Opinion
Docket Nos. 108364 108365.
1942-12-29
MARGUERITE T. PAYNE, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
J. P. Jackson, Esq., for the petitioner. D. D. Smith, Esq., for the respondent.
Petitioner, who left husband in Ohio to reside in Texas, and there returned only half of her income for tax purposes on the theory that it was governed by the community property law of Texas, held, individually taxable on her entire income. (Herbert Marshall, 41 B.T.A. 1064; Paul Cavanagh, 42 B.T.A. 1037;affd. (C.C.A., 9th Cir.), 125 Fed.(2d) 366, distinguished.) J. P. Jackson, Esq., for the petitioner. D. D. Smith, Esq., for the respondent.
Petitioner in these consolidated proceedings challenges the respondent's determination of income tax deficiencies in the amounts of $10,545.57 and $6,862.70 for the years 1938 and 1939, respectively. The single question involved is whether petitioner, because of residence in Texas apart from her husband, who resided in Ohio, is entitled to file returns on a community property basis.
FINDINGS OF FACT.
Petitioner, who is an individual, resides at Texarkana, Texas, and for the years in question filed Federal income tax returns with the collector of internal revenue at Dallas, Texas, on a community property basis. Petitioner, who was born in Texarkana and grew up there, married Robert B. Keeler on May 27, 1913. During their married life they lived in Cincinnati, Ohio; St. Louis, Missouri; and Lima and Cleveland, Ohio. Robert B. Keeler secured a divorce from petitioner on October 2, 1940, in Cuyahoga County, Ohio, after service by publication, on the ground of ‘gross neglect of duty.‘ The divorce decree recited that ‘the plaintiff (Robert B. Keeler) was a resident of the State of Ohio for one year next preceding the filing of his petition.‘ There was no property settlement as a result of the divorce proceedings. Three children had been born to the marriage and at the time of the divorce they were 19, 24, and 25 years of age, respectively.
On October 2, 1935, at which time petitioner resided at Lima, Ohio, her father, T. L. L. Temple, died and petitioner, as an heir, became entitled to payments from his estate. Petitioner's principal sources of income during the years in question were the T. L. L. Temple estate and dividends from the stock of the Temple Lumber Co. and the Southern Pine Lumber Co. which had been given to the petitioner by her father. In 1936 petitioner and family moved from Lima, Ohio, to Cleveland, Ohio, where they lived in a rented home on Exeter Road, Cleveland Heights. During the years in question petitioner's income was the principal source of family support; she retained control over it and contributed to Robert B. Keeler's support after the divorce.
Petitioner spent about a month and a half in 1936 and a substantial part of 1937 in Texarkana, Texas. In December 1937 petitioner and Robert B. Keeler went to Texarkana and in January 1938 petitioner purchased with her own funds a house in which both resided until March or April 1938, when Robert B. Keeler returned to Cleveland and lived at the Exeter Road residence. Petitioner returned to Cleveland in June 1938 and thereafter she and the family moved to a house which petitioner had built in 1926 on Brantley Road, Shaker Heights, Cleveland. That house and its furnishings were valued at approximately $43,000 and $8,000, respectively. On December 3, 1938, petitioner returned to Texarkana and in the latter part of January 1939 she again traveled to Cleveland, where she lived at Brantley Road until April 1939, when she returned to Texarkana. Petitioner's daughter was married on February 25, 1939, in Cleveland and petitioner closed the house on Brantley Road before returning in April 1939 to Texarkana. Between April 1939 and the date of the divorce petitioner returned to Cleveland twice, the first time for approximately three days in the fall of 1939 for the purpose of taking her dog to a veterinarian, and the second time for approximately a week in the spring of 1940 for the purpose of putting the Brantley Road house up for sale and transferring household effects which were in storage. On these two trips petitioner resided in hotels in Cleveland. Petitioner also attended her son's wedding in Cincinnati, Ohio, on June 30, 1940. Neither the Brantley Road house nor its furnishings have been sold by petitioner.
In the 1938 community return petitioner reported, among other things, $37,367 in income from dividends and $28,424.94 in income from the estate of T. L. L. Temple, and no income from salaries and compensation for personal services. In the 1939 community return petitioner reported, among other things, $4,325 in income from salaries and compensation for personal services and $59,010.11 in income from dividends. The salary of $4,325 was received by Robert B. Keeler from the Otis Co., Cleveland, while all dividends reported in both years were paid to petitioner on stock which petitioner owned.
OPINION.
OPPER, Judge:
The question is whether petitioner, a married woman, was entitled to treat her income in the tax years as community income so as to be permitted to report and pay tax on only one-half of the total. Although, as the question comes before us, it requires a determination of the rights and obligations of petitioner as to the payment of taxes, the claim which she makes in this respect is not an initial or independent assertion but derives from the contention that the part of the income on which she seeks to escape tax liability is legally and actually the income of another and does not belong to her at all. If that position is to be accepted, it must be on the ground that the income in controversy belonged to petitioner's husband and not to her. Poe v. Seaborn, 282 U.S. 101; and cf. United States v. Robbins, 269 U.S. 315. The preliminary and fundamental question is therefore one of law and requires consideration of the rights of petitioner's husband in this income under the circumstances shown to exist in these proceedings. If it can not be concluded that the income was that of the husband, petitioner's contention that it should be taxed to him and that she has no tax obligation in connection with it must fail.
It will be recognized immediately that the present situation is the converse of those presented in Herbert Marshall, 41 B.T.A. 1064, and Paul Cavanagh, 42 B.T.A. 1037, affd. (C.C.A., 9th Cir.), 125 Fed.(2d) 366. In each of those cases the income in controversy was that of the husband and the question was whether the rights of the respective wives were such by reason of community property law that the husband was not taxable on the wife's portion. In the Marshall case the rule was invoked that the domicile of the wife follows that of the husband and that, even though the wife did not actually reside there, ‘it must be held that the petitioner and his wife were legally domiciled in California during 1934 and 1935, and that the earnings of the petitioner constituted community property.‘
Following this principle the Board said in the Cavanagh proceeding: ‘In the instant case there have been no court proceedings instituted for divorce, separation, or property settlement. Neither can the wife be said to have deserted her husband. There is no evidence that he ever asked her to live with him in California. Under these circumstances the general common law rule that the wife's domicile follows that of her husband is applicable. It is a legal fiction, but California has followed that rule.‘ The same may be said of Texas, where this petitioner claims to have been domiciled in invoking the community property law. ‘It is the general rule that the domicil of the husband is the domicil of the wife. Her domicil is drawn to and follows his, and he has the right to select it; and when selected by him it is her duty to follow, and her refusal without sufficient excuse amounts to desertion. Speer, Law of Marital Rights in Texas, 95; Miller v. Stine (Tex.), 99 S.W.(2d) 397.
Here it is demonstrated that the husband's domicile and therefore that of the marital community was at all times in the State of Ohio. ‘The agreement to separate‘ did not come until the very end of the period we are considering here, ‘over the turn of the year of 1939 and 1940.‘ There was no desertion of the wife by the husband and no act of the husband which excused the wife for leaving him. See Montmorency v. Montmorency (Tex.), 139 S.W. 1168. This appears conclusively for our purposes from the Ohio divorce decree subsequently obtained, which finds ‘That the defendant (petitioner) was guilty of gross neglect of duty to the plaintiff (the husband),‘ and grants the divorce in the husband's favor. See Blair v. Commissioner, 300 U.S. 5; Freuler v. Helvering, 291 U.S. 35.
If, therefore, we were to follow dogmatically the theory of the Marshall and Cavanagh cases, we should be led to hold that petitioner was foreclosed as a matter of law from obtaining even a personal domicile in the State of Texas; that the domicile of the husband, of the marital community, and therefore of petitioner, remained at all times in the State of Ohio; and that, since that state recognizes no community property rights, the income belonged in its entirety to petitioner.
Since, however, it is the right of the husband in this income with which we are primarily concerned, it seems unnecessary for purposes of this case to proceed to these lengths. We may assume that as a matter of law petitioner could obtain a personal domicile in the State of Texas, and that as a matter of fact her state of mind and her acts were such that she did actually obtain such a domicile, although we decide neither of these questions. It still remains to be seen whether the husband would thereby have acquired a community interest in petitioner's income.
This right is obviously different from the interest which a wife obtains in the income of her husband. Thus, in Commissioner v. Cavanagh, supra, the Board was affirmed, but the court distinguished the case from that of a wife, saying: ‘It is true that a wife without fault may acquire a domicile separate from that of her husband for certain purposes, and that her earnings while living separate and apart from her husband are her separate property, C.C. 169, but this does not affect the status of the earnings of the husband. They are and in such circumstances remain community property of the spouses.‘ Lest it be rejoined that California law may differ from that of Texas, an examination will show that the latter's statutory system of community property applies only where Texas is the matrimonial domicile. ‘It is a generally accepted doctrine that the law of the matrimonial domicil governs the rights of married persons where there is no express nuptial contract * * * Generally the law of the matrimonial domicil governs the status of the parties, the legitimacy of their children, and their property rights in movables.‘ Speer, op. cit. 110. It would follow that only upon becoming domiciled in Texas would a husband secure community property rights, and this is the emphatic inference from the express declaration of the Texas law that ‘the marital rights‘ of persons married elsewhere shall upon their removal to Texas ‘be regulated by the laws of this state.‘ Vernon's Rev. Civ. Stat. Sec. 4627. To be consistent with the principle of this provision one must conclude that, in the absence of a previous matrimonial domicile in Texas, a husband who remains domiciled outside the state secures no community rights in the income of a wife merely because she alone acquires a Texas domicile. And while neither the parties nor an independent search reveals any decision holding that such is the Texas law, neither does it appear that the local courts have ever accorded comparable relief to any husband under circumstances of that character.
The conduct of the parties confirms this view. No claim was ever made by petitioner's husband nor recognized by petitioner that this was his income. No property settlement in his favor took place at the time of the divorce. While these actions can be construed, in accordance with petitioner's suggestion, as in the nature of a gift by the husband to the wife, he was apparently in meager financial circumstances and the conduct in question is more easily accountable as an assumption by both parties that the husband had no true legal interest in any of these funds.
We may go further and say that the lack of any authority, statutory or judicial, justifying the conclusion that under state law the income in question belonged to the husband, utterly precludes the successful prosecution of petitioner's claim here. Since petitioner actually received the income in controversy, it was incumbent upon her to show that the normal and generally anticipated tax consequences do not for some reason follow. ‘ * * * petitioner's receipt of the payments in question erects at the threshold a compelling inference that as recipient of the income he was taxable upon it. National City Bank of New York v. Helvering (C.C.A., 2nd Cir.), 98 Fed.(2d) 93; North American Oil Consolidated v. Burnet, 286 U.S. 417. ‘ Clinton Davidson, 43 B.T.A. 576, 585. Thus, the burden of legal persuasion to satisfy us that the state law would so operate as to confer upon the husband the necessary community rights has not been met. The absence of any such showing requires that the issue be determined in respondent's favor. Helvering v. Fitch, 309 U.S. 149; Helvering v. Leonard, 310 U.S. 80. Accordingly, we perceive no error in respondent's determination.
Decision will be entered for respondent.