# Brief for the Respondent in Opposition — Neeman v. Commissioner > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386419_0471%3A3 ## Record - **Collection:** Supreme Court brief - **Document type:** Brief for the Respondent in Opposition - **Published:** January 1, 1958 - **Citation:** 358 U.S. 841 ## Text ry ae T Ottiae Supreme Court, US. JT . FILED ff SEP 23 1958 : No. 306 JAMES R. BROWNING, Clerk - Iuthe Supreme Court of te Rated States OCTOBER TERM, 1958. - MURIEL DODGE NEEMAN (Formerly MURIEL Dooce), _ PETITIONER v. _ COMMISSIONER OF INTERNAL REVENUE On Petition for a Writ of Certiorari to the United States Court of Appeals for. the Second Circuit . BRIEF FOR THE RESPONDENT IN OPPOSITION | J. Lee RANKIN, Solicitor General, / | wares K. Rick, . op . Assistant Attorney General, | Lze A. JACKSON, L. W. Post, — Attorneys, Department of Justice, ” Washington 25, D. C. — A ee << - Appendix inepEX 6 ~*~ Opinions below. ae eae diintigel nada Jurisdiction . , Question presented . Statute involved , Statement Argument Conclusion Re Greta Fant ’ CITATIONS Cases : Burnet Vv. Wells, 289 U.S. 670. . Commissioner V. Glenshaw Glass: Co., 348 U. S. 126 “Commissioner V. Meyer, 104 Pp. 2d ‘155. ‘Commissioner V. Sunnen, 383 U.S. 591 Fairbanks V.,Commissioner, 191 F..2d 680, cer- ~ tiorari denied, 343 U. me 915 Gadd Vv. Gould, 245 U.S. 151. , oe Helvering V. Taylor, 293 Rhy WM ccde cis sine Luckenbach Vv. Pedrick, 214 F, 2d 914 ~ Mahana v. United poy 88 F. Supp. 285, | cer- tiorari denied, 339 TU. S, 978 Neeman V. Commissioner, ‘ » ev? 397, affirmed, 200 F, 2d 560; certiorari denied, 345 U. S. 956. Norfolk Nat. Bank of C. and T. v. C ee _ . 66 F. 2d 48 PRES rete ROIS 5 hPE LAM, Se Twinam Vv. Commissioner, 22 T. C. 83 United States V. International Building Co., 345 U. S. 502. Welsh, Albert Ro Gallatin, Trust v. Commissioner, 16 T. C. 1398, affirmed.sub nom. Girard Trust ~ Corn Exchange Bank, Trustee V. Commissioner, 19% F. 24 708 | Sito Mot) Il Cenmstitution and Statutes: | | ‘ Page Constitution of the United States: Fifth Amendment... .. in sshacaatarcaseSercppcansncas a7 Tenth Amendment ..... _......--.-- RT ee SOR PE Sixteenth Amendment Soh UST RAR oor 6,7 Income Tax Act of 1913, c. 16, 38 Stat. 114, See. mel Nees © ¥ Inter nal Revenue Code of 1939: “See, 22(b) (26 U.S.C. 1952 ed., Sec. wat). 1,0.8 10 Sec, 22(k) (26 U.S.C. 1952 ed., See, 2 22%) Y 2,5, 6, 7,8, 11 See. 23) (26 US.C.1952 4ot Sec. 23(u)) . 2 Miscellaneous: i ‘S.. Rep. No. 1631,: 77th. Cong., 24 Sess:, p. 84 (1942-2 Cum. Bull, 504,°568) ae \ a In the Supreme Court of the United States: OCTOBER TERM, 1958 “ No. 306 MURIEL Dover NEEMAN (Formerly MURIEL, DODGE), PETITIONER v.. 7. ; COMMISSIONER OF INTERNAL REVENUE On Petition for a Writ of Certiorari tosthe United States Court.of Appeals for the Second Circuit . —_— rr BRIEF FOR THE RESPONDENT. IN OPPOSITION ” OPINIONS BELOW ‘The opinion of the Tax Court (R. 29a-38a)' i reported at 26 T.C. 864. The per curiam opinion of the Court of Appeals ia 33-34). is reported at 259 F. 2d 841. | JURISDICTION The judgment of the Court of Appeals was.entered on May 27, 1958. (Pet. 35). The petition for a writ ' Record: references are to the Appendix to the taxpay er’s . brief in the Court of Appeals. 8 .~ (1)- a) _ of certiorari was filed on August 25, 1958. The juris- ‘diction ci this Court is invoked under 25 Use. 1254(1). | \ , . - QURSTION PRESENTER | - Whether the courts below\ correctly held that alimony payments received by \the taxpayer: during - the taxable years 1945 to 1948, \nclusive, constituted taxdble income to taxpayer under Sectiin 22(k) of the Internal Revenue Code of 1939, without violating -any provision of the Constitution of the United States. . 20 . STATUTE INVOLVED | The_pertinent provisions of Sections 22 and 25 of the In ernal Revenue Code. of 1939 are set out in the . Appendix, infra, pp- 10-18. ; , : STATEMENT The facts, as stipulated (R. 22a-28a ) and found by the Tax Court (R. 8()q-34da), may be sumimarized as. _ follows: : eat | _ In a_ previous decision,” rendered September 29, 1949, the Tax Court. held’ the taxpayer accountable . under Section 22 (k) of the Internal Revenue Code of 1939 for sums received from her former husband. Horace E. Dodge, as alimony for 1942 and 1945. That decision was affirmed. on appeal, and certiorari was denied. See Neeman X. Commissioner, 15. T. ( 397, affirmed por enriant, 200 F. 2d 560 (C...A. 2d),. certiorari denied, 345 U. $..956. (R. 22a, Sta.) | ° - are ae aes 2 ‘ In that case, the Tax Court found (inter alia) (R. - 8ia-32a) : (1) Pasicavics and Dodge were married May 17, 1928. (2) They ‘entered ‘into an agreement on Au- cust’ 4, 1933, which provided for periodic pay- “ments by Dodge to taxpayer; that he was to pay all United States and state income taxes which she ‘might be required to pay because of such alimony payments; that such provision for pay- ment of taxes by him was not binding on the - Commissioner of Internal Revenue and could not prevent him from’ determining taxes due from taxpayer based on such alimony payments. +, (3) That taxpayer and Dodge entered into” ‘another agreement on October 238, 1939, inaking _ certain changes in: the original “agreement of August 4, $933, inereasin the. payments ° there- under, and providing for approval of the agree- ‘ments in the pend} g divoree proceedings be- tween the parties. © (14) That taxpayer and Dodge were divorced . by a final decree of the Cireuit Court. Wayne County, Michigan, dated October 26, 1939, which — i apnroved, ratified; and confirmed the. above- mentioned agreement of. August 4, 1933, as amended bv the agreement of Octoher 23, 1939. _ Taxpayer receiv ed from Dodge $15,000 for each of the years 1945,°T946 and 1947, and $8,750 in the vear 1948 .in aniduani Ww ith the agreements and divorce deer ee. (R. 32a.) Dodge filed UnitedeStates income tax returns for the vears 1945 through 1948. He’ had gross taxable income for those years varying from a minimum of © y" - a 1 ot + . $3,953.43 in’ 1945 to a maximum of $7,556.95 in 1948; and he had deductions in excess —of < those amounts. Dodge, however, received, tax-exempt in- terest amounting to moi than 5145, 000.00 in each of the years 1945 to 1948} inclusive, and the specific source of funds used by him-to make. alimony: pay- ments te taxpayer is unknown. (R. 32a-33a. ) The parties in the present proceeding dre identical with the parties in the earlier proceeding. The mat- ters and issues raised in the present proceeding al: identical with those raise “1 in theMformer proceeding except thdt taxpayer has (1) not. alleged she wWas- entitled to an exemption 2s the head of a family, and’ * (2) in the preseng procecding she has raised certain constitutional questions that were not specifically _ pleaded in the earlier case, and also a ‘question as to the source of the pay ments that Dodge made to her. (R. 33a-34a. ) The Tax Covrt held that the doctrine, of collateral estoppel did not operate to preclude con- peng. of such questions, and after considering them, i gtained the Com: nissioner ’s determination © : holding taxpayer accountable for income taxes on the alimony . payments recéived by her. (R. .34a-38a.) “The Court of Appeals affirmed on the opinion of tl Tax Court. _(Pet. 33- 34.) ARGU MENT The decision of the court below, affirming the cde- cision of \the Tax, Cotrt, is clearly correct. There is — no’ conftiet of decisions or "other reason for further Review. / ~ , pe . e 0 Section 22(K) of the ‘teeta Revenue Code of 1939,. as added by the Revenue Act of 1942 ( Appen- dix, infra), provides that, in .the case of ‘a wife whv ‘is divorced or legally separated from her/ husband under a decree of divorce or of separate maintenance, periodie payments received subsequent to such decree in discharge of a legal obligation which, because of the marital or family relationship, is imposed upon or . incagred by the husband under such decree or under a written. instrument incident to such divorce, or separation shall be includible in the gross income of the wife. : | In the ‘prior proceeding involying the years 1942 and 1943, the Tax Court held the taxpayer account- able under Section 22 (k) for alimony received from Dodge for those years. See Nee ‘man v. Commissioner 13: T. 'C. 397, affirmed per curiam, 200 F. 2d 560 _(C. A. 2d), certiorari denied, 345 U. S. 956. And, under tne doctrine of collateral estoppel (Commis- “sioner v. Sunnen, 333 U.S. 591; United States ‘vy. Inte rnational Building Co., 345.U. S. 502), that de- _ cision operates to * preclude any further consideration ‘of the matters and issues that were actually raised and decided in the earlier proceeding even though we are here dealing with other and later tax years (1945 through 1948). Thé fundamental question which the ‘taxpayer now attempts to presént to this court (Pet. 4) is whether alimony paid to her by her former husband (Dodge) out of tax-exempt income or capital can constitutionally be taxed.. That is the only ques- ‘ tion which’ this Court need now consider here. Helver- . ing v. Taylor, 298 U.S. 507, 511. “s In the instant proceeding, the Tax Court held tha: the doctrine of collateral esto pel would not pré-clude review ‘of this question (R.‘34a), but concluded (RK. 38a) that there was a failure of proof by taxpayer as to. the source of the payments made to her. by Dodge. Indeed, the parties stipulated (R. 27a) that ° the specific source of funds used by Dodge to make the alimony payments was unknown, and, in th circumstances, there is lacking the requisite factua: basis for support of taxpayer'> contention. However, * the Tax Court did not rest its decision entirely upon ’ failure of proof. It went on to hold (R. 35a-55a) that the constitutionality of Section 22(k) does not depend uper whether the~person paying the alimony had or did not have taxable income with whic. to pay it, but rather depends upon whether alimony is ‘ income to ‘the recipient within the Sixteenth Amend: ment. and whether the statute is so arbitrary «yl unjust as. to violate the Fifth Amendment. The Tax Court relied (R 33a, 37a) upon three cases (Mahana v.. United States, 88 FP. Supp. wer eC. Cls.), certiorari denied, 35% U. S. 978; Fairbanks v. Commissioner, 11 F. 2d Bau (C. A. 8th), certionar denied, 343 U. S. 915; and Tecimam v. Commissioner. 22 T. C.-83) in each of which the constitutionality of Section 22(«) was explicitly upheld: Cf. Comuis* sioner V. Glenshaw Glass Co., 348 U.S. 4263 Buevet y. Wells, 289 U. S. 670. We know of no decision to the contrary. Moreover, the validity of the statute has been postulated by al! the courts which have dealt with it { Fairbanks vy. Commissioner, supre. } 681), and there have, of course, been many «: ss Ph — - under the statute which have been decided by the courts since it first became effective in 1942. The taxpayer, however, attempts to distinguish the Mahana, Fairbanks and Twinam cases onthe ground that the payments there were made out of taxable income. (Pet. 12.) Taxpayer says that the instant payments ‘must have been made to ‘her by Dodge out of tax-exempt income or capital since he did not have ‘ynough taxable income from which to make them, | and that it would violate the Sixteenth and Fifth Amend- ments to the- Constitution if Section 22(k) were ap- plied so as to subject her to taxation in such circum- ‘stanees. (Pet. 10-11, 20, 23, 25, 30.) Taxpayer r also -comends that, to the extent paid out of tax-exempt: income, her alimony is immune from taxation under Section 22{b) (4) of the. 1939 Code (Appendix, Mira) and the Tenth Amendment to the Constitution. (Pet, 23-24.) She argues that she can)in no event be taxed on this alimony because Dodge had nv tax burden in the first place, and hence there was no net taxable income to be. shifted over to her. (Pet. 20, 30. ) The short answer to these contentions is that the statute operates to tax the wife on alimony received . ' by her. without regard to the source from w hich the _ husband makes the pay ments (Luckenhach v. Pedrick, 214 F. 2d 914 (C. A. 2d): Albert R. Gallatin Welsh Trust x. Aaah rte 16 T. C. 1398, affirmed sith vom. Girard Trust Corn Exchange Bonk, . ustee.v. Commissioner, 194 EF. 2d 708 (C. Ao3d); S. Re ‘po No, 1651, 77th as 2d Sess., p. 84 (1942-2 Cun. Roll. g 504, 568);° and there is nothing unreasonable or arbitrary about such treatment. Gould v. Gould, 245 U.S. 151, cited by the taxpayer. (Pet. 8, 17, 18), did not deal with the scope of the.term “income” as used in the Sixteenth Amendment, and — purported to construe the definifion of ‘net, income’ enews in Section IT A and B of the Income Tax Act of 1915, ¢. | 16, 38 Stat. 114, 166. The law was amended in 1942 so . as to specifically change the result in the Gould case, and ‘rence that case has no application here. Under the law.as so changed, (Section 22(k) of the 1939 Code), the payments to the wife are treated as income to her in the same sense that salaries .or rents would be treated as income, and it makes no difference whether suc.’ items are paid out of earnings, capital, or tax-exempt income of the payor. In any case, they are income to the: recipient. 3 Here, Dodge was the owner of. the tax-exemp* . ) income, and that: exemption (Section 22 (b) (4)) would nct extend to the taxpayer even if he made the payments ia question to ) her from that source. Cf. | 2S. Rep. No. 1631 reads in part as follows (p. 84° (1912- _ Cum, Bull. 501, 568) ): . ¢ The full: amount of periodic payments received tinder the circumstances described in section 22(k) is required to be included in the gross income of the recipien whether such amounts are derived, in whole or in: part. from income received or acerued by the source to which : such payments are attributable. Thus, it matters no’ that such payments are attributable to. property in trust. . to life insurance, endowment, or annuity contracts, or to — any other interest in property, or are paid directly or indirectly by the, , obligor husband from his income or capital. * +. 9 Vorfolle N at. Bank. of Ci and Ty v. Commission r, 66 Fr 2d 48 (C. A. ith); Con missioner Vv . Meyer, 101 F, 2d 155 (C. A. 2d). Certainly, Dodge onl not im- munize per: sons to whom he paid salaries or rents, and the instant situation is not basically different. By tax- deprived Dodge of any exemption to which he may be entitled under Section 22(b) (4), relating to tax-ex- empt interest; and neither his constitutional nor stat-. utory rights Have been impaired. Indeed, taxpayer has no just ground to complain. since’she has received and enjoyed the alimony which is being taxed to her. - appears to be so (R. $la). However, such a private agreement constitutes no eréund for relieving her CONCLUSION It is respectfully submitted that the petition for. certiorari should be denied. — of J. LEE RANKIN, - Solicitor. General A LEE A. JACKSON, | L. W. Post, | Attorneys. .” SEPTEMBER, 1958. ing this alimony to taxpayer, the Commissioner has not . Finally, taxpayer "says: (Pet. 28-29) that Dodge is: contractually obligated to pay her taxes, and this . _ from tax. Moreover, this point was decided against - taxpayer in the prior proceeding. (13 T. C. at p. 399.) ~ CHARLEs K. nee) | . Assistant Attorhey General. -@ 10 - APPENDIX Internal Revenue Code of 1939:: - SEc..22. nancies INCOME. * 6 “ *. b) Exclusions from Gross Income.—The fol- ‘ing items shall not be included in gross in- ‘ come anid shall be exempt, from taxation under this chapter: . * * * ‘ (4) fas amended by Sec. 112(a) of the Revenue Act of 1942, c. 619, 56 Stat. 798; and by Sec. 11(d) of the Individual Eneome Tax Act of 1944, ¢. 210, 58 Stat. 231] Taz- free interest.—Interest upon fA)- the. obli- : gationg of a State, Terr itory, ‘or any politi- cal subdivision thereof, or the .District of Columbia; or. {B) obligations of a corpora- tion organized under Act of Congress, if; . such corporation is an instrumentality of _ the. United States; or (C). the obligations of — _the United States or its possessions. Every person owning any of the obligations enumerated in ise (A), (B), or (C) shall, when so required by regulations pre- scribed by the Commissioner with the ap- proval of the Secretary, submit in the re- turn required by this chapter a statement showine the number and amount of such obligations owned by him and the income received therefrom, in such form and with such information as such reeulations mv -preseribe. In the case of obligations of the ‘United States issued after September 1. 1917 (other than postal savinys certificatys , i. of deposit to the extent they represent de- _ posits made before March 1, 1949) and in’ the case of obligations of a corporation or- ganized under Act of Congress, the interest shall be exempt. only if and to the extent provided in the respective Acts authorizing the issue thereof as amended and supple- mented, and shall be excluded from gross income only if and to the extent it is wholly exempt from the taxes imposed by this chapter; ive ; * * * ° * : : R (k) fas added by See. 120(a) of the Revenue Act of 1942, supra] Alimony, Etc., Income.—In the case of a wiie’ who -is divorced or legally ‘se arated from hér husband under a decree of divorce or of separate maintenance,. -periodic payments (whether or not made at regular in- tervals) received subsequent to such decree in discharge of, or-attributable to property trans- | ferred (in trust or otherwise) in. discharge of, a ‘legal obligation which, because of the marital or, family relationship, is imposed upon or incurred | by such husband under such decree or under a written instrument incident to such a divorce. or separation shall be includible in the gross income. of such wife, and such amounts received as are attributable to property so transferred shall not he ineludible in the gross income of such hus- hand. This subsection shall not apply to that nart of any such periodic ‘payment. which the terms of the decree or written instrument fix, in terms of an amount of money or a portion of the, payment, as a sim which is pay Able for the sup- port of}minor children of such husband: In case any such periodic nayment is Jess than the é ® ” ms ee - amount specified in the decree or written instru- ment, for the purpose of applying the’ preceding sentence, such payment, to the extent of such sum payable for such support, shall be consid- ered a payment for such support. Installment payments, discharging a part of an obligation the principal sum of which is, in terms of. money or. property, specified. in the decree or instrument shall not be vonsidered periodic payments for the purposes of this subsection; except that an in- stallment payment.shall be considered a periodic payment forthe purposes of this subsection if such principal sum, by the terms of the decree or instrument, may be or is to be paid within a period ending more than 1Q years from the date’ of such decree or instrument, but only to: the. extent that such installment payment | for the taxable year of the wife (or if more than one such installment payment for such taxable vear is received during such taxable year, the agegre- éate of such installment payments) does net exceed 19 per centum of such pringipal sum. For the purposes of fhe preceding sentence, th ste 0s of a payment of the principal sum w hich . allocable to a period after the taxable vear of 3 the wife in which it is received shall he con- sidered an installment payment for the taxabl- vear in which it is received.“ (In cases wher such"periodie payments are attributable to pron- erty of an estate or property. held in trust. s« section 171(b).) - * i e . (26 U.S.C. 1952 ed:. See. 22.) * Sec. 23. DEDUCTIONS FROM GROSS INCOME.* In computing net income ‘there shall be allow ed as deductions: .— Fees : aoe * * * (u) [as added by Sec. 120(b) of the Revenue Act of 1942, supra] Alimony, Etc., Payments.— re the case of a husband described in section - 22(k), amounts includible under section 22 (k) in the gross income of his wife, payment of which is made within the husband’s taxable year. Ifthe amountgpf any such payment is, . _under section 22(k) or section 171, stated to be. not in¢ludible in such husband’s gross income, no deduction shall be. allowed‘ with respect to such payment under this subsection. (26 U.S.C. 1952 ed., See. 23.). . * ¢ - * > eC VER es” PRINT ne conde tase 47949: --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386419_0471%3A3. Public record. Not legal advice.