Saving Seaborn: Ownership as the Basis of Family Taxation

Abstract:     
This Article examines the historical and jurisprudential development of the principle that ownership determines federal taxation of families. It traces the "ownership equals taxability" principle from the late nineteenth century to 1930; that is, from the decades leading up to ratification of the Sixteenth Amendment to the U.S. Supreme Court's landmark decisions in Poe v. Seaborn and Lucas v. Earl. It is a story of the early federal income tax and its administration; of tax avoidance opportunities for families; of the nature of spouses' legal interests as defined by state property laws; and of early tax enforcement efforts by the Treasury Department and Congress. It is also a story of how the Supreme Court sought to protect Congress' taxing power by articulating an expansive definition of ownership for purposes of determining taxability that relied on indicia of ownership such as control, management, dominion, beneficial interests, equitable interests, enjoyment, and even a "flow of satisfactions" concept that tracked consumption tax principles more closely than income tax principles.

In the end, the Article lays the groundwork for removing the modern-day false barometer of marriage between a man and a woman as the basis of family taxation. In place of marriage, it reestablishes ownership principles grounded in longstanding Supreme Court jurisprudence as the historically and legally accurate gauge for family taxation. In so doing, the Article presages an argument that will be articulated in a subsequent Article for taxing members of all state-recognized civil partnerships - marriage, domestic partnerships, civil unions, reciprocal beneficiary relationships - according to ownership interests as determined by state law.

Keywords: Taxation, Tax Law, Income Tax, Legal History, Economic History, Income Tax, Family Law, Domestic Partner, Same-Sex Couples, Community Property, Tax Avoidance, Seaborn, Joint Returns

Working Paper Series