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retained a dower interest, but our legislature under the constitution, has so modified that law that the husband is not so powerful as the wife, and he is at the disadvantage in that he cannot bind his wife's property by any contract, but on the other hand he is responsible for her debt to a certain degree.

In other words, when I was a banker my lawyer told me when I loaned money to a man and his wife, and the man signed the note and she signed the security, that, unless I wrote on that security, “I hereby willingly consent to this debt”, she could defeat me entirely, whereas if I wrote it and she signed the note and signed that statement, she cannot do it.

They have modified those things. very drastically in our State to protect the wife, and what I was getting at is whether under your laws or constitution you could modify that matter of control by statute.

Mr. FULBRIGHT. Absolutely; and that has been done from time to time.

Mr. HILL. It is true that in other community-property States it is a matter wholly in the control of the legislature with no vested right in either spouse as to what the legislature does to control it.

Mr. FULBRIGHT. Yes; and in fact in all of the 48 States they have different laws as to the control of property held by the husband and wife.

Mr. SHALLENBERGER. My statement, of course, was not founded on the condition in those States, but the point I was trying to bring out was whether by statute your legislature could provide that the wife could sell the property or control it like the husband does now.

Mr. FULBRIGHT. Yes; they can do that, and not only that, but in many States there have been changes made.

Mr. FREAR. They can do that under the constitution?

Mr. FULBRIGHT. Yes, they can; and that is very settled in the State of Texas.

Mr. SUMNERS. Mr. Chairman, I am going to make just one statement then conclude.

I had in mind to take up the cases cited by the proponents of this legislation and undertake to show that these trust-creating cases that they have cited are to be distinguished from community-property cases, because in the community-property litigations the courts always held that the property belonged to the wife the minute it was acquired.

In the California case where a man sought to put his earnings and the income from his property and the earnings of his wife, where they made an agreement between themselves, the court held that he was to be taxed upon his income because he earned it, and the tax attached before he could get it into this common fund.

In the case of a revocable trust a man sought to put his own property out subjected to a specific use, and the court held that he had a right to revoke which prevented its passing, so that the provisions of the law levying a tax on a part of the income would not attach.

In the case by Mr. Justice Cordoza, I am going to leave that case for some of the other gentlemen to discuss, if the committee desires to hear them.

However, I do desire to direct the attention of the committee to a very brief statement to be found at page 178, volume 289, in the opinion by Mr. Justice Roberts in the case of Reinecke against Smith, as follows:

The case is plainly distinguishable from Hoeper v. Tax Commission (284 U.S. 206), on which respondents rely, for there the attempt was to tax income arising from property always owned by one other than the taxpayer, who had never had title to or control over either the property or the income from it. The measure of control of corpus and income retained by the grantor was sufficient to justify the attribution of the income of the trust to him.

There the court draws the distinction I have been insisting upon that in these cases there is that clear distinction between those cases and a number of cases cited by the proponents of the bill, from which they reason by analogy.

Mr. SHALLENBERGER. Before you conclude I would like to ask you one question which I know you can answer at once.

Is it your judgment that this bill, if passed and enacted into a law, would affect only the rights of the people in the communityproperty States and the amount of taxes they should pay?

Mr. SUMNERS. It is just as clear in the bill as can be that is what they intend to do.

Mr. SHALLENBERGER. Where is the provision in the bill that provides that? I know that has been stated several times.

Mr. SUMNERS. I do not believe that the gentleman who represents the Treasury will have any other statement than that this bill is to apply only to the eight community States.

Mr. Hill. I want to know the difference of opinion as to how farreaching that opinion is.

Mr. SHALLENBERGER. I ask you that question because I think you observed in the questions of Mr. Frear here that we might consider modifications of the law whereby to make it more directly apply to all of the States, seeking to get a law uniform for all, and in your opinion, I believe, this law does not do that.

Mr. SUMNERS. I believe the representative of the Treasury will so state.

Miss CARLOSS. Mr. Chairman, I am sure there is no intention on the part of the Treasury to have it reach anything except these eight States.

Mr. SHALLENBERGER. I am glad to have that cleared up.

Mr. SUMNERS. I thank you gentlemen very much for the courteous hearing you have given me. Mr. SHALLENBERGER. We thank

you your

statement. The subcommittee will adjourn until tomorrow morning at 10 o'clock.

(Thereupon the subcommittee adjourned until 10 a.m. Friday, May 4, 1934.)




FRIDAY, MAY 4, 1934



Washington, D.C. The committee met at 10 a.m., Hon. A. C. Shallenberger (chairman) presiding.

Mr. SHALLENBERGER. The committee will be in order. Congressman Sumners, of Texas, has asked to be permitted to add to his remarks of yesterday, and we shall be pleased to have him do so at this time.

Mr. SUMNERS. Mr. Chairman, I thank the committee very much for the privilege of making merely a suggestion for the consideration of the committee. I hope-in fact, I am sure—the committee will consider, when it comes to determine what it shall do with reference to the Treadway bill, whether such a legislative device as this meets the constitutional requirement with regard to geographic uniformity. Admittedly this operates with reference only to eight of the States, in connection with which it is sought to compel one rendition of the revenue from the property of husband and wife which in other States under existing law a husband and wife would not be compelled to do. So that, in view of the known fact that it will operate only within eight States, I ask the committee to consider whether it meets the constitutional requirement with regard to geographic uniformity.

Of course, the equities also are involved; whether, even if you had the constitutional power, this would be the right sort of thing to do. I do not desire to take up the time of the committee to argue either of those propositions. But it seems to me that they are important for gentlemen who have your sort of legislative responsibility to consider.

I am merely undertaking to do the service of submitting this suggestion to you in connection with what I have already said.

I thank you very much for your courtesy.
Mr. SHALLENBERGER. We appreciate the suggestion, Mr. Sumners.

The first witness on the calendar this morning is Judge George Donworth, of Seattle, Wash.


Mr. DONWORTH. Mr. Chairman and gentlemen of the committee, my name is George Donworth. I live in Seattle and have practiced law there for a long period of time. Before going to Seattle I practiced law in the State of Maine for several years and am, therefore, a member of the bar of two States having very diverse laws relating to domestic relations and the property rights of married persons.

I was counsel for the taxpayer Seaborn in the case of Poe v. Seaborn; conducted that case through the three courts—the District Court, the Circuit Court of Appeals, and the Supreme Court of the United States.

The committee is giving very patient, intelligent, and careful consideration to this bill, H.R. 8396, which it is proposed to enact and which provides that, for the purpose of determining the income tax liability of any individual during any taxable year beginning after December 31, 1933, property of a marital community shall be considered as the property of, and income of a marital community shall be considered as the income of, the spouse who has the management and control thereof under the law of the jurisdiction in which the marital community exists, and such spouse shall alone be entitled to the deductions and credits allowed under the internal-revenue laws, which are properly allocable to such property or income.

I take it there are three questions with which the committee is very much concerned in the consideration of this bill. They may be stated in any order.

One question is, Is this bill fair to the taxpayers whom it affects!

Second, Is it constitutional under the Constitution of the United States?

And third, Would it, if enacted, accomplish a beneficial and useful purpose ?

We counsel for the taxpayers in the eight community-property States have the view that each of those questions should be answered in the negative, and we cherish the hope, a confident hope, I might say, that this committee will agree with us in giving negative answers to each of those three questions.

I will not attempt in my remarks to divide the argument or the presentation along any particular line, because these three questions constantly run into each other. The committee will be able, I trust, to pick out and allocate, so to speak, what I may say as I go on so as to make the application to the different questions involved.

This proposed enactment is unjust for a number of reasons. Let me at the outset call attention to one reason why it is unjust. This bill proposes to take the statute law of eight States and to follow the provisions of that statute law and to give to that law application up to the point where it would increase taxes, and then to depart from that law and to refuse to give further recognition or effect to that law insofar as the consequences of that partial adoption of the law would lead to results favorable to the taxpayer.

If I ask a rhetorical question now and then, I may say that, of course, I ask the answer only in the report of the committee and not now. Now, is any proposition fair in a union of 48 States which says to 8 States, “We are going to give effect to your law up to a certain point, and then we are going to disregard your law”? The negative answer seems perfectly obvious. The proposed bill makes use of the State law to combine two incomes into a marital partnership and then to refuse recognition to the concomitant provision of the State law which says that this combined income is the property of two persons, not of one person alone. Where does the bill get the right to unite these incomes at all if the State law is not to have effect?

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