Poe v. Seaborn
282 U.S. 101 (1930)

  • Seaborn lived in Washington, which was a "community property" State.
    • In a community property State any income or property earned by one spouse is considered to be equally owned by both spouses.
  • Seaborn worked and his wife didn't. Seaborn filed separate tax returns for both himself and his wife, each reporting one-half of the income he earned. The IRS disagreed assessed a deficiency.
    • Seaborn argued that because half of every dollar that the husband earns is the property of the wife under community property laws, then half of the income should be attributable to the wife (who just happened to be in a much lower tax bracket...).
    • The IRS argued that it couldn't possibly be Congress' intent to include such a large example of horizontal inequity between those living in common-law States vs. community property States.
  • The Trial Court found for Seaborn. The IRS appealed.
  • The US Supreme Court affirmed.
    • The US Supreme Court looked to Washington law and found that there was plenty of evidence to show that Seaborn's wife had a vested one-half interest in Seaborn's income.
      • "Under the law of Washington, the entire property and income of the community can no more be said to be that of the husband than it could rightly be termed that of the wife."
      • The Court noted that Seaborn never had complete title to the income. The moment it was acquired, it was owned by the community.
    • The Court distinguished Seaborn's case from Lucas v. Earl (281 U.S. 111 (1930)). In Earl, the husband and wife signed a voluntary contract given each other rights to their property. Earl established the Assignment of Interest Doctrine, which basically says that a taxpayer cannot evade taxes by giving (assigning) his income to someone else in a lower tax bracket.
      • The Court felt Seaborn was different because he didn't sign a contract, he was just following the property laws of his State and didn't have a choice over whether or not to give half his income to his wife.
  • After this case, Congress changed the tax code to allow married couples to file jointly, thereby removing the tax consequence differences between those who lived in community property States and those who lived in common-law States.