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07/13/81 Iona Sutton Lane-Burslem, v. Commissioner of Internal


July 13, 1981






Before TAMM and WALD, Circuit Judges and MARKEY,* Chief Judge, United States Court of Customs and Patent Appeals.


Appeal from the Tax Court of the United States (T.C. No. 934-75).



Appellant Iona Sutton Lane-Burslem challenges a decision of the Tax Court *fn1 upholding a deficiency *fn2 noted by the Commissioner of the Internal Revenue Service ("Commissioner") against her 1971 federal income tax return. Appellant contends that the assessment of the deficiency violates her fourteenth amendment right to equal protection of the laws since it results from the disallowance of an exclusion from income she claims would have been available to a similarly situated male. Finding that no person, male or female, in the position of appellant was entitled to the disputed exclusion from income, we affirm the decision of the Tax Court without reaching the constitutional issue. *fn3 I. BACKGROUND

Until 1976, when Congress changed the statute, *fn4 the Internal Revenue Service ("IRS" or "Service") allowed some Americans working and residing abroad but domiciled in community property states to insulate one-half of their earnings from federal income taxation by attributing it to their nonresident alien spouses. *fn5 Despite an IRS and Tax Court finding that she had no legal basis for claiming that her salary should be considered community income, appellant asks the court to give her the benefit of this tax provision.

Appellant, born and bred in the Natchitoches Parish in Louisiana, has been employed overseas since 1951 by the United States Government as a teacher for dependents of United States military personnel. *fn6 In 1964, she married a British citizen, Eric Lane-Burslem. Since that time, the couple has resided together in England, *fn7 though both profess an intention to move to Louisiana following appellant's retirement in 1981 or 1982. *fn8

In 1972, when she learned that a tax advantage was available to residents of community property states married to nonresident aliens, appellant filed an amended tax return *fn9 for the 1971 tax year*fn10 in which she denominated her income as community income, attributed one-half of it to her nonresident alien husband, calculated the tax due on the remainder, and demanded a tax refund. The Commissioner responded with a statutory Notice of Deficiency assessing federal income tax on the excluded income. Attached to the Notice was an Explanation of Adjustments, which read in pertinent part:

It is determined that your domicile is the domicile of your husband therefore, since your (sic) are not domiciled in a community property state, you are not entitled to the income-splitting provision of Louisiana community property law.*fn11

Appellant challenged the deficiency in the Tax Court, arguing that under Louisiana law, her earnings should be considered community property, or, alternatively, if her earnings were not considered community property because Louisiana law deemed her domicile to be that of her husband, Louisiana law invidiously discriminated against women because it made it harder for a married woman to qualify her earnings as community property than it did for a man.*fn12 The Tax Court affirmed the Service's interpretation of Louisiana law, holding that community property existed only if both spouses lived in Louisiana. The opinion failed, however, squarely to confront the equal protection implications of the hypothetical posed by appellant: that a nonresident woman's domicile could be deemed to be that of her Louisiana husband, thus entitling him to the exclusion from income denied appellant, while a Louisiana wife could not make a similar claim of exclusion for her nonresident spouse. Instead the Tax Court found appellant's marital domicile to be England even if a gender-neutral "facts and circumstances" test were applied.

In a supplemental opinion, the Tax Court expanded its analysis. The court reasoned that appellant had no standing to raise the constitutional issue because the alleged constitutional violation arose not from the community property laws, but from the section of the Civil Code of Louisiana, Article 39, which presumes a woman's domicile to be that of her husband.*fn13 Since without this presumption, no person in appellant's situation regardless of sex could claim community property status attached to income earned abroad, a ruling that the presumption was unconstitutional would not benefit appellant. Rather, it would result in the denial of the benefit to all Louisiana domiciliaries, like appellant, married to nonresident aliens.*fn14 Thus, the court concluded, resolution of the constitutional challenge was unnecessary to settle the dispute in the instant case. II. THE ISSUE

On appeal, appellant presses only her constitutional argument, that because a similarly situated male would be allowed to exclude one-half of his income from federal income taxation as community property owned by a nonresident alien spouse, she is entitled to the same benefit.*fn15 However, as a preliminary matter we must confront the question raised by the Service: whether Louisiana law*fn16 provides community property treatment of any income earned outside the state by any person, man or woman, in appellant's situation. III. ANALYSIS

Appellant premises her argument that the sex-based domiciliary presumption in Article 39 is determinative of the existence of a community interest in her salary on her interpretation of the requisites of a community property regime under Louisiana law: "(t)o obtain the benefits of community property, a taxpayer must establish (only) that he or she is domiciled in a community property state."*fn17 In fact, Louisiana has a more complicated system for determining whether and to what extent a "community of acquets or gains" exists between partners in marriage.*fn18 The foundation of this system is contained in three articles of the Civil Code. Article 2399 establishes a community for "(e)very marriage contracted in this State...."*fn19 Article 2400 provides that "(a)ll property acquired in this State by nonresident married persons ... shall be subject to the same provisions of law which regulate the community of acquets and gains between citizens of this State."*fn20 Finally, Article 2401 declares:

(a) marriage, contracted out of this State, between persons who afterwards come here to live, is also subjected to community of acquets, with respect to such property as is acquired after their arrival.*fn21

None of these statutes, on its face, provides a solution to the question facing this court: what, if any, community property interests are created when one and only one spouse of a marriage contracted out of state "come(s) ... to live" in Louisiana though both profess an intention to reside there at a definite time in the future.*fn22 Appellant, relying on Succession of McKenna,*fn23 decided in 1871, argues that Article 39 fills this seeming gap. In McKenna, the nonresident alien wife of a Louisiana domiciliary claimed a community property interest in her husband's estate. The couple, like the Lane-Burslems, had been married abroad; the wife had never set foot in Louisiana.*fn24 Nonetheless, the court, adverting to Article 39 in conjunction with Article 2401, concluded that

according to our law, the domicile of the wife was that of the husband, in New Orleans, and that a community of acquets and gains existed between them....*fn25

Over fifty years later, however, the Louisiana Supreme Court had another occasion to consider what community property interests exist when only one party to an out-of-state marriage resides in the state. Though the court did not expressly repudiate McKenna, it impliedly rejected McKenna's analysis. In Succession of Dill,*fn26 the guardian of a nonresident woman filed a claim for one-half of the estate of her husband, who had been domiciled in Louisiana.*fn27 The court traced the history of community property in Louisiana from its "promulgation by royal authority of the ancient customs of the kingdom of Castile" through its legislative revision in 1825 and 1852, and concluded that

all these communities have, as their basis, equality between the spouses; that is to say, property acquired in this state by either of them falls into the community.

(Emphasis supplied).*fn28 The court then held that Article 2400, not Article 2401, determined the community interest of the wife, "for the one who remains away is certainly a nonresident married person," so that her interests extended to "all property acquired in this state."*fn29

Moreover, Dill was recently approved in two decisions written by the Louisiana Court of Appeal,*fn30 and scholarly analysis of Louisiana's community property law focuses on Dill as the controlling precedent on community property.*fn31 Thus, McKenna seems to have slipped into the hazy bayous of Louisiana jurisprudence, superseded by Dill's*fn32 analysis which rests on the specific language of Art. 2400 imputing community property status only to "property acquired in (the) State." In short, we think that if a Louisiana court were confronted with our case, it would not hold that Article 2401 and Article 39 combine to accord domiciliary status to a nonresident alien spouse so that all property acquired at any location by either spouse after marriage falls within Louisiana's community property laws, but rather it would find that such nonresident spouse's community interest in the domiciliary spouse's property would be limited to property "acquired in this State."*fn33 As appellant's salary was acquired in England, not Louisiana,*fn34 her husband gained no community property interest in it; the Service therefore properly disallowed the claimed exclusion from income.*fn35 Since this result is unaffected by the sex of the domiciliary, it suffers no constitutional infirmity.

Further, this result comports with general conflict of laws principles. These principles were summarized in West v. United States,*fn36 in which the Court of Claims held that in the absence of "controlling ... authority,"*fn37 the ownership interests in marital personal property should be determined by the internal law of the state with the most significant relationship to the spouses and to the earnings.*fn38 The court found that Spain had the most significant relationship when the "husband and wife (were) domiciled in different places (Kansas and Spain), residing in one place (Spain), which is also the jurisdiction where the money was earned,"*fn39 and therefore concluded that the husband's salary, in accordance with the demands of Spanish law, *fn40 was community property. Here, too, we would be hard-pressed to make a case that England did not have the most significant relationship to appellant's earnings, even if it lacks the power to tax them. *fn41 Under English law, appellant would hold her income as separate, not community, property. *fn42

In sum, we find that the income earned abroad in 1971 by appellant or any other person similarly situated is not subject to Louisiana's community property laws. She therefore has no legal basis for claiming that she should be entitled to an exemption of one-half of that income as belonging to her nonresident alien spouse. The judgment of the Tax Court is



* Sitting by designation pursuant to 28 U.S.C. ยง 293(a).

Opinion for the Court filed by Circuit Judge WALD.

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