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Text: Sections 1 and 3 of the 1954 Code, 26 U.S. C. §§ 1 and 3, as have all of their predecessors since the Revenue Act of 1917,[3] impose a tax on the taxable income "of every individual." The statutes, however, have not specified what that phrase includes.

Forty years ago this Court had occasion to consider the phrase in the face of various state community property laws and of §§ 210 and 211 of the Revenue Act of 1926. A husband and wife, residents of the State of Washington, had income in 1927 consisting of the husband's salary and of amounts realized from real and personal property of the community. The spouses filed separate returns for 1927 and each reported half the community income. Mr. Justice Roberts, in speaking for a unanimous Court (two Justices not participating) upholding this tax treatment, said:

"These sections lay a tax upon the net income of every individual. The Act goes no farther, and furnishes no other standard or definition of what constitutes an individual's income. The use of the word `of' denotes ownership. It would be a strained construction, which, in the absence of further definition by Congress, should impute a broader significance to the phrase." Poe v. Seaborn, 282 U.S. 101, 109 (1930).
The Court thus emphasized ownership. It looked to the law of the State as to the ownership of community property and of community income. It concluded that in Washington the wife has "a vested property right in the community property, equal with that of her husband; and in the income of the community, including salaries or wages of either husband or wife, or both." Id., at 111. It noted that, in contrast, in an earlier case, United States v. Robbins, 269 U.S. 315 (1926), the opposite result had been reached under the then California law. But:

"In the Robbins case, we found that the law of California, as construed by her own courts, gave the wife a mere expectancy and that the property rights of the husband during the life of the community were so complete that he was in fact the owner." 282 U.S., at 116.
In companion cases the Court came to the same conclusion, as it had reached in Seaborn, with respect to the community property laws of Arizona, Texas, and Louisiana. Goodell v. Koch, 282 U.S. 118 (1930); Hopkins v. Bacon, 282 U.S. 122 (1930); Bender v. Pfaff, 282 U.S. 127 (1930). In the Louisiana case it was said:

"If the test be, as we have held it is, ownership of the community income, this case is probably the strongest of those presented to us, in favor of the wife's ownership of one-half of that income." 282 U.S., at 131.
The Court then reviewed the relevant Louisiana statutes and the power of disposition possessed by each spouse. It noted that, while the husband is the manager of the affairs of the marital partnership, the limitations upon the wrongful exercise of his power over community property are more stringent than in many other States. It concluded:

"Inasmuch, therefore, as, in Louisiana, the wife has a present vested interest in community property equal to that of her husband, we hold that the spouses are entitled to file separate returns, each treating one-half of the community income as income of each `of' them as an `individual' as those words are used in §§ 210 (a) and 211 (a) of the Revenue Act of 1926." 282 U.S., at 132.
Two months later the Court arrived at the same conclusion with respect to California community property law and federal income tax under the 1928 Act, with the Government conceding the effectiveness, in this respect, of amendments made to the California statutes since the Robbins decision. United States v. Malcolm, 282 U.S. 792 (1931). Significantly, the Court there answered in the affirmative, citing Seaborn, Koch, and Bacon, the following certified question:

"Has the wife under § 161 (a) of the Civil Code of California such an interest in the community income that she should separately report and pay tax on one-half of such income?" 282 U.S., at 794.
This affirmative answer to a question phrased in terms of "should," not "may," clearly indicates that the wife had the obligation, not merely the right, to report half the community income.

The federal courts since Malcolm consistently have held that the wife is required to report half the community income and that the husband is taxable only on the other half. Gilmore v. United States, 154 Ct. Cl. 365, 290 F.2d 942 (1961), rev'd on other grounds, 372 U.S. 39 (1963); Van Antwerp v. United States, 92 F.2d 871 (CA9 1937); Simmons v. Cullen, 197 F. Supp. 179 (ND Cal. 1961); Dillin v. Commissioner, 56 T.C. 228 (1971); Kimes v. Commissioner, 55 T.C. 774 (1971); Hill v. Commissioner, 32 T.C. 254 (1959); Hunt v. Commissioner, 22 T.C. 228 (1954); Freundlich v. Commissioner, T. C. Memo. 1955-177; Cavanagh v. Commissioner, 42 B. T. A. 1037, 1044 (1940), aff'd, 125 F.2d 366 (CA9 1942). There were holdings from the Fifth Circuit to this apparent effect with respect to Louisiana taxpayers. Commissioner v. Hyman, 135 F.2d 49, 50 (1943); Saenger v. Commissioner, 69 F.2d 633 (1934); Smith v. Donnelly, 65 F. Supp. 415 (ED La. 1946). See Henderson's Estate v. Commissioner, 155 F.2d 310 (CA5 1946), and Gonzalez v. National Surety Corp., 266 F.2d 667, 669 (CA5 1959).

Thus, with respect to community income, as with respect to other income, federal income tax liability follows ownership. Blair v. Commissioner, 300 U.S. 5, 11-14 (1937). See Hoeper v. Tax Comm'n, 284 U.S. 206 (1931). In the determination of ownership, state law controls. "The state law creates legal interests but the federal statute determines when and how they shall be taxed." Burnet v. Harmel, 287 U.S. 103, 110 (1932); Morgan v. Commissioner, 309 U.S. 78, 80-81 (1940); Helvering v. Stuart, 317 U.S. 154, 162 (1942); Commissioner v. Harmon, 323 U.S. 44, 50-51 (1944) (DOUGLAS, J., dissenting); see Commissioner v. Estate of Bosch, 387 U.S. 456 (1967). The dates of the cited cases indicate that these principles are long established in the law of taxation.