 285 U.S. 136 (1932)
  • Poe v. Seaborn, 282 U.S. 101 (1930)
  • Oklahoma v. Texas, 281 U.S. 109 (1930)
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