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. P. 281 U. S.
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.
Page 281 U. S. 113
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
Page 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
Page 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.
THE CHIEF JUSTICE took no part in this case.