Transcript lucas v earl

INTRODUCTION TO TAX SCHOOL
Top 100 Cases
Lucas v. Earl, 281 U.S. 111 (1930)
Poe v. Seaborn, 282 U.S. 101 (1930)
Edited Case
Top 100 Cases List
Unedited Case
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
Slides List
Top 33 Doctrine List
1
Lucas v. Earl, 281 U.S. 111 (1930)
• Lucas v. Earl is famous for two important
overlapping propositions:
– The Claim of Right Doctrine.
– Every Year Stands Alone.
• This second proposition is conjunction with two other
famous cases:
– Burnet v. Sanford & Brooks, 282 U.S. 359 (1931)
– U.S. v. Lewis, 340 U.S. 590 (1951).
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
2
Lucas v. Earl, 281 U.S. 111 (1930)
• Lucas v. Earl is famous for two important
overlapping propositions:
– The
Claim
of Right Doctrine.
The
Assignment
of Income Doctrine
– Every Year Stands Alone.
• This second proposition is conjunction with two other
famous cases:
– Burnet v. Sanford & Brooks, 282 U.S. 359 (1931)
– U.S. v. Lewis, 340 U.S. 590 (1951).
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
3
Lucas v. Earl, 281 U.S. 111 (1930)
• Lucas v. Earl is famous for two important
overlapping propositions:
The Assignment of Income Doctrine
– The Claim of Right Doctrine.
The Fruit and Tree Analogy
– Every Year Stands Alone.
• This second proposition is conjunction with two other
famous cases:
– Burnet v. Sanford & Brooks, 282 U.S. 359 (1931)
– U.S. v. Lewis, 340 U.S. 590 (1951).
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
4
Lucas v. Earl, 281 U.S. 111 (1930)
• Lucas v. Earl is famous for two important
overlapping propositions:
The Assignment of Income Doctrine
– The Claim of Right Doctrine.
The Fruit and Tree Analogy
– Every Year Stands Alone.
– The first proposition more precisely states:
– Burnet v. Sanford & Brooks, 282 U.S. 359 (1931)
– U.S. v. Lewis, 340 U.S. 590 (1951).
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
5
Lucas v. Earl, 281 U.S. 111 (1930)
• Lucas v. Earl is famous for two important
overlapping propositions:
The Assignment of Income Doctrine
– The Claim of Right Doctrine.
The Fruit and Tree Analogy
– Every Year Stands Alone.
– The first proposition more precisely states:
Income from
personal services
– Burnet v. Sanford & Brooks, 282 U.S. 359 (1931)
is taxed to the person who
– U.S. v. Lewis, 340 U.S. 590 (1951).
controls the earning of it.
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
6
Lucas v. Earl, 281 U.S. 111 (1930)
The reference to personal services
distinguishes the case from
subsequent Assignment of Income
cases dealing with income from
property.
Income from personal services
is taxed to the person who
controls the earning of it.
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
7
Lucas v. Earl, 281 U.S. 111 (1930)
The reference to personal services
distinguishes the case from
subsequent Assignment of Income
cases dealing with income from
property.
Income from personal services
is taxed to the person who
controls the earning of it.
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
8
Lucas v. Earl, 281 U.S. 111 (1930)
The reference to personal services
distinguishes the case from
subsequent Assignment of Income
cases dealing with income from
property.
Income from personal services
is taxed to the person who
controls the earning of it.
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
9
Lucas v. Earl, 281 U.S. 111 (1930)
The reference to personal services
distinguishes the case from
subsequent Assignment of Income
cases dealing with income from
property.
–Blair v. Comm’r, 300
U.S. 5 (1937)
–Helvering v. Horst, 311
U.S. 112 (1940)
Income from personal services
is taxed to the person who
controls the earning of it.
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
–Helvering v. Eubank,
311 U.S. 122 (1940)
–Harrison v. Schaffner,
312 U.S. 579 (1941)
10
Lucas v. Earl, 281 U.S. 111 (1930)
The reference to personal services
distinguishes the case from
subsequent Assignment of Income
cases dealing with income from
property.
–Blair v. Comm’r, 300
U.S. 5 (1937)
–Helvering v. Horst, 311
U.S. 112 (1940)
Income from personal services
is taxed to the person who
controls the earning of it.
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
–Helvering v. Eubank,
311 U.S. 122 (1940)
–Harrison v. Schaffner,
312 U.S. 579 (1941)
11
Lucas v. Earl, 281 U.S. 111 (1930)
The reference to personal services
distinguishes the case from
subsequent Assignment of Income
cases dealing with income from
property.
–Blair v. Comm’r, 300
U.S. 5 (1937)
–Helvering v. Horst, 311
U.S. 112 (1940)
Income from personal services
is taxed to the person who
controls the earning of it.
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
–Helvering v. Eubank,
311 U.S. 122 (1940)
–Harrison v. Schaffner,
312 U.S. 579 (1941)
12
Lucas v. Earl, 281 U.S. 111 (1930)
The reference to personal services
distinguishes the case from
subsequent Assignment of Income
cases dealing with income from
property.
–Blair v. Comm’r, 300
U.S. 5 (1937)
–Helvering v. Horst, 311
U.S. 112 (1940)
Income from personal services
is taxed to the person who
controls the earning of it.
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
–Helvering v. Eubank,
311 U.S. 122 (1940)
–Harrison v. Schaffner,
312 U.S. 579 (1941)
13
Lucas v. Earl, 281 U.S. 111 (1930)
These four cases are also
on the top 100 list.
The reference to personal services
distinguishes the case from
subsequent Assignment of Income
cases dealing with income from
property.
–Blair v. Comm’r, 300
U.S. 5 (1937)
–Helvering v. Horst, 311
U.S. 112 (1940)
Income from personal services
is taxed to the person who
controls the earning of it.
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
–Helvering v. Eubank,
311 U.S. 122 (1940)
–Harrison v. Schaffner,
312 U.S. 579 (1941)
14
Lucas v. Earl, 281 U.S. 111 (1930)
• To summarize:
– When you hear of Lucas v. Earl you must think of:
– You should also associate the case with transactional accounting
and the notion that every year stands alone.
• Ideally, you would also associate the case with
– Burnet v. Sanford & Brooks, 282 U.S. 359 (1931)
– U.S. v. Lewis, 340 U.S. 590 (1951).
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
15
Lucas v. Earl, 281 U.S. 111 (1930)
• To summarize:
– When you hear of Lucas v. Earl you must think of:
– You should
associate the case
with transactional
accounting
Thealso
Assignment
of Income
Doctrine
and the notion that every year stands alone.
• Ideally, you would also associate the case with
– Burnet v. Sanford & Brooks, 282 U.S. 359 (1931)
– U.S. v. Lewis, 340 U.S. 590 (1951).
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
16
Lucas v. Earl, 281 U.S. 111 (1930)
• To summarize:
– When you hear of Lucas v. Earl you must think of:
– You should
associate the case
with transactional
accounting
Thealso
Assignment
of Income
Doctrine
and the notion that every year stands alone.
• Ideally, you would also associate the case with
– Burnet v. Sanford & Brooks, 282 U.S. 359 (1931)
– U.S. v. Lewis, 340 U.S. 590 (1951).
Ideally, you will
recall it deals with
income from
services.
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
17
Lucas v. Earl, 281 U.S. 111 (1930)
• To summarize:
– When you hear of Lucas v. Earl you must think of:
– You should
associate the case
with transactional
accounting
Thealso
Assignment
of Income
Doctrine
and the notion that every year stands alone.
• Ideally, you would also associate the case with
And, you should
– Burnet v. Sanford & Brooks, 282 U.S. 359 (1931)
– U.S. v. Lewis, 340 U.S. 590 (1951).
associate it with the
Ideally, you will
recall it deals with
income from
services.
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
Fruit and Tree
Analogy.
18
Lucas v. Earl, 281 U.S. 111 (1930)
And, you should
associate it with the
Fruit and Tree
Analogy.
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
19
Lucas v. Earl, 281 U.S. 111 (1930)
• Facts:
– H & W agreed to share equally in all
earnings of each other. Joint
returns were not available.
• Issue:
– Who is taxed on the earnings, which
are actually split equally.
• Held:
– Earner is taxed. Thus H pays on his
income and W pays tax on hers.
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
20
Lucas v. Earl, 281 U.S. 111 (1930)
• Facts:
– H & W agreed to share equally in all
earnings of each other. Joint
returns were not available.
• Issue:
– Who is taxed on the earnings, which
are actually split equally?
• Held:
– Earner is taxed. Thus H pays on his
income and W pays tax on hers.
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
21
Lucas v. Earl, 281 U.S. 111 (1930)
• Facts:
– H & W agreed to share equally in all
earnings of each other. Joint
returns were not available.
• Issue:
– Who is taxed on the earnings, which
are actually split equally.
• Held:
– Earner is taxed. Thus H pays on all
of his income and W pays tax on all
of her income.
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
22
Lucas v. Earl, 281 U.S. 111 (1930)
For example:
•Suppose H earned $100,000 and W earned $60,000.
•Per their agreement, each would receive $80,000 [half of
the total $160,000].
•H would be taxed on his $100,000 and W would be
taxed on her $60,000.
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
23
Lucas v. Earl, 281 U.S. 111 (1930)
For example:
•Suppose H earned $100,000 and W earned $60,000.
•Per their agreement, each would receive $80,000 [half of
the total $160,000].
•H would be taxed on his $100,000 and W would be
taxed on her $60,000.
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
24
Lucas v. Earl, 281 U.S. 111 (1930)
For example:
•Suppose H earned $100,000 and W earned $60,000.
•Per their agreement, each would receive $80,000 [half of
the total $160,000].
•H would be taxed on his $100,000 and W would be
taxed on her $60,000.
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
25
Lucas v. Earl, 281 U.S. 111 (1930)
For example:
•Suppose H earned $100,000 and W earned $60,000.
•Per their agreement, each would receive $80,000 [half of
the total $160,000].
•H would be taxed on his $100,000 and W would be
taxed on her $60,000.
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
26
Lucas v. Earl, 281 U.S. 111 (1930)
For example:
•Suppose H earned $100,000 and W earned $60,000.
•Per their agreement, each would receive $80,000 [half of
the total $160,000].
•H would be taxed on his $100,000 and W would be
taxed on her $60,000.
Per Lucas v. Earl, the
attempted assignment of
income from services would
not be successful.
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
27
Lucas v. Earl, 281 U.S. 111 (1930)
For example:
•Suppose H earned $100,000 and W earned $60,000.
•Per their agreement, each would receive $80,000 [half of
the total $160,000].
•H would be taxed on his $100,000 and W would be
taxed on her $60,000.
Per Lucas v. Earl, the
attempted assignment of
income from services would
not be successful.
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
28
Lucas v. Earl, 281 U.S. 111 (1930)
• Facts:
– H & W agreed to share equally in all
earnings of each other. Joint
returns were not available.
• Issue:
– Who is taxed on the earnings, which
are actually split equally.
• Held:
– Earner is taxed. Thus H pays on all
of his income and W pays tax on all
of her income.
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
29
Lucas v. Earl, 281 U.S. 111 (1930)
• Facts:
– H & W agreed to share equally in all
earnings of each other. Joint
returns were not available.
• Issue:
– Who is taxed on the earnings, which
are actually split equally.
• Held:
– Earner is taxed. Thus H pays on all
of his income and W pays tax on all
of her income.
But, in Poe v. Seaborn, 282 U.S. 101 (1930),
the Court held that taxpayers in a
community property state do split income:
each legally owns ½ of the others’ earnings.
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
30
Lucas v. Earl, 281 U.S. 111 (1930)
• Facts:
– H & W agreed to share equally in all
earnings of each other. Joint
returns were not available.
• Issue:
– Who is taxed on the earnings, which
are actually split equally.
• Held:
– Earner is taxed. Thus H pays on all
of his income and W pays tax on all
of her income.
As a result, several
states adopted
community property.
In turn, Congress
passed rules
permitting joint
returns, which
effectively permit
income splitting by
spouses.
But, in Poe v. Seaborn, 282 U.S. 101 (1930),
the Court held that taxpayers in a
community property state do split income:
each legally owns ½ of the others’ earnings.
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
31
Lucas v. Earl, 281 U.S. 111 (1930)
• Facts:
– H & W agreed to share equally in all
earnings of each other. Joint
returns were not available.
• Issue:
– Who is taxed on the earnings, which
are actually split equally.
• Held:
– Earner is taxed. Thus H pays on all
of his income and W pays tax on all
of her income.
As a result, several
states adopted
community property.
In turn, Congress
passed rules
permitting joint
returns, which
effectively permit
income splitting by
spouses.
But, in Poe v. Seaborn, 282 U.S. 101 (1930),
the Court held that taxpayers in a
community property state do split income:
each legally owns ½ of the others’ earnings.
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
32
Lucas v. Earl, 281 U.S. 111 (1930)
• Facts:
– H & W agreed to share equally in all
earnings of each other. Joint
returns were not available.
• Issue:
– Who is taxed on the earnings, which
are actually split equally.
• Held:
– Earner is taxed. Thus H pays on all
of his income and W pays tax on all
of her income.
But, in Poe v. Seaborn, 282 U.S. 101 (1930),
the Court held that taxpayers in a
community property state do split income:
each legally owns ½ of the others’ earnings.
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
As a result, several
states adopted
community property.
In turn, Congress
passed rules
permitting joint
returns, which
effectively permit
income splitting by
spouses.
Assignment of
earnings from
services is still not
permitted outside the
joint return situation.
33
Lucas v. Earl, 281 U.S. 111 (1930)
“Tax cannot 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.”
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
34
Lucas v. Earl, 281 U.S. 111 (1930)
“Tax cannot 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.”
This is some of the most
quoted language of the case.
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
35
Lucas v. Earl, 281 U.S. 111 (1930)
“Tax cannot 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.”
Note: This decision
applied to services
income . . . not to
property income.
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
36
Lucas v. Earl, 281 U.S. 111 (1930)
“Tax cannot 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.”
The Court disapproved of
schemes by which “fruits
are attributed to a different
tree from that on which they
grew.”
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
37
Lucas v. Earl, 281 U.S. 111 (1930)
“Tax cannot 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.”
The Court disapproved of
schemes by which “fruits
are attributed to a different
tree from that on which they
grew.”
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
38
Lucas v. Earl, 281 U.S. 111 (1930)
“Tax cannot 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.”
This is the other often
quoted language.
The Court disapproved of
schemes by which “fruits
are attributed to a different
tree from that on which they
grew.”
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
39
Lucas v. Earl, 281 U.S. 111 (1930)
–When you hear of Lucas v. Earl you must think of:
The Assignment of Income Doctrine
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
40
Lucas v. Earl, 281 U.S. 111 (1930)
–When you hear of Lucas v. Earl you must think of:
The Assignment of Income Doctrine
The Fruit and Tree Analogy
© Steven J. Willis and UF College of Law 2007 All Rights Reserved
41