Distributed: July 6, 1979

Ct. Cl. No. 170-77
Decision: June 1, 1979

Section 61 — Gross Income v. Not Gross Income
61.00-00 Gross Income v. Not Gross Income
61.31-00 Community Property

CC:TL-R-327-77
CC-1979-164
Br7:FJElward

Tax, Year and Amount

Income; 1975; $611.82

ISSUE

Whether the law of the wage-earner’s domicile (Kansas) or the law of his residence (Spain), where the wages were also earned, controls his and his spouse’s property rights in his wages. 0061.31-00.

DISCUSSION

Plaintiff was married to Mr. West in Spain prior to 1975. They resided in Spain from the date of their wedding through 1975. Mr. West was in the United States Navy performing his duties in Spain during 1975. He was domiciled in Kansas, a non-community property state. Plaintiff is a native of Spain and a nonresident alien for United States income tax purposes. The law of Spain purports to create a currently vested community property interest in each spouse equal to one-half of the income earned by both during the marriage where, as here, the parties were married in Spain and there was no antenuptial agreement to the contrary.

Although the plaintiff, the Government, and the Court of Claims were in agreement that local law determines the property rights of a wage earner and his spouse in income earned during the marriage, there was disagreement as to what local law was applicable here. The Government contended that the law of the wage-earner’s domicile controlled and thus plaintiff had no current vested property right in any portion of Mr. West’s salary. Plaintiff contended that the law of Spain was applicable and gave her a current vested one-half interest in Mr. West’s wages during 1975. Although there is no tax law precedent exactly on point, the Court of Claims held that the choice of local law was determined by the conflicts of law principle that the situs law could control if it affirmatively sought to do so. Thus, in this case the law of Spain determined the property rights of the wage earner and his spouse in his wages. However, even the principal authority cited by the court recognized that the great weight of authority in American cases was to the effect that the law of the wage-earner’s domicile controls the respective property rights of the wage earner and his spouse in the earnings during marriage. Internal Revenue Code § 879(a)(1) would supply the rule for decision should the problem in this case arise in a year after 1976. While we do not accept the present decision as correct, it does not conflict with any Court of Appeals or other court decision in a tax case. The issue currently lacks demonstrable administrative importance.

RECOMMENDATION

No certiorari
FRANCIS J. ELWARD
Attorney

Approved:
LESTER STEIN
Acting Chief Counsel

By:
DANIEL F. FOLZENLOGEN
Technical Advisor to the Chief Counsel

This document is not to be relied upon or otherwise cited as precedent by taxpayers.