Saving Seaborn: Ownership Not Marriage as the Basis of Family Taxation

Dennis Ventry, UC Davis School of Law

Abstract

Later this year, one of the most famous Supreme Court tax cases will celebrate its eightieth birthday. In Poe v. Seaborn, the Court reified two principles of the federal income tax: ownership determines tax liability and state law determines ownership. This article establishes that tax liability for families continues to follow ownership not marriage, despite the federal government’s position that the “ownership equals taxability” principle applies exclusively to heterosexual spouses. Verifying the broad application of this principle carries significant implications for all families. Under the aegis of Seaborn, it authorizes members of state-recognized relationships—marriages, domestic partnerships, civil unions—to file federal income taxes according to ownership interests under state law, an outcome at odds with current treatment.

To prove that ownership of income and property rather than marriage determines family tax liability, this article traces the “ownership equals taxability” principle from the late nineteenth century to after World War II; that is, from the decades leading up to ratification of the Sixteenth Amendment to the Supreme Court’s landmark decision in Seaborn and beyond. It is a story of the early federal income tax; 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 protected Congress’ taxing power and the federal purse by articulating an expansive definition of ownership for tax purposes, particularly in the context of the family.