# Opinion — United States v. Mitchell (No. 798)

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opinion
- **Published:** January 1, 1970

## Text

NOTE: Where it is deemed desirable, a syllabus (headnote) will
be released, as is being done in connection with this case, at the time
the opinion is issued. The syllabus constitutes no part of the opinion
of the Court but has been —— by the Reporter of Decisions for
the convenience of the reader. See United States v. Detroit Lumber
Co., 200 U.S. 321, 337.

SUPREME COURT OF THE UNITED STATES

Syllabus

UNITED STATES et at. v. MITCHELL et At.

CERTIORARI TO THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

No. 798. Argued April 20, 1971—Decided June 7, 1971

A married woman domiciled in Louisiana, where under state law
the wife has a present vested interest in community property
equal to that of her husband, is personally liable for federal income
taxes on her one-half interest in community income realized during
the existence of the community, notwithstanding her subsequent
renunciation under state law of her community rights, since federal,
not state, law governs what is exempt from federal taxation. Pp.
4-16.

430 F. 2d 1 and 7, reversed.

BuacKMUN, J., delivered the opinion for a unanimous Court.

NOTICE : This opinion is subject to formal revision before ae
in the preliminary print of the United States Reports. Readers are re-
ted to notify the Reporter of Decisions, Supreme Court of the
nited States, Washington, D.C. 20543, of any a or other
formal errors, in order that corrections may be made before the pre-
liminary print goes to press.

SUPREME COURT OF THE UNITED STATES

No. 798.—OctToser TrerM, 1970

United States et al., On Writ of Certiorari to

Petitioners, the United States Court
v of Appeals for the Fifth

Anne Goyne Mitchell et al.} Circuit.
[June 7, 1971]

Mr. Justice BLacKMUN delivered the opinion of the
Court.

These two cases present the issue whether a married
woman domiciled in the community property State of
Louisiana is personally liable for federal income tax on
half the community income realized during the existence
of the community despite the exercise of her statutory
right of exoneration. The issue arises in the context,
in one case, of a divorce, and, in the other, of the hus-
band’s death.

I

Mrs. Mitchell and Mrs. Sims. The Commissioner of
Internal Revenue determined deficiencies against Anne
Goyne Mitchell and Jane Isabell Goyne Sims for the tax
years 1955-1959, inclusive. These were for federal in-
come tax and for additions to tax under § 6651 (a) (fail-
ure to file return), § 6653 (a) (underpayment due to
negligence or intentional disregard of rules and regula-
tious), and § 6654 (underpayment of estimated tax) of
ume Internal Revenue Code of 1954, 26 U. S. C.
§§ 6651 (a), 6653 (a), and 6654. Mrs. Sims is the sister
of Mrs. Mitchell. The determinations as to her were
made under § 6901 as Mrs. Mitchell’s transferee without
consideration.

TET See

ia ee ee

2 UNITED STATES v. MITCHELL

Anne Goyne and Emmett Bell Mitchell, Jr., were mar-
ried in 1946. They lived in Louisiana. In July 1960,
however, they began to live separately and apart. In
August 1961 Mrs. Mitchell sued her husband in state
court for separation. Upon his default, she was granted
this relief. A final decree of divorce was entered in
October 1962. In her separation suit Mrs. Mitchell
prayed that she be allowed to accept the community of
acquets and gains with benefit of inventory. However.
taking advantage of the privilege granted her by Article
2410 of the Louisiana Civil Code,* she formally renounced
the community on September 18, 1961. As a conse-
quence, she received neither a distribution of community
property nor a property settlement upon dissolution of
her marriage. This renunciation served to exonerate her
of “debts contracted during the marriage.”

Mrs. Mitchell earned $4,200 as a teacher during 1955
and 1956. From these earnings tax was withheld. Mr.
Mitchell enjoyed taxable income during the five years in
question. All income realized by both spouses during
this period was community income.

Mrs. Mitchell had little knowledge of her husband's
finances. She rarely knew the balance in the family
bank account. She possessed a withdrawal privilege on
that account, and occasionally exercised it. Her hus-
band was in charge of the couple’s financial affairs and
did not usually consult his wife about them. She was
aware of fiscal irresponsibility on his part. She ques-
tioned him each year about tax returns. She knew
returns were required, but relied on his assurances that
he was filing timely returns and paying the taxes due.
She signed no return herself and assumed that he had

* Art. 2410. “Both the wife and her heirs or assigns have the
privilege of being able to exonerate themselves from the debts con-
tracted during the marriage, by renouncing the partnership or com-
munity of gains.”

UNITED STATES v. 1aITCHELL 3

signed her name for her. In July 1960 she learned that,
in fact, no returns had ever been filed for 1955-1959.

The deficiencies determined against Mrs. Mitchell were
based upon half the community income. The Commis-
sioner sought to collect the deficiencies from property
Mrs. Mitchell inherited from her mother in 1964 and
immediately transferred, without consideration, to Mrs.
Sims.

Mrs. Mitchell sought redetermination in the Tax Court.
Judge Forrester held that under Louisiana community
property law Mrs. Mitchell possessed an immediate
vested ownership interest in half the community
property income and was personally responsible for the
tax on her share. He also ruled that this tax liability
was not affected by her Article 2410 renunciation.
Mitchell v. Commissioner, 51 T. C. 641 (1969).

On appeal, the Fifth Circuit reversed, holding that by
the renunciation Mrs. Mitchell avoided any federal in-
come tax liability on the community income. Mitchell
y. Commissioner, 430 F. 2d 1 (CA5 1970).* Judge
Simpson dissented on the basis of Judge Forrester’s opin-
ion in the Tax Court. 430 F. 2d, at 7.

Mrs. Angello. Throughout the calendar years 1959-
1961 Mrs. Angello, who was then Frances Sparacio, lived
with her husband, Jack Sparacio, in Louisiana. Com-
munity income was realized by the Sparacios during those
years, but neither the husband nor the wife filed any
returns. In 1965 the District Director made assessments
against them for taxes, penalties, and interest, filed a
notice of lien, and addressed a notice of levy to the Metro-
politan Life Insurance Company, which had a policy
outstanding on Mr. Sparacio’s life. The insured died
in March 1966 and the notice of levy (for that amount
of tax and interest resulting from imputing to Mrs.

? Accord, with respect to Texas law, Ramos v. Commissioner, 429
F. 2d 487 (CA5 1970).

a ee: by aS

4 UNITED STATES v. MITCHELL

Sparacio half the community’s income for the tax years
in question) attached to the proceeds of the policy, The
widow, who was the named beneficiary, sued the Metro-
politan in state court to recover the policy proceeds,
The United States intervened to assert and protect its
lien. The case was then removed to federal court. The
Metropolitan paid the proceeds into the court registry
and was dismissed from the case.

Each side then moved for summary judgment. Judge
Christenberry granted the Government’s motion and de-
nied Mrs. Angello’s. Despite the absence of any formal
renunciation by Mrs. Angello under Article 2410, the
Government did not contend that she had accepted any
benefits of the community. On appeal, the Court of
Appeals reversed, relying on the same panel’s decision
in the Mitchell case. Angello v. Metropolitan Life Ins.
Co., 480 F. 2d 7 (CA5 1970). Judge Simpson again
dissented.

We granted certiorari in both cases, 400 U. S. 1008
(1971), on a single petition filed under our Rule 23.5.

II

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,° impose a tax on the taxable income “of every
individual.” The statutes, however, have not specified
what that phrase includes,

‘Internal Revenue Code of 1939, §§ 11 and 12; Revenue Act of
1938, §§ 11 and 12, 52 Stat. 452-453; Revenue Act of 1936, §§ 11
and 12, 49 Stat. 1653; Revenue Act of 1934, §§ 11 and 12, 48 Stat.
684; Revenue Act of 1932, §§ 11 and 12, 47 Stat. 174; Revenue Act
of 1928, §§ 11 and 12, 45 Stat. 795, 796; Revenue Act of 1926, §§ 210
and 211, 44 Stat. 21, 22; Revenue Act of 1924, §§ 210 and 211, 43
Stat. 264, 265; Act of March 4, 1923, 42 Stat. 1507; Revenue Act
of 1921, §§ 210 and 211, 42 Stat. 233; Revenue Act of 1918. §§ 210
and 211, 40 Stat. 1062; Revenue Act of 1917, §§ 1 and 201, 40 Stat.
300, 303.

UNITED STATES v. MITCHELL 5

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 treat-
ment, 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 defini-
tion by Congress, should impute a broader signifi-
cance 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.” /d., at 111.
It noted that, in contrast, in an earlier case, U nited
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.

t
“a

ee ee See ee we eee Hs

6 UNITED STATFS v. MITCHELL

In companion cases the Court came to the same eon.
clusion, as it had reached in Seaborn, with respect to the
community property laws of Arizona, Texas, and Louisi-
ana. Goodell v. Koch, 282 U.S. 118 (1930) ; Hopkins y,
Bacon, 282 U. S. 122 (1930); Bender v. Pfaff, 282 U.s
127 (1930).. In the Louisiana case it was said:

“Tf 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.” 289
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 prop-

erty 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 in-
come 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 con-
clusion with respect to California community property
law and federal income tax under the 1928 Act. with
the Government conceding the effectiveness, in this re-
spect, of amendments made to the California statutes
since the Robbins decision. United States vy. Malcolm,
282 U. 8. 792 (1931). Significantly, the Court there

UNITED STATES v. MITCHELL 7

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 com-
munity income and that the husband is taxable only on
the other half. Gilmore v. United States, 160 Ct. Cl. 777,
290 F. 2d 942 (1961), reversed 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,
N. D. Cal. (1961); Dillon v. Commissioner, 56 T. C. No.
22 (1971); Kimes v. Commissioner, 55 T. C. No. 81
(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 (1955) ; 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 (CA5 1943) ; Saenger v. Commissioner, 69 F. 2d
633 (CA5 1934); Smith v. Donnelly, 65 F. Supp. 415
(ED La. 1946). See Henderson’s Estate v. Commis-
sioner, 155 F. 2d 310 (CA5 1946), and Gonzalez v. Na-
tional Surety Corp., 266 F. 2d 667, 669 (CA5 1959).

Thus, with respect to community income, as with re-
spect to other income, federal income tax liability follows
ownership. Blair v. Commissioner, 300 U. S. 5, 11-14

8 UNITED STATES v. MITCHELL

(1937). See Hoeper v. Tax Commission, 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) ; Commis.
sioner v. Harmon, 323 U. S. 44, 50-51 (1944) (Doveras.
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.
III

This would appear to foreclose the issue for the pres-
ent cases. Nevertheless, because the petitioners and the
Court of Appeals stress the effervescent nature of the
wife’s interest in community property in Louisiana, a re-
view of the pertinent Louisiana statutes and decisions is

perhaps in order.

Every marriage contracted in Louisiana “superinduces
of right partnership or community of acquets or gains,
if there is no stipulation te the contrary.” L.S. A-C.C.
Art. 2399 (1971). “This partnership or community con-
sists of the profits of all the effects of which the husband
has the administration and enjoyment, either of right
or in fact, of the produce of the reciprocal industry and
labor of both husband and wife, and of the estate which
they may acquire during the marriage, either by dona-
tions made jointly to them both, or by purchase, or in
any other similar way, even although the purchase be
only in the name of one of the two and not of both,
because in that case the period of time when the pur-
chase is made is alone attended to, and not the person
who made the purchase. ...” Art. 2402. The debts
contracted during the marriage “enter into the partner-

UNITED STATES v. MITCHELL 9

ship or community of gains, and must be acquitted out
of the common fund... .” Art. 2403. “The husband
is the head and master of the partnership or community
of gains; he administers its effects, disposes of the reve-
nues which they produce, and may alienate them by an
onerous title, without the consent and permission of his
wife.’ Also “he may dispose of the movable effects by
a gratuitous and particular title, to the benefit of all
persons.” Art. 2404. The same article, however, de-
nies him the power of conveyance, “by a gratuitous title,”
of community immovables, or of the whole or a quota
of the movables, unless for the children; and if the hus-
band has sold or disposed of the common property in
fraud of the wife, she has an action against her husband’s
heirs. At the dissolution of a marriage “all effects which
both husband and wife reciprocally possess, are presumed
common effects or gains ... .” Art. 2405. At dissolu-
tion, “The effects which compose the partnership or com-
munity of gains, are divided into two equal portions
between the husband and the wife, or between their
heirs... .” Art. 2406. “It is understood that, in the
partition of the effects of the partnership or community
of gains, both husband and wife are to be equally liable
for their share of the debts contracted during the mar-
riage, and not acquitted at the time of its dissolution.”
Art. 2409. Then the wife and her heirs or assigns may
“exonerate themselves from the debts contracted during
the marriage, by renouncing the partnership or com-
munity of gains.” Art. 2410. And the wife “who re-
nounces, loses every sort of right to the effects of the
partnership or community of gains” except that “she
takes back all her effects, whether dotal or extradotal.”
Art. 2411.

The Louisiana court has described and forcefully stated
the nature of the community interest. In Phillips v.

10 UNITED STATES v. MITCHELL

Phillips, 160 La. 813, 825-826, 107 So. 584, 588 (1926),
it was said:

“. . . The wife’s half interest in the community
property is not a mere expectancy during the mar-
riage; it is not transmitted to her by or in conse-
quence of a dissolution of the community. The title
for half of the community property is vested in the
wife the moment it is acquired by the community
or by the spouses jointly, even though it be acquired
in the name of only one of them. ... There are
toose expressions, appearing in some of the opinions
rendered by this court, to the effect that the wife's
half interest in the community property is only an
expectancy, or a residuary interest, until the com-
munity is dissolved and liquidated. But that is
contrary to the provisions of the Civil Code...
and is contrary to the rule announced in every deci-
sion of this court since the «or was first
committed ... .”

Later, in Succession of Wiener, 203 La. 649, 14 So. 2d
475 (1943), a state inheritance tax case, the court, after
referring to §§ 2399 and 2402 of the Civil Code, said:

“That this community is a partnership in which
the husband and wife own equal shares, their title
thereto vesting at the very instant such property is
acquired, is well settled in this state ....

“The conclusion we have reached in this case is in
keeping with the decision of the United States Su-
preme Court in the case of Bender v. Pfaff, supra,
where that court recognized that under the law of
Louisiana the wife is not only vested with the own-
ership of half of the community property from the
moment it is acquired, but is likewise the owner of
half of the community income. ...” 203 La., at
657 and 662, 14 So. 2d, at 477 and 479.

UNITED STATES v. MITCHELL ll

After reviewing joint tenancy and tenancy by the entirety
known to the common law, the Court observed:

“In Louisiana, the situation is entirely different,
for here the civil law prevails, and the theory of the
civil law is that the acquisition of all property during
the marriage is due to the joint or common efforts,
Jabor, industry, economy, and sacrifices of the hus-
band and wife; in her station the wife is just as much
an agency in acquiring this property as is her hus-
band. In Louisiana, therefore, the wife’s rights in
and to the community property do not rest upon
the mere gratuity of her husband; they are just as
great as his and are entitled to equal dignity. .. .
She is the half-partner and owner of all acquisitions
made during the existence of the community,
whether they be property or income. . . .

“Tt is true that in weaving this harmonious com-
mercial partnership around the intimate and sacred
marital relationship, the framers of our law and its
codifiers saw fit, in their wisdom, to place the hus-
band at the head of the partnership, but this did not
in any way affect the status of the property or the
wife’s ownership of her half thereof .... And
the husband was made the managing partner of the
community and charged with the administration of
its effects, as well as with the alienation of its effects
and revenues by onerous title, because he was deemed
the best qualified to act.” 203 La., at 665-667, 14
So. 2d, at 480-481.

The court then outlined in detail the various protections
afforded by Louisiana law to the wife and concluded:

“Tt is obvious, therefore, that the wife’s interest
in the community property in Louisiana does not
spring from any fiction of the law or from any gift
or act of generosity on the part of her husband but,

12 UNITED STATES v. MITCHELL

instead, from an express legal contract of partnership
entered into at the time of the marriage. There js
no substantial difference between her interest therein
and the interest of an ordinary member of a limited
or ordinary partnership, the control and management
of whose affairs has, by agreement, been entrusted
to a managing partner. The only real difference
is that the limitations placed on the managing part-
ner in the community partnership are fixed by lav,
while those placed on the managing partner in an
ordinary or limited partnership are fixed by con-
vention or contract.” 203 La., at 669, 14 So. 2d. at
481-482.

The husband thus is the manager and agent of the Louisi-
ana community, but his powers as manager do not serve
to defeat the ownership rights of the wife.

These principles repeatedly have found expression in
Louisiana cases. United States Fidelity and Guaranty
Co. v. Green, 252 La. 227, 232-233, 210 So. 2d 328. 330
(1968); Gebbia v. City of New Orleans, 249 La. 409.
415-416, 187 So. 2d 423, 425 (1966); Azar v. Azar, 239
La. 941, 946, 120 So. 2d 485, 487 (1960) ; Messersmith vy.
Messersmith, 229 La. 495, 507, 86 So. 2d 169, 173 (1956):
Dizon y. Dizon’s Executors, 4 La. (0. S.) 188, 23 Am.
Dee. 478 (1832).

This Court recognized these Louisiana community
property principles in the Wiener estate’s federal estate
tax litigation. Fernandez v. Wiener, 326 U. S. 340
(1945). There the inclusion in the decedent’s gross
estate of the entire community property was upheld for
purposes of the federal estate tax which is an excise tax.
Mr. Chief Justice Stone noted the respective interests of
the spouses when, in the following language, he spoke of
the effect of deaths

“. . . As we have seen, the death of the husband
of the Louisiana marital community not only oper-

UNITED STATES v. MITCHELL 13

ates to transfer his rights in his share of the com-
munity to his heirs or those taking under his will.
It terminates his expansive and sometimes profitable
control over the wife’s share, and for the first time
brings her half of the property into her full and
exclusive possession, control and enjoyment. The
cessation of these extensive powers of the husband,
even though they were powers over property which
he never ‘owned,’ and the establishment in the wife
of new powers of control over her share, though it
was always hers, furnish appropriate occasions for
the imposition of an excise tax.

“Similarly, with the death of the wife, her title or
ownership in her share of the community property
ends, and passes to her heirs or other appointees.
More than this, her death, by ending the marital
community, liberates her husband’s share from the
restrictions which the existence of the community
had placed upon his control of it... .

“This redistribution of powers and restrictions
upon power is brought about by death notwithstand-
ing that the rights in the property subject to these
powers and restrictions were in every sense ‘vested’
from the moment the community began. . . .” 326
U. S., at 355-356.

Ti.us the Louisiana statutes and cases also seem to
foreclose the claims advanced by the petitioners.

IV

Despite all this, despite the concession that the wife’s
interest in the community property is not a mere ex-
pectancy,* and despite the further concession that she
has a vested title in, and is the owner of, a half share
of the community income,’ the petitioners take the posi-

* Angello brief, 2.
’ Angello brief, 2 and 9.

14 UNITED STATES v. MITCHELL

tion that somehow the wife’s interest is insufficient to
make her liable for federal income tax computed on that
half of the community income.

It is said that her right to renounce the community
and to place herself in the same position as if it had
never existed is substantive; that the wife is not per-
sonally liable for a community debt; that it is really the
community as an entity, not the husband or the wife,
that owns the property; and that Seaborn and its com-
panion cases were concerned only with the right to
split income, not with the obligation so to do. It is
also said that the wife’s dominion over the community
property is nonexistent in Louisiana; that the husband
administers the community’s affairs as he sees fit; that
he is not required to account to the wife, even for mis-
management, unless he enriches his estate at her expense
by fraud; that she has no way to terminate the com-
munity other than by suit for separation, and then only
by showing mismanagement on his part that threatens
her separate estate; that her status is imposed by law,
as contrasted with a commercial partnership where status
is consensual; that she has no legal right to obtain the
information necessary to file a tax return or to obtain the
funds with which to pay the tax; and that Robbins
authorizes taxing the whole of the community income to
the husband. The same arguments, however, were ad-
vanced in Seaborn, 282 U. S., at 103-105, and in its
companion cases, 282 U. S., at 119, 123, and 128, and
were unavailing there, 282 U. S., at 111-113. They do
not persuade us here. Specifically, the power to re-
nounce, granted by Article 2410, is of no comfort to the
wife-taxpayer. As Judge Forrester aptly expressed it,
51 T. C., at 646, Mrs. Mitchell’s renunciation “came
long after her liabilities for the annual income taxes here
in issue had attached.” Further, “. . . This right of

-_

UNITED STATES v. MITCHELL 15

the wife to renounce or repudiate must not be miscon-
strued as an indication that she had never owned and

her share, for that fact was not denied ; but she
did have, under the principles of community, the right

to revoke her ownership and possession... .” 1 W.
deFuniak, Principles of Community Property, § 218, p.
621 (1943).

The results urged by the petitioners might follow, of
course, in connection with a tax or other obligation the
collection of which is controlled by state law. But an
exempt status under state law does not bind the federal
collector. Federal law governs what is exempt from fed-
eral levy.

Section 6321 of the 1954 Code imposes a lien for the
income tax “upon all property and rights to property . - -
belonging to” the person liable for the tax. Section
6331 (a) authorizes levy “upon all property and rights
to property . . . belonging to such person... .” What
is exempt from levy is specified in § 6334 (a). Section
6334 (c) provides, “Notwithstanding any other law of the
United States, no property or rights to property shall be
exempt from levy other than the property specifically
made exempt by subsection(a).” This language is spe-
cific and it is clear and there is no room in it for automatic
exemption of property that happens to be exempt from
state levy under state law. United States v. Bess, 357
U.S. 51, 56-57 (1958) ; Shambaugh v. Scofield, 132 F. 2d
345 (CA5 1943); United States v. Heffron, 158 F. 2d 657
(CA9 1947), cert. denied, 331 U. S. 831; Treas. Regs.
§ 301.6334-1 (c). See Birch v. Dodt, 2 Ariz. App. 228,
407 P. 2d 417 (1965). As a consequence, state law which
exempts a husband’s interest in community property from
his premarital debts does not defeat collection of his
federal income tax liability for premarital tax years from
his interest in the community. United States v. Over-

16 UNITED STATES v. MITCHELL

man, 424 F. 2d 1142, 1145 (CA9 1970) ; In re Ackerman,
424 F. 2d 1148 (CA9 1970). The result as to Mrs.
Mitchell and Mrs. Angello is no different.

It must be conceded that these cases are “hard”’ cases
and exceedingly unfortunate for the two women tax-
payers.© Mrs. Mitchell loses the benefit of her inheri-
tance from her mother, an inheritance that ripened after
the dissolution of her marriage. Mrs. Angello loses her
beneficiary interest in her deceased husband’s life insur-
ance policy. This takes place with each wife not really
aware of the community tax situation, and not really in
a position to ascertain the details of the community in-
come. The law, however, is clear. The taxes were due.
They were not paid. Returns were not even filed. The
“fault,” if fault there be, lies with the four taxpayers and
flows from the settled principles of the community prop-
erty system. If the wives were to prevail here, they
would have the best of both worlds.

The remedy is in legislation. An example is P. L.
91-679 of January 12, 1971, 84 Stat. 2063, adding
to the Code subsection (e) of § 6013 and the final sen-
tence of § 6653 (b). These amendments afford relief to
an innocent spouse, who was a party to a joint return,
with respect to omitted income and fraudulent under-
payment. Relief of that kind is the answer to the peti-
tioners’ situation.

The judgment in each cass: is reversed.

It is so ordered.

® Of course, as Baron Rolfe long ago observed, hard cases “are apt
4o introduce bad law.” Winterbottom v. Wright, 10 M. & W. 109,
116, 152 Eng. Rep. 402, 406 (1842).

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386413_0303%3A7. Public record. Not legal advice.