Lucas v. Earl

Holding

Income from personal services is taxable to the person who earns it; a contract assigning future earnings to another person does not shift the income tax liability to the assignee.

Facts

Earl and his wife had a 1901 contract under which all property and earnings acquired by either spouse would be held as joint tenants. Earl reported only half of his salary and attorney's fees, attributing the other half to his wife under the contract. The Commissioner assessed tax on the entire amount as Earl's income.

Reasoning

Justice Holmes wrote that the tax statute reaches the salaries of those who earn them; income is taxed to the tree that bears the fruit, not the branches to which it may be attributed by contract. The assignment-of-income doctrine prevents taxpayers from anticipatorily assigning earned income to lower-bracket family members.