I. Joint Returns.

Section 6013(d) requires joint and several liability of the spouses if they elect to file jointly. More than 98% of married taxpayers file jointly each year, because filing separately usually results in a higher tax. The incentive is all but irresistible, and joint filing has aptly been called "mandatory in fact." Thus virtually all married taxpayers are subject to Joint return liability.

The statute itself is gender-neutral, but it appears that the vast majority of collections from the "wrong" (or non-earning) spouse are from women. The figure would be over 90% if the litigated innocent spouse cases reflect the general percentage of all collections.

This liability is aberrational when compared to tax systems in other countries ( For example, no marital liability for income taxes is imposed in any form in Canada, Australia, Japan, Italy, Spain, Sweden, or the United Kingdom.), even those which also provide valuable tax benefits to married persons filing jointly (Cf. Germany, which provides for income-splitting computed as under U.S. Law, but without joint and several liability, and Belgium, which has a still more generous system of income-splitting.) No other OECD country taxes wives for their husbands' income as a general rule, much less women who are separated or divorced ( In France, joint liability is imposed in principle, but wives who are no longer living with their husbands at the time of enforcement proceedings are nearly always excused. Also, unlike U.S. law, in France the tax authorities must exhaust all possibilities of collecting from the husband before turning to the wife. In the U.K., husbands were formerly liable for tax on their wives' income, but wives were never liable for their husbands' taxes. This system was abolished in 1990 in favor of completely separate liability for both spouses.). Under U.S. Law, by contrast, thousands of separated and divorced women each year are taxed for no other reason than that they were married at the time their ex-husbands earned income.

The rule of joint return liability was first enacted in 1938. Until then, filing jointly (which had been allowed since 1918) did not entail joint and separate liability of the spouses, despite the government's insistence to the contrary. See Cole v. Comm'r, 81 F.2d 485 (CA-9, 1935), rev'g 29 B.T.A. 602 (1933).

In Cole, the Ninth Circuit held that a taxpayer's cardinal right to be taxed only on his own income was unchanged by joint filing, and rejected the government's argument that administrative necessity requires joint and several liability, at least where the respective separate incomes of the spouses are ascertainable. The government argued that because joint returns do not explicitly set forth the respective separate incomes and deductions of the spouses, it would be unable to determine the separate amounts for which each spouse should be liable.

This purported "administrative necessity" was the only reason put forth in the committee reports when Congress overruled Cole by enacting the predecessor of Section 6013(d) in 1938. Yet the argument is palpably insufficient. There is ordinarily no difficulty in determining each spouse's net income on a joint return. The audit process almost necessarily reveals the source of any asserted deficiency ( There was no such difficulty in the Cole litigation either; the Bureau of Internal Revenue had simply assessed the husband by mistake, and negligently let the statute of limitations run as to the wife. In case of doubt, the IRS can always assess both spouses, and let the taxpayers prove the sources of their income, as the Cole court pointed out.). Moreover, such determinations are in fact sometimes required under current law in order to limit the amount of each spouse's separate losses which may be carried forward or back to offset his or her share of income in a joint return year, and in order to calculate the amount of each spouse's separate right to a refund from a joint return ( See Rev. Ruls. 80-6,7,8; 1980-1 C.B. 296 ("separate tax method of allocation" applied to refunds; and for losses see Rev. Rul. 60-216, 1960-1 C.B. 126; Rev. Rul. 65-140, 1965-1 C.B. 127; and Rev. Rul. 75-368, 1975-2 C.B. 480. Similar rules were in effect at the time of the Cole litigation, as well as other regulations (later invalidated) which required the same determination of the separate net incomes of the spouses for the purpose of limiting each spouse's charitable contributions and capital losses on joint returns. The Treasury has apparently never experienced any difficulty administering these rules. They all worked to the Treasury's advantage, however. The government's litigating position in Cole was thus at best uninformed, and was possibly in bad faith.). The method used is to calculate each spouses' separate net income as if he or she had filed separately. There are adequate rules under current law for apportioning personal deductions and dependent exemptions for this purpose ( The current rules are as follows: Business income and deductions are allocated to the owner(s) of the business. Investment income from community property and jointly owned property is divided equally between the spouses, even if one spouse actually receives all the income. Items of personal deduction (such as medical expenses) which are paid out of community or jointly owned funds are ordinarily divided equally between the spouses, but items paid out of separately owned property are normally deductible only by the payor spouse, even if the payment is for a joint obligation. (The limitations as to such items, such as the 7.5% floor on medical expenses, are separately applied to each spouse.) If the taxpayer can prove that the funds used were his own, however, he will be entitled to the entire deduction even when payments are made out of a joint account.). Over 2,000,000 separate returns are filed each year by married persons, with no apparent difficulty.

Adequate reasons for imposing joint and several liability have never been provided. There is no evidence that couples ordinarily share all their property to such an extent that they should be presumed indifferent to the incidence of tax liability. And even if such sharing were the norm, it could not justify joint liability after termination of the economic unity of the family by divorce (Application of Section 6013(d) liability against separated and divorced women seems to be an unintended consequence of the original enactment of the general rule of joint return liability. Not one of the half-dozen cases litigated before its enactment in 1938 involved separation or divorce. The IRS seems to have developed its aggressive position in this area in the 1960's, during the post-war explosion in divorce rates. This social development could not have been foreseen in 1938.). Contrary to widely held belief, joint return liability was not enacted as the "price one must pay" for lower tax rates on joint returns. The favorable tax rates for joint returns computed by income-splitting were not introduced until 1948, some 10 years after a enactment of joint return liability (Income-splitting was not enacted as compensation for assuming joint return liability, but for the entirely different purpose of equalizing the tax burden between the common law states and the community property states, where income-splitting was already allowed on separate returns under the doctrine of Poe v. Seaborn, 282 U.S. 101 (1930).). Moreover, the right of spouses to offset deductions and losses against each other's income and gains had been available to taxpayers from 1918 until 1938 without the "price" of joint and several liability. Joint returns were introduced in 1918, apparently for the sole purpose of convenience both for taxpayers and for the government, without any thought of special rates or privileges for married persons.

The quid-pro-quo justification for joint return liability is as weak logically as it is historically. The size of the benefits of joint filing (if any) bears no relation to the joint return liability assumed, which may be unlimited in amount. The benefit explanation cannot justify joint liability for an amount greater than the tax saving from filing jointly.

Finally, the "benefits" usually inure to the husband, while the liability almost always is borne by the wife. Joint return liability is not only unfair in principle, it is highly discriminatory against women in fact.

Innocent Spouse Rules.

Congress enacted the "innocent spouse" rules under Section 6013(e) in 1971 in order to mitigate the harsh effects of joint return liability. Under these rules, a wife may be relieved of liability for tax items of the husband only if they are "grossly erroneous" ( An item of omitted income is "grossly erroneous" per se. Erroneous claims of deduction, credit, or basis may also qualify for relief, but such items must in addition be "without foundation in fact or law." This phrase has severely limited relief for such items. Mere disallowance of a deduction does not qualify. There is no relief for simple nonpayment of tax where the return is correct; relief is in effect limited to items of negligence and fraud. There is no obvious reason for these limitations, and they have the somewhat bizarre effect of putting the wife in a better position if the husband misreports than if he reports honestly.); they cause a "substantial understatement;" (There are dollar limitations under Section 6013(e)(3) and (4) restricting relief to items exceeding $500, and in the case of erroneous claims of deduction, credit, or basis, the item must in addition exceed 10% of the wife's pre-assessment year income if $20,000 or less, or 25% if her income exceeds $20,000. For these purposes, if the wife has remarried, her current husband's income must be included in the floor whether or not they file jointly.); the wife did not know, and had no reason to know of the substantial understatement caused by such items ("innocence") ( Factors which have been used by the courts as indicating that the wife had "reason to know" include lavish or unusual expenditures, involvement in the family budget or the husband's business, and higher education or business experience. The courts have not applied these factors consistently. The cases are split as to whether the wife has a duty to review the return. Compare e.g. the recent tax shelter decisions in Cohen, 54 T.C.M. 944 (1987) and Shapiro, 51 T.C.M. 818 (1986)(taxpayers lost) with Hinds, 56 T.C.M. 104 (1988) and Killian, 53 T.C.M. 1438 (1987)(taxpayers won). The wife has sometimes been held to have "reason to know" if she is aware of the existence of the underlying transaction, even if she knows nothing of its tax consequences or how the husband reported it. This doctrine that "ignorance of the law is no excuse" is without foundation in the statute.); and taking into account all the facts and circumstances, it would be inequitable to hold the wife liable for the understatement ("equity") ( The principal factor considered under the equity test is whether the wife benefited from the item over and above ordinary support. The courts have been extremely inconsistent as to what this means. Note, too, that because all elements for relief must be met, the wife may lose even if she did not benefit at all, if she is found to have had reason to know of the item.). The wife has the burden of proof as to all the elements for relief.

The relief rules are unsatisfactory in two respects. First, they limit relief in many deserving cases due to the arbitrary restrictions to "grossly erroneous" items and to "substantial understatements," and second, they are vague and unpredictable due to the nature of the "innocence" and "equity" requirements. There is a large body of case law interpreting the innocence requirement ( There are over 400 reported decisions under Section 6013(e), and the confusion grows ever greater. A considerable simplification would result if the relief rules could be repealed together with joint return liability.), but the decisions are in conflict ( A particularly glaring conflict is presented by the "ignorance of the law is no excuse" doctrine. This doctrine seems to have been selectively applied only against women who are still married at the time of trial.), and the outcomes are largely unpredictable ( At least as to the stated grounds of decision. It appears that many of the inconsistencies in the reported decisions can be accounted for by supposing that unconscious preferences of the judges have been at work. It appears that divorced women who had been housewives or who fulfilled traditional roles of dutiful dependency have fared better in the Tax Court than independent and educated women. Higher education and business experience have no obvious relevance to whether the wife had reason toe know of the husband's understatement, but they are routinely treated as factors unfavorable to the wife.).

The arbitrary limitations could be adequately reformed by amending the statute to omit the dollar limitations and the requirement, in effect, of negligence or fraud on the part of the husband But there is no way to amend the innocence and equity tests, because they are essentially misconceived ( The reason for most of the defects in 6013(e) is that the rules were narrowly drafted to track the ad hoc reasoning used by the Sixth Circuit to nullify joint and several liability in a spectacularly unfair case. In Scudder v. Comm'r, 405 F.2d 222 (1968), rev'g 48 T.C. 36 (1967), the husband had embezzled large sums from a business owned by the wife and her sisters, without their knowledge. The IRS pursued her for taxes (including the 50% fraud penalty) on the embezzlements, and won in the Tax Court. The Sixth Circuit simply refused to apply the law, and exonerated the wife on the ground that she could not have intended to file jointly as to these fraudulent items, where she did not know of them, and did not benefit from them. The Sixth Circuit's ingenious approach allowed it to do justice in the case at bar at a time when no statutory relief at all was available. But the relief was crafted to fit unusual facts, and it was inappropriate for Congress to use this narrow ad hoc device as the basis for general statutory reform.).

The "innocence" test is at the heart of the relief rules (The importance of the innocence test is perhaps due to an intuitive perception that joint return liability is itself simply unfair. To the extent that the liability can be rationalized as somehow due to the wife's own fault, liability can be imposed in a manner less troubling to the conscience.). But this test is illogical and inappropriate as a basis for relief. Ordinarily a reason to know (or due diligence) test is applied in the context of assessing whether a person who is in a position to prevent foreseeable harm to others has breached his duty of care. But the wife has no duty to certify the accuracy of her husband's tax items, except as created by the innocent spouse rules. Women generally do know that they have any such duty of certification (It appears that very few taxpayers are, or have any reason to be aware of this assumption of liability. There is no warning on the Form 1040. Nor does it appear that preparers or divorce lawyers generally take this liability into account. Even if a wife is aware of this "duty," the penalty for breaching it is unfair. If a professional return preparer or an IRS agent fails to use due diligence, he does not become liable for the tax deficiency he could reasonably have been expected to discover on someone else's return. And yet such persons have both tax expertise and awareness of their professional duties, upon which the IRS does reasonably rely.), and do not act as if they did. In countless instances, the wife simply signs the return as an accommodation to her husband ( When the duty of due diligence is pushed as far as it was in Bokum, it in effect requires the wife to seek a second professional opinion in all cases. Such a requirement is not only unrealistic and unreasonable, it also defeats the original purpose of joint filing, which was to provide convenience to both the taxpayer and the government. It is unreasonable to expect both spouses to duplicate the effort of preparing the return, particularly if only one has income, or any complexity to his tax affairs.). And if she refuses, she may risk her marriage.

In short, it makes no real difference at all to the government's interests whether the wife is innocent or not, nor whether she makes any effort at due diligence when she is "put on notice." For that reason, there is no underlying purpose or principle to guide the courts in weighing the variety of factors used to determine degrees of "innocence."

Under these circumstances, it is not surprising that the various legal "tests" have in large part degenerated into a global subjective one of whether the woman and her plight can move the judge to sympathy. It is obvious that taxation should not depend on such subjective criteria, and for that reason the innocent spouse rules cannot provide the remedy for the unjust effects of joint return liability. Effects of Repeal of 6013(d).

In order to institute a regime of elective separate liability for married persons, no other changes will be required The current rate structure and system of filing statuses can remain unchanged, and the benefits of income-splitting for joint filers can be preserved. The separate liability of each spouse will be calculated according to the "separate tax formula" cited above. First each spouse's tax is calculated as if he or she filed separately, and then the ratio of wife's separate tax to the sum of both separate taxes is applied to the total joint tax due. In this way the benefit of the income-splitting rate structure is preserved, but the wife is liable only for the portion of the joint tax which is due to her separate income ( This calculation will not increase the complexity or difficulty of preparing returns, because it will only be employed on audit in cases where there is a deficiency which is contested by the wife.). The formula is thus:

sep. liability = (sep. tax / both sep. taxes) x joint tax

Calculation of the wife's separate tax liability in the first instance will not require any changes in current law.

II. Abuse Potential.

There would appear to be no abuse potential in repeal of joint return liability. Whatever abuse potential might arise from repeal of joint return liability would appear to exist already under current law. A couple planning to avoid the husband's taxes while leaving the wife with property not subject to tax can simply file separately. If there were any abuse potential here, it would already be exploited.

If joint return liability is repealed, the IRS may be expected to rely upon transferee liability under Section 6901 as a substitute. Although transferee liability will not apply in many cases where Section 6013(d) currently does apply, transferee liability should be adequate to police any potential abuses. Establishment of transferee liability for taxes depends upon state law of fraudulent conveyance, or federal bankruptcy law, where applicable. this will usually require the IRS to prove that the husband was insolvent at the time of a transfer of property to the wife, or that he became insolvent as a result of the transfer, and that the property was transferred without adequate or fair consideration. Where there is inadequate consideration for the transfer, it is presumptively fraud and there is no need to prove actual fraudulent intent on the part of either the debtor or the transferee [ See e.g. Mysse v. Comm'r 57 T.C. 680 (1972)(transfer of $10,000 C.D. to wife without consideration set aside where embezzler husband was insolvent at time of transfer because unassessed tax liability of over $115,000 from unreported income exceeded his total assets of $46,429. (Montana law)).]. Transferee liability can therefore apply under current law even if the wife is an innocent spouse within the meaning of IRC 6013(e) ( In Mysse, the wife was held to be an innocent spouse with respect to IRC 6013(e) because she had no actual or constructive knowledge of the embezzlements, and received no significant benefit beyond ordinary support. She was nevertheless liable as a transferee for her husband's taxes to the extent of the transfer.). Even if adequate consideration supports the transfer, however, if the wife is aware of or participates in her husband's id on his creditors, the transfer may still be set aside as fraudulent ( See e.g. Wilkey v. Wax, 225 N.E. 2d 813 (App.Ct.I11 1967) and US. v. Alaska, 661 F. Supp. 727 (N.D.I11 1987).).

Transferee liability cannot apply unless the husband is insolvent and unable to pay at the time of attempted collection, as well as at the time of of the transfer. Thus if the IRS is restricted to exclusive reliance on transferee liability because joint return liability is unavailable, that, will automatically have the desirable effect of forcing the IRS to exhaust all remedies against the husband before proceeding against the wife. In addition, transferee liability is limited to the amount of the transfer, and therefore (unlike liability under Section 6013(d)) the wife's liability cannot exceed the amount by which she was, benefited.

Finally, under transferee liability the wife is not at any unfair disadvantage compared with other transferees. All transferees are treated alike under Section 6901, without regard to marital status. By contrast, 6013(d) applies only to spouses. Children, parents, and even an adulterous girlfriend may receive gifts out of the husband's untaxed income, even with actual knowledge of his tax cheating, without incurring any liability (provided that the husband is solvent). Wives alone incur a liability in this situation.

I do not claim that transferee liability will be a complete substitute for joint return liability. Some situations will inevitably arise where the IRS will not be able to recover property of the wife which is in part derived from untaxed income of the husband. It seems unlikely, however, that such situations will arise frequently or will present a problem serious enough to require a remedy in anticipation, and none is suggested here.

It is well to remember that every other modern count manages to collect its taxes without reliance on joint and several liability.

III. Community Property Liability.

A wife who resides in a community property jurisdiction is subjected to liability for one-half of her husband's taxes under the doctrine of Poe v. Seaborn, 282 U.S. 101 (1930), which construed family property law in the community property states to create a separate liability of each spouse for one-half of the tax on the income of the other on the theory that all earnings during marriage inure to the marital community, and are therefore owned by and taxable to each spouse in equal amounts. This form of liability does not depend upon filing a joint return, and results automatically from residence in a community property jurisdiction.

The Seaborn decision was very questionable when decided Under community property law generally the wife has no right to spend or otherwise dispose of any part of her husband's earnings ( This is still true even under the modern dual-management community property regimes. See Smith, The Partnership Theory of Marriage: A Borrowed Solution Fails, 68 Texas L. Rev. 689 (1990).). Her "ownership" rights to such income arise only upon dissolution of the marital community by divorce or death, and then only to such income that the husband has not already spent.

The Seaborn decision arose in the context of rates rather than liability, because the wife was willing and eager to accept liability in order to reduce her husband's taxes through income splitting. The question was whether the wife had the right to report half of her husband's income on her separate return, rather than whether she had the duty to do so. It was not long before the IRS seized upon the decision to construct such a duty, however, and the result was a number of very harsh decisions requiring divorced women to pay half of their ex-husbands' taxes in situations where they had received no benefit from his earnings ( See US. v. Mitchell, 91 S.Ct. 1763 (1971). The Supreme Court noted the harshness of the result, but said the law was clear and the only remedy was legislative action similar to the newly enacted Section 6013(e). Enactment of Section 66 was nine years in coming, and probably would not have protected the wife in Mitchell any event. The Seaborn briefs did not anticipate that the government might someday use the rule as a sword against non-earning wives. The anti-taxpayer use of the rule seems wholly unintended.). A woman cannot protect herself from this form of liability even by filing separately, unless she first dissolves the community of property.

Apparently, no other income tax system in the world today except the U.S. imputes earned income from one spouse to the other on the ground of community property law ( Countries which ignore their community property law for purposes of taxing earned income include Canada, Germany, Belgium, the Netherlands, Sweden, and Italy, as well as France, Spain and Mexico.), including Spain, France, and Mexico, from which our state community property laws derive. In Canada, a situation arose which was identical to that in Seaborn, and the Canadian Supreme Court reached the opposite conclusion interpreting Quebec community property law. Because the husband had the absolute right to dispose of his earned income as he pleased, he must be taxed on it despite the wife's contingent rights under the community property regime ( See F. Sura v. M.N.R, 62 D.T.C. 1005 (1957)(Quebec taxpayer not permitted to split his income with his wife through community property law; Seaborn rule rejected)).

Still more surprising is the fact that at least two community property states, Arizona and California, reserve the right for state income tax purposes to tax either the earner for the full amount, or the community property owner for one-half. Thus the federal tax system defers to state matrimonial property law where the state's own tax law does not ( If it had been thought necessary to respect the matrimonial property law of the community property states for purposes of taxing earned income, the result should probably have been as it was generally in Europe in the early part of the century: mandatory joint returns with the husband primarily responsible for payment as sole administrator of the community property. See generally Dulude, Taxation of the Spouses: A Comparison of Canadian, American, British, French, and Swedish Law, 23 Osgood Hall L.J. 67 (1985). This would have been a far more realistic interpretation of community property law than the Seaborn decision, which imputed half of the husband's earned income to the wife. Also, it would not have created the intolerable disparities in the level of tax burden between the states which arose in consequence.).

Relief Under Section 66.

There are relief provisions under IRC 66, first enacted in 1980, for the innocent spouse which provide limited relief from community property liability analogous in many respects to relief under IRC 6013(e) ( Before enactment of the relief provisions, at least one court refused to apply the rule of Seaborn to avoid the "horrendous" result that the wife was "stripped clean" by the IRS though she had received none of his income. In Bagur v. US., 603 F. 2d. 491 (1979), Judge Wisdom remanded the consolidated appeals to the Tax Court to determine whether the wives had suffered the equivalent of theft losses of their share of the community income.). The rules are far too restrictive, and have often failed to prevent obviously unfair results. Nearly all petitioners for relief under Section 66 have lost. It is revealing to note that when Section 66 was enacted, its revenue cost was estimated to be "negligible."

Section 66(c) (enacted in 1984) contains the same requirements of "innocence" and "equity" which are criticized above in connection with Section 6013(e). The innocence test is nearly impossible to meet under Section 66, because if the wife knows her husband was employed, she loses. Two other provisions allow relief without proof of innocence, but they suffer other shortcomings. None of the Section 66 provisions provides any relief for items other than omissions of income. Section 66(a) provides relief only if the couple lived apart at all times during the calendar year, and none of the earned income in question was transferred between them. Even one day of cohabitation during the year, or payments of support which are not de minimis, will preclude relief.

Section 66(enacted in 1984) provides that the benefits of community property law may be disallowed to any taxpayer if he acts as if solely entitled to the community income, and fails to notify his spouse of the nature and amount of such income before the due date for the taxable year. The "benefit" here is the husband's relief of liability for one half of his earnings. This provision may be defeated if the husband notifies wife wife of her liability, even if he gives her nothing

Repeal of Seaborn.

There is no doubt that Congress has the authority to overrule Seaborn, and it has already done so in many limited contexts Many sections of the Code contain provisions which are to be applied "without regard to community property laws." Among these are Section 32(c)(2)(B)(i) [earned income credit]; Section 402(e)(4)(G) [lump-sum benefits]; Section 408(g) [individual retirement accounts]; Section 414(d)(4)(A) [limitation on cash method of accounting]; Section 457(d)(7) [deferred compensation plans of state and local governments]; Section 911(b)(2)(C) [foreign earned income]; Section 4980(d)(4)(A) [excess distributions from qualified plans], and, of course, Section 6013(e)(5) [innocent spouse rule] and Section 66 itself.). The Seaborn rule has never been applied at all for purposes of the payroll taxes (social security and hospital insurance) and for the tax on self employment income. Also, in 1976, Congress in effect repealed the Seaborn rule for couples one or both of whom are nonresident aliens.

The Seaborn rule now provides no benefit to taxpayers, and is advantageous only to the government ( Except for a husband who may escape tax on half of his income. Note that this is a complete escape, since the wife has no right to contribution from him for her payment of his taxes, as she does in the case of joint return liability.). This is a ironic in view of the fact that the Seaborn doctrine arose as a device to benefit residents of community property jurisdictions. This benefit was jealously guarded by representatives of such jurisdictions when repeal was attempted in 1940 (by means of proposed mandatory joint returns, without joint and several liability) in order to equalize the tax burden among the states. But since the 1948 introduction of income-splitting on joint returns, for all married persons, the Seaborn rule no longer provides any advantage to taxpayers, and there should be no opposition to its repeal from the community property states ( Repeal of Seaborn would of course have no effect on community property law itself, and no recommendation is made here as to any issue of state family property law. Note that even after repeal of Seaborn, women subject to community property law will remain under a tax disadvantage, because the husband's community half interest in her earnings is a property interest within the meaning of Section 6321 and subject to levy even for his antenuptial tax debts. Thus one-half of the wife's earnings may be levied upon to pay all husband's taxes even where she has no personal liability for them under Seaborn. See, e.g. Medaris v. US., 884 F.2d 832 (CA-5, 1989).).

IV. Effect on the Tax System.

Neither repeal of Section 6013(d) nor repeal of the Seaborn rule need have any effect upon current tax rates nor filing statuses, and none is recommended here. These proposals for separate tax liability are put forward on their own merits for the sake of fairness and simplicity.

Revenue Cost.

The IRS keeps no statistics on the frequency or amounts of collection from the non earning spouse. It is therefore difficult to estimate the revenue loss from repeal of 6013(d) or Seaborn. It is probable that the loss (if any) will not be large, because often the husband is available to pay, and the wife is taxed only because her assets are more easily accessible to levy. In such cases, there may be an added cost of collection, but no revenue loss. In other cases, transferee liability would apply. In some instances, the Treasury will even profit from repeal ( For example, under current law a wife may actually escape tax on her own earnings by achieving innocent spouse status under Section 6013(e). This seems to have occurred in Price v. US., 887 F.2d 959 (CA-9, 1989).). In the community property states, some husbands report only half their income and force the government to collect the remaining half from an absent wife. Repeal of Seaborn would end this practice. Some revenue loss is probably inevitable, however ( The expected revenue loss should not estimated by simply writing off all potential assessments under Section 6013(d), because many such assessments are unrealistic or illusory. The IRS often assesses huge deficiencies on insolvent taxpayers (typically, but not limited to narcotics dealers and embezzlers) where it is obvious that the deficiency cannot be collected from either spouse. See, e.g. Ratana v. US., 662 F.2d 220 (CA-4, 1981).). But it must be borne because the government's revenue needs cannot justify taxing the wrong taxpayer in amounts bearing no relation to ability to pay.

Transferee liability cannot apply unless the husband is insolvent and unable to pay at the time of attempted collection, as well as at the time of of the transfer. Thus if the IRS is restricted to exclusive reliance on transferee liability because joint return liability is unavailable, that, will automatically have the desirable effect of forcing the IRS to exhaust all remedies against the husband before proceeding against the wife. In addition, transferee liability is limited to the amount of the transfer, and therefore (unlike liability under Section 6013(d)) the wife's liability cannot exceed the amount by which she was, benefited.

Finally, under transferee liability the wife is not at any unfair disadvantage compared with other transferees. All transferees are treated alike under Section 6901, without regard to marital status. By contrast, 6013(d) applies only to spouses. Children, parents, and even an adulterous girlfriend may receive gifts out of the husband's untaxed income, even with actual knowledge of his tax cheating, without incurring any liability (provided that the husband is solvent). Wives alone incur a liability in this situation.

I do not claim that transferee liability will be a complete substitute for joint return liability. Some situations will inevitably arise where the IRS will not be able to recover property of the wife which is in part derived from untaxed income of the husband. It seems unlikely, however, that such situations will arise frequently or will present a problem serious enough to require a remedy in anticipation, and none is suggested here.

It is well to remember that every other modern count manages to collect its taxes without reliance on joint and several liability.