Pulliam v. CIR

• Decision Date: 15 April 1964
• Docket Number: No. 7402.,7402.
• Parties: David R. PULLIAM, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
• Court: U.S. Court of Appeals — Tenth Circuit

329 F.2d 97 (1964)

David R. PULLIAM, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.

No. 7402.

United States Court of Appeals Tenth Circuit.

March 16, 1964.

Rehearing Denied April 15, 1964.

Morrison Shafroth, Denver, Colo. (Grant, Shafroth, Toll & McHendrie, and James H. Skinner, Jr., Denver, Colo., were with him on the brief), for petitioner.

Gilbert E. Andrews, Jr., Washington, D. C. (Louis F. Oberdorfer, Asst. Atty. Gen., Lee A. Jackson, I. Henry Kutz, and William A. Friedlander, Attys., Dept. of Justice, Washington, D. C., were on the brief), for respondent.

Before PICKETT, LEWIS and SETH, Circuit Judges.

SETH, Circuit Judge.

The Commissioner of Internal Revenue determined there was a deficiency in petitioner's individual income tax return because there was not included in it a long-term capital gain. This gain, the Commissioner held, resulted from a transfer of property from the petitioner to his former wife as a "division of property" in a divorce decree. The Tax Court agreed with the Commissioner, and the taxpayer asked for this review.

Petitioner's wife filed a petition for divorce which contained no prayer for alimony or support, but stated:

"That during the married life of plaintiff and defendant certain property has been acquired by the said parties; that a division of said property should be made in order that each of the parties hereto shall receive their fair and equitable portion of the same."

The petitioner in his answer in the divorce proceedings joined in the wife's prayer for a division of property. There is nothing in the record to show that petitioner later objected to this way of handling the property question in the divorce proceedings, but it does appear he did contest the details of and values used in the "division."

The Colorado court in the divorce action noted that the parties had been married thirty years, that there were no children, and held that the petitioner had a duty to make provision for his wife's support. Under Colorado law the wife's rights during marriage do not vest in her an ownership of any part of the husband's property. Thus the liability of the husband for support of his wife is more in the nature of a personal obligation. The right of dower does not exist in Colorado, and a husband who has title to the property may convey it without the consent of the wife. It appears that the only inchoate right of any consequence the wife has in Colorado is, if she survives her husband, she may reject provisions he makes for her in his will and take instead one-half of his estate. In this instance the wife performed the usual duties of a housewife, and performed no other tasks to specifically assist in the accumulation of property, and brought no property into the marriage.

The divorce court acted under the Colorado statute which permitted it to make such provision for payment of alimony and maintenance of the wife "as may be reasonable," and to require security for its payment, or to enforce payment, "or may decree a division of property." 3 Colo.Rev.Stat.1953 Ann. § 46-1-5. The divorce court recited the several factors it took into consideration, including the financial condition of the parties, the duty of the husband to support and maintain the wife, whether the wife brought any property into the marriage, the husband's earning capacity, and several other factors. As to the property, the divorce court then entered a decree that the parties each should have and retain as his or her sole and separate property all real and personal property the title to which was in his or her name at the time the action commenced. The decree also stated that it would act as a conveyance of title from petitioner to his wife of an additional described parcel.

There was no property settlement agreement entered into by the petitioner and his wife. They had attempted to reach such an agreement but were unable to do so, and the divorce court made the allocation. The wife did not sign any release of alimony or of support. The Tax Court held that this case was controlled by United States v. Davis, 370 U.S. 65, 82 S.Ct. 1190, 8 L.Ed.2d 335, and found that the petitioner-appellant realized a long-term capital gain "as a result of the decree of divorce."

Petitioner argues that the Tax Court was in error in holding that a divorce decree in Colorado, which purported to transfer appreciated property to the wife, results in a capital gain to the husband in the absence of any voluntary agreement for a property settlement. Petitioner urges that the Tax Court was in error in holding that the case was governed by United States v. Davis, supra. He states that the case does not apply because the voluntary nature of the settlement or transfer was "the sine qua non" of Davis. The opinion does at several points mention the fact that the settlement there concerned was a voluntary one. In the case at bar, the transfer was instead accomplished by the court with no property settlement agreement entered into between the parties. The petitioner states that without such an agreement, "the willing buyer and willing seller test of market value" could not be applied. He argues also that the court decree is not the "promise" or the "agreement" of Harris v. Commissioner, 340 U.S. 106, 71 S.Ct. 181, 95 L.Ed. 111. He further asserts that he has received no property at fair market value. Petitioner concedes there might be a basis for a claim that there was a sale in the event the court had given the wife...