Court Opinion

ID: 9442293
Source: CourtListenerOpinion
Date Created: 2023-08-03 18:42:30.125621+00
Date Added: 2024-06-11T17:29:02.842999
License: Public Domain

SOPER, Circuit Judge
(dissenting in part).
In that part of the opinion of the court which requires the Commissioner to determine the value of the Canadian rights assigned to the Curtis Publishing Company, I concur.
I dissent from the holding that the assignments of a one-half interest in the stories by Wodehouse to his wife lacked legal validity. It is said that the assignments lack “economic reality” because of the failure of the sales agent to notify the purchaser of the assignments, the existence of a joint bank account in the name of husband and wife, and the suspicion aroused in the court’s mind when transfers are made in the family group to diminish taxes; and the conclusion is reached that the transfers were merely attempts on the taxpayer’s part to assign to his wife a share in his future income.
It is undisputed, however, that written assignments of the stories were executed and sent to the agent who collected the purchase price and sent one-half to the husband and one-half to the wife. There is no evidence that these substantial sums were deposited in the joint bank account or that the wife did not retain complete control over her share. The economic realty of the transaction is therefore plain unless the transfers were fraudulent in design and execution, and the court does not venture to go that far. The burden of proof was on the Commissioner to show fraud.
It cannot be said that a husband may not make a gift to his wife so that the income subsequently earned on the property conveyed is taxable to her. There was no transfer of future income in the pending case because the property conveyed consisted of the stories which were completed when the transfers were made. Blair v. Commissioner, 300 U.S. 5, 57 S.Ct. 330, 81 L.Ed. 465.
The Commissioner’s present attitude in this case is the result of a reversal of position on his part. Originally he recognized the validity of the assignment after an investigation, and did not attempt to include the wife’s one-half interest in the assessment against the husband. It is noteworthy that the pending case is stronger for the taxpayer than that in the Second Circuit, where a decision in his favor was rendered on this point, because there the burden of proof' rested on him to establish the bona fides of the transfers. The fact that the burden of proof was on the taxpayer in that case weighed heavily in the mind of the dissenting judge.