## Facts

- H. G. Seaborn and his wife were married residents of Washington, a community-property state.
- For the 1927 tax year, they filed separate federal income tax returns, each reporting one-half of community income consisting of Mr. Seaborn’s salary and other income (interest, dividends, and gains) from property held in his name.
- The parties agreed the income was community property under Washington law and exceeded $38,000.
- The Collector of Internal Revenue, following the Commissioner’s determination, required the husband to report all community income and assessed surtax accordingly.
- Seaborn paid the assessment under protest and sued for a refund in federal district court.
- The district court ruled for Seaborn; the case reached the Supreme Court after the Ninth Circuit certified the controlling question and the Court called for the full record.
- The case was part of federal “test cases” addressing community-property income taxation under the Revenue Act of 1926.

## Issues

1. Under the Revenue Act of 1926, must Washington community income be returned entirely by the husband, or may each spouse return one-half as his or her own income?
2. Does the husband’s state-law power to manage and control community property make him the owner of all community income for federal tax purposes?
3. Should federal tax ownership of community income be determined by state property law or by who earns or controls the income?

## Decision

- The Supreme Court affirmed judgment for Seaborn.
- The Court held that the Revenue Act of 1926 taxes the “net income of every individual” based on ownership of income.
- Under Washington law, each spouse has a present, vested, equal one-half ownership interest in community property and community income, including wages.
- The husband’s management authority is exercised as agent for the community and does not negate the wife’s equal ownership.
- Accordingly, when spouses file separate returns, each may report and be taxed on one-half of Washington community income.

## Legal Principles

- For federal income tax, statutory references to the “net income of every individual” assign tax liability to the person who owns the income.
- In the absence of a federal definition of ownership, state property law determines whether a spouse’s interest in community income constitutes ownership.
- In Washington’s community-property regime, the wife’s interest in community income is present and vested, not a mere expectancy; each spouse is an equal co-owner of community earnings.
- Management and control powers granted to the husband under state law do not convert community income into his separate property for federal tax purposes.
- Federal provisions addressing prior-year community returns (and related limitation-period measures) were treated as preserving administrative and governmental positions for past periods and pending disputes, not as altering the substantive ownership analysis for later years.

## Conclusion

Because Washington law gives each spouse an equal, vested ownership interest in community income, federal income tax liability follows that ownership, permitting spouses filing separate returns to report and be taxed on one-half of community income each.


Poe v. Seaborn, 282 U.S. 101 (1930)