United States v. Davis, 370 U.S. 65 (1962)

CERTIORARI TO THE COURT OF CLAIMS

Syllabus

Pursuant to a property settlement agreement later incorporated in a divorce decree, a taxpayer in Delaware transferred to his former wife, in return for the release of her marital claims, certain shares of stock which had appreciated in market value and which were solely his property subject to certain inchoate marital rights of the wife, including a right of intestate succession and a right upon divorce to a "reasonable" share of the husband’s property. He also paid the fees of her attorney for advice given to her about the tax consequences of the property settlement.

Held:

1. In these circumstances and in view of pertinent provisions of Delaware law, this transfer of stock is to be considered under the Internal Revenue Code of 1954 not a nontaxable division of property between co-owners, but a taxable transfer of property in satisfaction of a legal obligation. Pp. 68-71.

2. On the record in this case, the Commissioner’s assessment of a taxable gain based upon the value of the stock at the date of its transfer has not been shown to be erroneous. Pp. 71-74.

3. The amount paid by the husband to his former wife’s attorney as a fee for advice given to her about the tax consequences of the property settlement was not deductible by the husband under § 212(3) of the Internal Revenue Code of 1954. Pp. 74-75.

152 Ct.Cl. 805, 287 F.2d 168, affirmed in part and reversed in part.