Commissioner v. Lester

PETITIONER: Commissioner
LOCATION: Circuit Court of Montgomery County

DECIDED BY: Warren Court (1958-1962)
LOWER COURT: United States Court of Appeals for the Second Circuit

CITATION: 366 US 299 (1961)
ARGUED: Apr 25, 1961
DECIDED: May 22, 1961

Facts of the case


Media for Commissioner v. Lester

Audio Transcription for Oral Argument - April 25, 1961 in Commissioner v. Lester

Earl Warren:

-- Petitioner, versus Jerry Lester.

Mr. Tadlock.

C. Guy Tadlock:

Mr. Chief Justice, may it please the Court.

This case involves the question of which spouse is liable for tax on child support payments, payments which are paid by the husband to the wife under a separation agreement or a divorce decree.

A conflict has developed among the Circuits as to the interpretation of the language of the statute after the statute had been applied in accordance with the Commissioner's position over a period of about 15 years.

The primary question, therefore, we believe as one of the statutory construction, specifically the meanings -- the meaning of two words in this statute, the words, "payable for."

The controversial language is found in Section 22 (k) which has set forth in petitioner's brief on page 35.

Potter Stewart:

1939 code?

C. Guy Tadlock:

Of the 1939 code.

Potter Stewart:


C. Guy Tadlock:

The 54 code Your Honor is substantially the -- the same.

The only change makes it conform to a change -- that Congress had in mind that the agreement did not have to particularly attach itself with divorce decree.

It could be a separate maintenance without divorce decree.

Otherwise, it's substantially the same.

Now, there is also a treasure regulation of implementing this Section.

It's found in the petitioner's brief and it starts at page 36.

But it does not cover this point directly, the -- the pointing issue.

In combination with Section 23 (u) which was found on 36, 22 (k) provides as a general rule that the support payments will be taxable to the wife, deductible by the husband.

However, the Section draws a distinction between alimony and child support payments and we're concerned here today with the provisions for child support payments.

The statute assumes from its wording that -- and that this is genially the case that the periodic payments from the husband and the wife will include both alimony and child support.

But it released the tax on and we call the Court's attention to the second sentence of 22 (k) on page 35.

It released that the wife, the tax on that part of the periodic payment which is fixed by the terms of the instrument as being payable for child support.

Now, therefore, the terms of the instrument either divorce decree or the agreement must fix an amount payable for child support.

Now, the Commissioner of Internal Revenue since 1942 has been fought -- has been following a practice, a consistent practice of interpreting the statute to mean that the words "payable for" simply mean that an amount must be set aside by the terms of the instrument as payable for child support allocated or apportioned for child support looking to the purpose of the payment irrespective of how the wife uses the money and how the wife uses the money is the heart of this case, we believe.

Now, in contrast, the Second Circuit, fall out reasonably by the Sixth Circuit takes a much more strict review of the wording of the statute.

In his opinion below, the Second Circuit says that the words payable for have reference to terms and in agreement which must fix an amount that must be used by the wife solely and exclusively for the children without regard or whether she feels that the money should be used for herself, maybe for the best interest of -- of all her children without exercising any discretion at all.

The Second Circuit says she -- she may not have discretion as to the use since she can have no possibility of a beneficial interest in herself.

Charles E. Whittaker:

Even to say she may not have of any discretion as between the beneficiaries namely the children or that she may not have any -- any discretion to use the portion of that part for herself?

C. Guy Tadlock:

We think that the -- that the holding of the Second Circuit means both.

But first, it means that she may not spend any of it on herself and the opinion uses this language, even if the expenditure on herself may in the long run be the best for the group, for instance to buy a house or a rug for a home or an automobile.