Document Type

Article

Publication Title

Washington Law Review

Abstract

The often attenuated distinction between a wife's right to support from her husband and her property rights in the marital wealth causes excessive uncertainty of tax consequences. Variations in state laws defining the wife's property rights exacerbate the problem, leading to the danger of discriminatory taxation. Not surprisingly, then, the rule in United States v. Davis that the transfer of appreciated property can generate taxable gain to the husband has suffered wide and harsh criticism. Proposals for remedial legislation are numerous. Curiously, critics have relatively seldom discussed the effect of the support-versus-property distinction on the treatment of periodic cash payments; curious because periodic cash payments are a common means of settling marital wealth. One surmises that taxpayers and the revenue are affected more by this regime of taxation than by the rule on transfers of appreciated property. Moreover, the regimes, though separate, are so functionally interrelated under present law that revision of one will necessarily alter the role and integrity of the other. Given the outpouring of proposals to overrule Davis, congressional action in the reasonably near future is not unlikely. The intent of this article is to inspire a review of the entire area of wealth transfers incident to divorce; to take the scope of review beyond fixation on Davis, with the view of integrating the present regimes in a scheme that is less dependent on the subtle and often invisible distinction between support and property rights. The article discusses first, the purpose of the rules governing periodic cash payments; second, the evolution of the rule on transfers of appreciated property; third, an assessment of the need for reform; and fourth, a proposal for unified treatment of all marital wealth transfers, influenced primarily by the objective of allocating income and the attendant tax liability simply and equitably between husband and wife.

First Page

217

Volume

56

Publication Date

1981

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