author: BREITENSTEIN, Circuit Judge.

text:
    Richard E. WILES, Jr., and Karen B. Wiles, Petitioners-Appellants, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.
    No. 73-1677.
    United States Court of Appeals, Tenth Circuit.
    Argued March 20, 1974.
    Decided June 26, 1974.
    Rehearing Denied July 25, 1974.

      John H. Foard, Kansas City Mo., for petitioners-appellants.
    Arthur L. Bailey, Atty., Tax Div., Dept, of Justice (Scott P. Crampton, Asst. Atty. Gen., and Meyer Rothwacks and Grant W. Wiprud, Attys., Tax Div., Dept, of justice, on the brief), for respondent-appellee.
    Before PICKETT, BREITENSTEIN and BARRETT, Circuit Judges.
   BREITENSTEIN, Circuit Judge.

In this federal income tax case the question is whether the taxpayer realized a taxable gain upon, the transfer of certain appreciated personal property to his former wife under a property settlement agreement incorporated in a Kansas divorce decree. The Tax Court, with three judges dissenting, upheld the contention of the Commissioner that the gain was taxable. See 60 T.C. 56. Taxpayer appeals.

The facts are stipulated. Taxpayer was married to Constance who sued him for divorce in a Kansas court. Taxpayer and Constance negotiated to settle their property rights, and reached a voluntary agreement whereby neither would claim alimony, and the total value of all property held by each would be equally divided. Because the value of property in taxpayer’s name exceeded that in Constance’s name, taxpayer agreed to transfer property in his name, corporate stocks, having an assigned value of $550,-000, to Constance to accomplish the equal division of their combined holdings. The agreement was made a part of the divorce decree. The taxpayer’s aggregate base for the transferred property was $83,169.65. The Commissioner assessed a deficiency on the basis that the transaction was a taxable event resulting in a gain from the exchange of property, see §§ 1001(c) and 1002 of the Internal Revenue Code of 1954, and the Tax Court affirmed him. The amount in controversy is $109,650.54. Taxpayer’s present wife is joined because she and her husband filed a joint return for the year in question.

The issue is whether the transfer of the appreciated property was a taxable event, or a division of property between co-owners. United States v. Davis, 370 U.S. 65, 82 S.Ct. 1190, 8 L.Ed.2d 335, was concerned with a Delaware divorce and a transfer of individually owned appreciated securities by the husband in satisfaction of all claims against him. The Court recognized that state law would affect the federal tax question because state law determined the substantive rights of the parties in the transferred property during marriage. Ibid, at 71, 82 S.Ct. 1190. In Delaware the wife had only certain statutory marital rights in her husband’s property. These were her rights to intestate succession, dower, and a share of his property upon divorce. Ibid, at 66, 82 S.Ct. 1190. She had no interest in the management or disposition of her husband’s personal property and she had to survive him to share in his intestate estate. Ibid, at 70, 82 S.Ct. 1190. On dissolution of the marriage she shared in the property only to the extent which the court deemed reasonable after consideration of relevant factors including her needs, age, health, and the number of children. Ibid, at 70, 82 S.Ct. 1190. The Court said that “the inchoate rights granted a wife in her husband’s property by the Delaware law do not even remotely reach the dignity of co-ownership.” Ibid, at 70, 82 S.Ct. at 1193. We recognized the Davis decision in Pulliam v. Commissioner of Internal Revenue, 10 Cir., 329 F.2d 97, cert. denied 379 U.S. 836, 85 S.Ct. 72, 13 L.Ed.2d 44. If the state-created rights result in co-ownership of the property, the transfer on divorce is a division of property, nontaxable to the transferor.

We turn to the law of Kansas. In that state, a wife has a right to intestate succession if she survives her husband. K.S. A. § 59-504. She also is entitled to one-half of all her deceased husband’s realty, the sale of which she did not consent to during marriage. K.S.A. § 59-505. This right is somewhat analogous to dower. The two mentioned rights are all that a wife has in her husband’s property during marriage except certain specified rights in exempt property. See K.S.A. §§ 58-312 and 60-2301. Although the Kansas Supreme Court has recognized that these rights possess some elements of a property interest, they rise no higher than inchoate rights contingent upon the wife’s survival. See In re Williams’ Estate, 158 Kan. 734, 150 P.2d 336, 338; Bates v. State Sav. Bank, 136 Kan. 767, 18 P.2d 143, 145; and Murray v. Murray, 102 Kan. 184, 170 P. 393, 394.

Just as the wife’s inchoate rights vest upon her husband’s death, the filing of a divorce suit confers additional rights on the wife. The state divorce laws compel the courts to marshal all of the parties’ property, regardless of ownership or acquisition, and to divide it in a just and reasonable manner. K.S.A. § 60-1610 (b). Accordingly, a wife may expect to receive a certain share of her husband’s property upon divorce. This expectation is independent of any right to alimony. See K.S.A. § 60-1610(b) and (c), and D. Hopson, Divorce and Alimony Under the New Code, 12 Kan.L.Rev. 27, 41.

The division of the property is wholly within the discretion of the trial court. Harrah v. Harrah, 196 Kan. 142, 409 P.2d 1007, 1011; Zeller v. Zeller, 195 Kan. 452, 407 P.2d 478, 485. In the exercise of its discretion, it considers the source of the property, the contribution of each party, earning capacity, fault, needs, ages, and length of marriage. Harrah, 409 P.2d at 1011; Folk v. Folk, 203 Kan. 576, 455 P.2d 487, 489; and Saint v. Saint, 196 Kan. 330, 411 P.2d 683, 688. These factors are inconsistent with the idea of co-owned property. If the wife were a co-owner in Kansas, her interest in the property to be divided would be based on more than a right to a “just and equitable” share therein. See Garver v. Garver, 184 Kan. 145, 334 P.2d 408, 410; and Cummings v. Cummings, 138 Kan. 359, 26 P.2d 440, 442.

The Davis test depends on the transferee’s rights in the property during marriage. 370 U.S. at 70, 82 S.Ct. 1190. One commentator, speaking of Kansas law, has said that “[a] division of the, couple’s jointly owned property is to be distinguished for federal tax purposes from a division of ‘jointly acquired’ property held solely in the name of the husband in which the wife has only an inchoate interest.” B. Moore, Federal Tax Aspects of Divorce, 35 J.K.B.A. 175, 209 n. 21. Indeed, Cofield v. Koehler, D.C.Kan., 207 F.Supp. 73, appeal dismissed, 10 Cir., 311 F.2d 221, holds that a transfer of jointly acquired and owned bonds incident to divorce is not a taxable event. In the case at bar there was no joint ownership, and the rights of the wife in the husband’s property were inchoate.

Although we believe that under Davis the Kansas law is controlling and defeats the taxpayer’s claim, we cannot ignore the Collins cases on which he relies. These involved Oklahoma law. In Collins v. Commissioner of Internal Revenue, 10 Cir., 388 F.2d 353, we held that a transfer of property pursuant to a settlement was, for federal income tax purposes, a disposition of property and a taxable transaction. Ibid, at 357-358. Thereafter, in Collins v. Oklahoma Tax Commission, Okl., 446 P.2d 290, 295, the Oklahoma Supreme Court held that property acquired during coverture is “a species of common ownership.” The United States Supreme Court vacated our judgment and remanded the case for consideration in the light of the mentioned decision of the Oklahoma Supreme Court. 393 U.S. 215, 89 S.Ct. 388, 21 L.Ed.2d 355. On remand we held that under the Oklahoma decision, the transfer was nontaxable. 412 F.2d 211, 212. The Oklahoma situation is pertinent because the Oklahoma law was adopted from the law of Kansas. Vanderslice v. Vanderslice, 195 Okl. 496, 159 P.2d 560, 562. In any event the Oklahoma position is still troublesome. In Sanditen v. Sanditen, Okl., 496 P.2d 365, a case involving a gratuitous transfer by a husband of property jointly acquired during coverture, the court held that a wife has no vested rights in the property subject to division. Vesting occurs by virtue of the divorce action, and not the marriage relationship. 496 P.2d at 367. See also McDaniel v. Oklahoma Tax Commission, Okl., 499 P.2d 1391, 1393-1394. The Oklahoma law would seem to be in a state of flux.

The situation in Colorado must also be mentioned. In Pulliam v. Commissioner of Internal Revenue, 10 Cir., 329 F.2d 97, cert. denied 379 U.S. 836, 85 S.Ct. 72, 13 L.Ed.2d 44, we held that a taxable capital gain resulted from a divorce decree that acted as a conveyance from husband to wife of described property. In our first Collins decision we said that we saw no controlling distinction between Oklahoma law and Colorado law and followed the Pulliam decision. 388 F.2d at 357. The problem did not stay buried in Colorado. Imel v. United States, D.C.Colo., 375 F.Supp. 1102, was an action for refund of a capital gains tax paid on appreciated property transferred to a wife under a divorce settlement agreement. As permitted by the Colorado Appellate Rules, 21.1, see also Lehman Brothers v. Schein, 416 U.S. 386, 94 S.Ct. 1741, 40 L.Ed.2d 215, the federal court certified to the Colorado Supreme Court, see In re Questions Submitted by the United States District Court, Colo., 517 P.2d 1331, the question, Ibid, at 1332:

“Under Colorado law, is such a transfer a recognition of a ‘species of common ownership’ of the marital estate by the wife resembling a division of property between co-owners, or does the transfer more closely resemble a conveyance by the husband for the release of an independent obligation owed by him to the wife ? ”

In answer the state supreme court said, Ibid, at 1334:

“We answer in the affirmative that, under Colorado law, the transfer involved here was a recognition of a ‘species of common ownership’ of the marital estate by the wife resembling a division of property between co-owners. We answer in the negative whether the transfer more closely resembles a conveyance by the husband for the release of an independent obligation owed by him to the wife.”

The Colorado Supreme Court reviewed the Collins series of cases and commented that it perceived no material distinction between the statutes of Colorado and those of Oklahoma considered in the Collins cases. Ibid, at 1334. We are not told what the future course of the Imel litigation will be.

The Oklahoma and Colorado decisions are not conclusive here. They are noted in recognition of the disparities which exist in the application of federal tax statutes to transactions occurring in the states which compose the Tenth Circuit. We are bound by Davis which comments that although Congress has alleviated disparities in many areas “in other areas the facts of life are still with us.” 370 U.S. at 71, 82 S.Ct. at 1193. Davis requires us to follow Kansas law. We are convinced that under the pertinent Kansas statutes and decisions the wife has no vested co-ownership in property of the husband during marriage. Consequently, the transfer of some of that property pursuant to a divorce settlement was a taxable event.

A few matters remain to be mentioned.. The government says that the wife’s waiver of alimony in the settlement agreement, and the provision of the subsequent divorce decree that the settlement covers “all marital rights and obligations,” establish that the transfer was in exchange for an independent legal obligation, and hence a taxable event. In Davis the settlement was of “any and all claims and rights against the husband whatsoever,” 370 U.S. at 67, 82 S.Ct. at 1191, and the Court held that decision rested on whether under state law they were co-owners. 370 U.S. at 70-71, 82 S.Ct. 1190.

The taxpayer asserts that the Commissioner improperly has taken inconsistent positions by asserting a tax claim against the wife on the basis of the settlement transaction. The Commissioner replies that this is an administrative practice for the protection of the revenues. See Estate of Goodall v. Commissioner of Internal Revenue, 8 Cir., 391 F.2d 775, 782-783, cert. denied 393 U.S. 829, 89 S.Ct. 96, 21 L.Ed.2d 100; cf. Commissioner of Internal Revenue v. Southwest Exploration Co., 350 U.S. 308, 309 n. 1, 76 S.Ct. 395, 100 L.Ed. 347. We are confident that the Commissioner will not attempt to collect double taxes and, if he does, the liability of the divorced wife can then be considered.

Affirmed.


source: Caselaw Access Project

author: PER CURIAM.

license: Public Domain

text:
    UNITED STATES of America, Appellee, v. William Michael SWEET, Defendant, Appellant.
    No. 74-1095.
    United States Court of Appeals, First Circuit.
    Argued June 3,1974.
    Decided June 25, 1974.

      Michael B. Keating, Boston, Mass., with whom Foley, Hoag & Eliot, Boston, Mass., was on brief, for appellant.
    Robert B. Collings, Asst. U. S. Atty., with whom- James N. Gabriel, U. S. Atty., was on brief, for appellee.
    Before COFFIN, Chief Judge, Mc-ENTEE and CAMPBELL, Circuit Judges.
   PER CURIAM.

Appellant Sweet was convicted in a jury trial of failing to report for induction, in violation of 50 U.S.C. App. § 462 (1970). In this appeal he contends that the conviction was barred 1) by his local board’s failure to state reasons for rejecting a conscientious-objector claim, and 2) by the trial court’s refusal to allow as a defense the issue of legality of the Vietnam war. We affirm.

The facts are uncontested. After registering for the draft on August 19, 1969, appellant received a classification questionnaire (SSS Form 100) from Local Board No. 167. He mailed the form back on September 16 and the board received it on September 18. In the form, appellant claimed conscientious-objector status by signing Series VIII. Elsewhere on the form he stated reasons for doing so. In response, the board then mailed to appellant a special form for conscientious-objector claims, SSS Form 150. Appellant received this form but never returned it, as was noted in his selective-service file. The board reviewed the file on April 24, 1970, and classified appellant 1-A. He received notice of the classification, plus a separate form advising him of his rights to a personal appearance before the board, to an appeal of the classification and to the assistance of a specified appeal agent. The 1-A notice did not, however, include an explicit rejection of the conscientious-objector claim. Appellant took no action after receiving the notice. Subsequently, he was ordered to report for a physical. He did so, passed, and a statement of acceptability was mailed to him on August 7, 1970. On January 6, 1971, the board ordered appellant to report for induction. He failed to do so and the instant prosecution followed.

Appellant first contends that by signing Series VIII on the initial classification questionnaire and including therewith his statement of reasons he established a prima facie claim for conscientious-objector status .which the local board could not reject without at least providing a statement of reasons of its own. United States v. Edwards, 450 F.2d 49 (1st Cir. 1971). The trial court never decided this issue. Instead, assuming arguendo the establishment of a prima facie claim, the court held that appellant nevertheless was barred from challenging his indictment on that ground because, unlike the registrant in Edwards, he had failed to utilize any of the administrative appeal procedures available to him and thus provide the board an opportunity to correct the assumed error.

As a general rule, the validity of a 1-A classification may not be challenged in a section 462 prosecution if the defendant has previously failed to utilize normal, available administrative remedies. See McGee v. United States, 402 U.S. 479, 483, 91 S.Ct. 1565, 29 L.Ed.2d 47 (1971). The rule is well founded in policy. As indicated by the trial court, it seeks to insure that selective service registrants will make use of the administrative remedies which are especially prepared to deal with complaints and contentions concerning the draft. See 372 F.Supp. at 74. The rule also helps prevent the scenario in which a registrant might detect a substantial procedural defect in his file, yet keep the knowledge to himself until the last possible moment, thereby hoping to escape both the induction process and any criminal prosecution. Of course, as a policy-oriented rule, the exhaustion requirement is not to be applied “blindly in every case.” McKart v. United States, 395 U.S. 185, 201, 89 S.Ct. 1657, 23 L.Ed.2d 194 (1969). But whether an exception will be recognized in any given case necessarily depends on the case’s particular facts. McGee v. United States, supra, 402 U.S. at 485, 91 S.Ct. 1565. The inquiry is whether the policies underlying the exhaustion requirement will, not be served because of the individual fact situation. Id.

Here, we have a selective-service registrant whose only assertion of a conscientious-objector claim appeared in the initial communication with his board. After that, until his trial for refusing induction, it was as though he had not asserted the claim at all. Through the series of subsequent contacts with the board, including his 1-A classification and physical, appellant raised no objection and made no mention of conscientious-objector status. Certainly, he had ample opportunity to do so. In particular, he was expressly offered an administrative appeal and personal appearance following the 1-A classification. But as appellant acknowledged at trial, he simply chose to do nothing. In these circumstances, we have no reason to relax the exhaustion requirement. Appellant’s complaint was the kind which could have been corrected through administrative appeal. His refusal to avail himself of the remedy was the only barrier. The cases cited by appellant as mandating an exception are all distinguishable on their facts. They involve situations where the registrants at least offered explanations for their respective failures to pursue administrative remedies. See United States v. Newmann, 478 F.2d 829 (8th Cir. 1973) ; United States v. Rabe, 466 F.2d 783 (7th Cir. 1972). The instant case is closer to McGee itself. See also United States v. Hayes, 493 F.2d 1279 (1st Cir. 1974).

Appellant’s second contention, that he should have been permitted to challenge the section 462 prosecution on the ground that the Vietnam war was illegal, was rejected by this court in United States v. Jacques, 463 F.2d 653, 656-657 (1st Cir. 1972). We stand by that decision.

Affirmed.

      . Two judges dealt with this case in the district court. Judge Wyzanski’s pretrial opinion on the Vietnam war issue can be found at 359 F.Supp. 114 (D.Mass.1973). After Judge Wyzanski recused himself from further participation in the proceedings, Judge Aldrich of this court, sitting as a- district judge, presided at trial. His post-trial opinion on the conscientious-objector issue can be found at 372 F.Supp. 72 (D.Mass.1974).

      . This portion of the printed form reads :
      “I claim to be a conscientious objector by reason of my religious training and belief and therefore request the local board to furnish me a Special Form for Conscientious Objector (SSS Form 150).”

      . The appellant’s statement read :
      “My signing as a conscientious objector to the military commitments of the United States Armed Forces is a serious and meaningful step in my life. I do so sign because of my religious belief that God is the only Being who has the right to take the precious gift of life from another being. I do so sign because I feel as an American and as a human being it is my duty to try and correct wrong doings such as our commitments in Hell or Viet-Nam whichever. Being a conscientious objector, I would gladly and wholeheartedly serve in the Armed Forces of the United States to promote 'peace and goodwill in the world, and if called on to serve in Viet-Nam will go but only in the interests of peace. If called on to fight or ‘protect’ with arms against any human being wether [sic] in Viet-Nam or the Pbillipines I will not do so. I understand the consequences and would serve ten years in jail rather than act as a puppet for our countries [sic] politicians.”

      . The court said in pertinent part:
      “I assume in his favor that the first part [see n. 3 supra] had it stopped there, would have been a sufficient prima facie claim. By one interpretation, the second half spoiled it; by another it did not; by a third it would reduce him from a full conscientious objector (I-O) to one conscientiously opposed to combatant military duty (I-A-O). Reading the statement as a whole, it could be fairly said that all interpretations were reasonable, and that the most reasonable was the last.” 372 F.Supp. at 73.
      It is clear from this excerpt that the court did not actually hold that a prima facie ease was set out. At several points, appellant’s argument appears to assume that such a holding was made.

      . The failure of the board to invite appellant in on its own for a personal interview about his claim, as proposed in a nonbinding local board memorandum in effect at the time, cannot be considered sufficient ground for an exception to the exhaustion requirement. See United States v. Yapp, 5 Selec.Serv.L.Rep. 3403 (N.D.Cal.1972). We note that noncompliance with the memorandum did not prevent the Supreme Court from invoking the exhaustion requirement in McGee. See 402 U.S. at 490, n. 13, 91 S.Ct. 1565.