Court Opinion

ID: 3019972
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:22:02.004799+00
Date Added: 2024-06-11T11:47:20.319726
License: Public Domain

United States Court of Appeals
                               FOR THE EIGHTH CIRCUIT
                                   ___________

                                   No. 97-1110
                                   ___________
Jennifer L. Meisner,                    *
                                        *
            Plaintiff - Appellant,      *   Appeal from the United States
                                        *   District Court for the District
     v.                                 *   of Nebraska.
                                        *
United States of America,               *
                                        *
            Defendant - Appellee.       *
                                        *

                                   ___________

                        Submitted: September 11, 1997
                        Filed:         January 9, 1998
                                  ___________

Before HANSEN, ROSS, and MURPHY, Circuit Judges.
                               ___________

HANSEN, Circuit Judge.

      Jennifer Meisner appeals from the district court’s1 denial of her
motion for judgment as a matter of law (JMOL) in this federal income tax
refund suit, contending that there was insufficient evidence to support a
jury verdict for the United States. She

      1
       The Honorable Kathleen A. Jaudzemis, United States Magistrate Judge for the
District of Nebraska, presiding by consent of the parties pursuant to 28 U.S.C. §
636(c).
also takes issue with several of the jury instructions and with the verdict
form. We affirm.

                                                     I.

      Jennifer Meisner was married to Randall Meisner from 1963 to 1981.
Randall held certain pieces of intellectual property, consisting of licenses
and copyrights related to songs performed by the Eagles, a singing group to
which he at one time belonged. In 1978, Randall entered into a termination
agreement with the Eagles. In this agreement, Randall ceded all of this
intellectual property to the Eagles in return for a royalties contract
entitling him to a portion of proceeds from the sales of certain of the
Eagles’ recordings. He has not been a shareholder, director, or member of
the Eagles since that time.

      In 1981, the Meisners divorced. At divorce, the couple entered into
a property settlement agreement (PSA), pursuant to which Jennifer acquired
an undivided forty percent interest in the royalty contract. Paragraph
nine of the PSA provides:

     [Jennifer] shall have as her separate property and the title to the same shall be quieted in her the
     following items:
             ....
     c. Forty percent (40%) of all earnings, copyrights, and recording rights [Randall] owns as a
     performer and/or composer as set forth in paragraph 5b.

Paragraph five of the PSA clarifies that the rights ceded to Jennifer
include royalties, and provides, inter alia, that Jennifer’s rights to an
undivided forty percent interest in the royalty contract was not subject to
any reversionary or contingent interests, but

                                                    -2-
would survive her own death as well as that of her ex-husband.2 It also
provides that Jennifer’s 40 percent would be paid directly from the Eagles
to Jennifer. The jury found, and both parties now agree, that after the
divorce, Randall had no power to affect Jennifer’s rights to the royalty
payments.

      Jennifer has received royalties consistent with her forty percent
interest every year since 1982. In 1994, she requested a refund of the
federal income taxes she had paid on these royalties, claiming that the
royalties were properly taxable to her ex-husband rather than to her. A
jury trial was held regarding her claims for 1987, 1988, 1990, and 1993.
At the close of the evidence, Jennifer moved for JMOL. The judge

     2
      Paragraph 5b of the PSA provides:

     [Jennifer] shall receive forty percent (40%) of all the gross future
     earnings, royalties and income from the work performed and completed
     by [Randall] (including the "Eagles" royalties) prior to October 1, 1981,
     including, but not limited to, song and performer royalties from
     copyrights, songs composed and recordings. [Randall] shall assign all of
     said property rights (to the extent of 40 percent) to [Jennifer], and such
     assignments shall be presented to the various publishers, recording
     companies and other concerns responsible for the payments of said
     royalties and use fees. Payment of such forty percent (40%) shall
     commence with all royalties and use fees payable on or accumulated
     through November 1, 1981, and thereafter. Such forty percent (40%)
     shall be paid direct to [Jennifer] except, where such payment is not
     practicable, it may be forwarded through [an accounting firm] directly to
     [Jennifer]. It is understood by the parties that such payments will be
     made at such times and intervals as provided in the various contracts now
     existing with such paying companies.
            Gross future earnings shall mean such royalties and earnings
     payable after recoupment by the recording and royalty-paying companies
     of expenses and items recoverable under existing contracts with
     [Randall].

                                        -3-
denied her motion, finding that a question of material fact still existed.
The judge sent the case to the jury with a special verdict form limited to
the issue of whether Randall had exercised power or control over Jennifer's
royalty rights.3   The jury found that Randall had not exerted power or
control over Jennifer’s rights—a verdict for the government.       Jennifer
appeals the denial of her motion for judgment as a matter of law and
contests the instructions and verdict form given to the jury.

      We review the denial of Jennifer’s motion for JMOL de novo, and we
apply the same standard as the district court.    See Keenan v. Computer
Assocs. Int’l, Inc., 13 F.3d 1266, 1268 (8th Cir. 1994). “A [JMOL] is in
order only where the evidence points all one way and is susceptible of no
reasonable inferences sustaining the position

      3
       Instruction 12 provides:

            In order to meet her burden of proof . . . the plaintiff must prove one of the
      following:

      1.    that Randy Meisner retains power and control over the 40% of the royalty
            payments assigned to plaintiff, Jennifer Meisner; or
      2.    that Randy Meisner retains power and control over Jennifer Meisner’s
            receipt of the 40% of the royalty payments.

The special verdict form asked the jury to determine, for every year in question,
whether the plaintiff had

      proved by the greater weight of the evidence that Randy Meisner retained
      sufficient power and control over the royalty payments made to plaintiff
      in [year], or over plaintiff’s receipt of the income in [year], to make it
      reasonable to treat Randy Meisner as the recipient of the income for
      purposes of federal income taxation.

The jury was asked no additional questions.

                                          -4-
of the nonmoving party.” See Giordano v. Lee, 434 F.2d 1227, 1231 (8th Cir.
1970), cert. denied, 403 U.S. 931 (1971).      We apply this standard and
affirm.

      When a taxpayer is firmly entitled to receive income but
anticipatorily assigns this income to another, the donor will be taxed on
it just as though he had actually received it. See Harrison v. Schaffner, 312 U.S. 579,
580 (1941) (taxing assignor on assigned income); see also Greene v. United States, 13 F.3d 577, 581-82 (2d Cir.
1994) (discussion). This is true even if the income will not accrue until some future date. See Helvering v. Horst,
311 U.S. 112, 119-20 (1940) (assignment of bond coupons constituted anticipatory assignment). However,
if the taxpayer instead assigns an income-producing asset, the result is
different. All income that is thereafter produced by the asset is taxed to
the assignee. See, e.g., Blair v. Commissioner, 300 U.S. 5, 13-14 (1937) (taxpayer's gift conveyed
entire interest in income stream, and so did not fall under assignment of income doctrine); Caruth Corp. v. United
States, 865 F.2d 644, 648-49 (5th Cir. 1989) (“When a taxpayer gives away earnings derived from
income-producing asset, crucial question is whether asset itself, or merely the income from it, has been
transferred.”); Commissioner v. Reece, 233 F.2d 30, 34-35 (1st Cir. 1956) (where
taxpayer assigned asset itself, subsequent income from that asset taxed to
assignee). This distinction between income and income-producing assets is
generally discussed in terms of “fruits” and “trees,” and the rule is that
fruits may not, for tax purposes, be attributed “to a different tree from
that on which they grew.” Lucas v. Earl, 281 U.S. 111, 115 (1930).

      In deciding whether the rights assigned by Randall to Jennifer
constituted a tree or merely fruits, we are mindful of the Supreme Court’s
decision in another assignment of royalties case, Commissioner v. Sunnen,
333 U.S. 591 (1948), which both parties cite as the controlling authority.
There the Court wrote:

        It is not enough to trace income to the property which is its
        true source, a matter which may become more metaphysical than
        legal. Nor is the tax

                                                      -5-
        problem with which we are concerned necessarily answered by the
        fact that such property, if it can be properly identified, has
        been assigned.     The crucial question remains whether the
        assignor retains sufficient power and control over the assigned
        property or over receipt of the income to make it reasonable to
        treat him as the recipient of the income for tax purposes. As
        was said in Corliss v. Bowers, 281 U.S. 376, “taxation is not so
        much concerned with the refinements of title as it is with
        actual command over the property taxed—the actual benefit for
        which the tax is being paid.”

Id. at 604-05 (emphasis added); see also Helvering v. Clifford, 309 U.S.
331, 335 (1940) (retention of control over corpus by donor suggested gift
was one of income only). The district court rightly determined that this
case, like Sunnen, turns on the amount of “power and control” retained by
Randall after the transfer.

      Our review of the record reveals no evidence of retained control by
Randall.   Randall unconditionally assigned Jennifer an undivided forty
percent interest. He carved out no reversionary interest for either himself
or his estate and retained no direct or indirect ability to affect the value
of the rights transferred. Nor did he retain power over Jennifer’s receipt
of royalty payments—the checks did not come through him, but went directly
to Jennifer. In short, the relevant facts here are much more similar to
those at issue in Reece, 233 F.2d at 34-35 (finding no anticipatory
assignment where taxpayer unconditionally assigned royalty rights to wife),
and Greene, 13 F.3d at 582 (finding no anticipatory assignment where donor
retained no control over the donated asset’s ability to produce income),
than they are to the facts in Sunnen, 333 U.S. at 608 (finding anticipatory
assignment because husband retained substantial power over license contracts
and payment of royalties to wife), or Caruth, 865 F.2d at 648-49 (5th Cir. 1989) (finding
anticipatory assignment because donor carved out only a short-term interest for donee and retained a reversionary
interest).

      It is also significant that the transfer of rights occurred pursuant
to a divorce settlement. In the context of a gift to a loved one (usually
one within the donor's

                                                     -6-
nuclear family), it can be argued that “[t]he exercise of that power to
procure the payment of income to another is the enjoyment and hence the
realization of the income by him who exercises it.” Horst, 311 U.S. at 118;
see also Schaffner, 312 U.S. at 582 (“by the exercise of his power to
command the income, [the transferor] enjoys the benefit of the income on
which the tax is laid.”). The same cannot be said in the context of a
divorce settlement. Nor can it be argued that a transfer pursuant to a
divorce fails to “effect[] any substantial change in the taxpayer’s economic
status.” See Sunnen at 609-10. Divorce transfers are much more akin to
negotiated arms-length transactions between adversaries than to displays of
generosity.4

      Because there is no evidence of retained control over Jennifer’s
rights by Randall and because this transfer of rights occurred pursuant to
a divorce, we cannot say that the evidence is “susceptible of no reasonable
inference sustaining the position of [the government].” See Keenan, 13 F.3d
at 1269 (standard for JMOL).     We therefore affirm the district court’s
denial of Jennifer’s motion for JMOL.

      We also find that jury instruction number 12 and the verdict form
correctly stated the law. The language used in both the jury instruction
and the verdict form comes right out of Sunnen, which both parties concede
is the controlling authority. The trial court correctly found that there
was no genuine issue of material fact regarding any question other than that
of Randall’s retained power and control, and therefore the instruction and
special verdict form were appropriate. We commend the district court for
reducing the case to its disputed essentials in the submission of the case
to the jury.

      4
        Jennifer relies heavily on the tax court’s decision in Moore v. Commissioner,
27 T.C.M. 536, 1968 WL 1221 (Tax Ct.). We find Moore unpersuasive. First,
Moore did not deal with a transfer of rights made pursuant to a divorce settlement, but
rather with a gift to the transferor’s children “in consideration of my love and
affection.” As such, it is inapposite. Additionally, the tax court fails to even mention
Sunnen and ignores the distinction between compensation for an individual’s labor and
royalties earned on intellectual property.

                                          -7-
      Jennifer also contests jury instruction number 9, and argues that the
court abused its discretion in failing to include several of her proposed
instructions. We have carefully reviewed the claims of error and find none.

     Accordingly, we affirm the judgment of the district court.

     A true copy.

           Attest:

                 CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

                                   -8-