Poe v. Seaborn

Holding

Spouses domiciled in a community property state may each report one-half of community income on their separate federal returns, because each spouse has a vested ownership interest in community income under state law.

Facts

Seaborn and his wife were domiciled in Washington, a community property state. Each spouse filed a separate federal return reporting one-half of the husband's salary and investment income as community property. The Commissioner contended the entire community income was taxable to the husband.

Reasoning

The Court held federal income tax follows state property law in defining ownership. Under Washington community property law, each spouse owned a present, vested half-interest in community income at the time it was earned, so each properly reported half. The case carved out community property states from Lucas v. Earl.