Case Name: Sidney Blumenthal, Petitioner, v. Commissioner of Internal Revenue, Respondent
Court: United States Board of Tax Appeals
Jurisdiction: United States
Decision Date: 1929-04-12
Citations: 15 B.T.A. 1394
Docket Number: Docket No. 34092
Parties: Sidney Blumenthal, Petitioner, v. Commissioner of Internal Revenue, Respondent.
Judges: Gkeen and Sieekin concur in this dissent.
Reporter: Reports of the United States Board of Tax Appeals
Volume: 15
Pages: 1394–1400

Head Matter:
Sidney Blumenthal, Petitioner, v. Commissioner of Internal Revenue, Respondent.
Docket No. 34092.
Promulgated April 12, 1929.
Walter E. Liebman, Esq., for the petitioner.
Brice Toole, Esq., for the respondent.

Opinion:
OPINION.
Littleton:
The antenuptial agreement made in Alsace-Lorraine, as between petitioner and his wife, remained in force during 1925, the taxable year in question, but it did not have the effect of changing the law of New York, in which State the community property system does not prevail, nor did the agreement operate to relieve the petitioner from taxation under the Federal statute upon his entire earnings.
Notwithstanding the rights and privileges of petitioner and his wife as they existed under the antenuptial agreement and community property law of Alsace-Lorraine, neither was effective to make an exception in their favor in New York in the matter of reporting their taxable income arising from the salary of the husband, first earned and received by him in New York from two corporations.
The income in question, one-half of the salary of petitioner for 1925, was not in existence until more than twenty years after the agreement was made. Under the laws of New York and section 213 of the Revenue Act of 1924, the salary of petitioner was taxable income to him before any rights of his wife could vest by virtue of the antenuptial agreement.
Neither the Federal statute nor the law of New York was affected or changed by the community system of property prevailing in Alsace-Lorraine, where the antenuptial contract was made.
As the community system of property does not exist in New York, the wife of petitioner could acquire no vested interest in his 1925 salary by virtue of the law of Alsace-Lorraine, or by reason of the antenuptial contract, in such way as to prevent the entire salary being taxable to the petitioner. In In re Black, 123 N. Y. Supp. 371, 373, the court said:
An assignment of something which has no present, actual or even potential existence when the assignment is made does not operate to transfer the legal title to that thing when it does come into existence. ⅜ Such an instrument, if made in good faith for a valuable consideration and not void as against public policy, operates as an executory contract to transfer such after acquired property, and creates an equitable lien thereon. * ⅜ * But the legal title remains in the assignor. ⅜ And at law that title is not transferred until either the equitable lien is enforced by judicial decree or some new act intervenes by which the assignor puts the assignee in possession thereof.
In Bing v. Bowers, 22 Fed. (2d) 450, the court states:
To permit the assignor of future income from his own property to escape taxation thereon by a gift grant in advance of the receipt by him of such income would by indirection enlarge the limited class of deductions established by statute. As long as he remains the owner of the property the income therefrom should be taxable to him as fully, when he grants it as a gift in advance of its receipt, as it clearly is despite a gift thereof immediately after its receipt.
In Ormsby McKnight Mitchel, 1 B. T. A. 143, 148, this Board said:
⅜ No one is permitted to make his own tax law and if it were permitted to modify the express provisions of a taxing statute by agreement any taxpayer could say what should or should not be income. To merely state the proposition is to expose its fallacy, and it is of no importance that the taxpayer, as stated in his brief, believes in the community property theory in effect in some of the States. The answer to such a contention is that even if it would effect the result desired it is not in force in New York State and that a community created by positive law has attributes which cannot be given effect m a community created by agreement.
We think the Commissioner properly held petitioner liable for tax upon his entire salary for the taxable year. Cf. Florence V. Cruickshank, 13 B. T. A. 508.
Reviewed by the Board.
Judgment will be entered for the respondent.