Lucas v. Earl

281 U.S. 111, 50 S. Ct. 241 (1930)

 

RULE:

There is no doubt that the Revenue Act of 1918, 40 Stat. 1065, could tax salaries to those who earned them and 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. 

FACTS:

Earl claimed that he should not be taxed for his entire salary and attorney fees earned by him after he and his wife entered into a contract that any property either of them owned or thereafter acquired, including salaries, would be owned as joint tenants, with right of survivorship. He contended that he should only be taxed for half of his salary and attorney fees based on the contract with his wife. Despite the validity of the contract, the Commissioner of Internal Revenue, and the Board of Tax Appeals imposed a tax upon the whole salary. On appeal, their decisions were reversed by the appellate court.

ISSUE:

Should his salaries be taxed in its entirety? 

ANSWER:

Yes

CONCLUSION:

Upon review under writ of certiorari, the Court reversed because there was no doubt that the Revenue Act of 1921, 42 Stat. 227, required salaries to be taxed by those who earned them and provided 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.

Click here to view the full text case and earn your Daily Research Points.