- 73 -
arrangements that, if successful, would be exploited by others.
As a result, legislative and judicial countermeasures “have come
to permeate the tax law so completely that they sometimes
determine which of several parties to an ordinary business
transaction must report a particular receipt or can deduct a
liability.” Id. However, those observations don’t answer the
question. They just remind us that the taxpayer’s arguments
deserve strict scrutiny.
I also acknowledge that the assignor’s lack of retained
control may be trumped if the subject of the assignment is
personal service income.44 Unlike the trust and property cases,
Lucas v. Earl, supra, can be rationalized not so much on the
service provider’s retained control over whether or not he
works,45 “but on the more basic policy to ‘tax salaries to those
who earned them’”.46
My response is that Mr. Kenseth’s claim did not generate
personal service income. Even though the loss of past earnings
44 3 Bittker & Lokken, Federal Taxation of Income, Estates,
and Gifts 75-7 (2d ed. 1991).
45 The Court of Appeals in Estate of Clarks v. United
States, supra, misstates Lucas v. Earl, 281 U.S. 111 (1930), in
saying that in that case, as in Helvering v. Horst, supra, “the
income assigned to the assignee was already earned, vested and
relatively certain to be paid to the assignor”. As a matter of
fact, the assignment document in Lucas v. Earl had been executed
in 1901, long before the effective date of the 16th Amendment;
the taxable years in issue were 1920 and 1921. See Lucas v.
Earl, supra at 113.
46 Bittker & Lokken, supra, at 75-11; see also Chirelstein,
Federal Income Taxation 194-195, 214-216 (8th ed. 1999).
Page: Previous 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 NextLast modified: May 25, 2011