dissenting: I respectfully dissent from the opinion of the majority.
The result in the instant case is dictated by the application of the rationale of the Supreme Court in United States v. Davis, 370 U.S. 65 (1962). If the transfer from petitioner to his former wife pursuant to the property settlement agreement was in satisfaction of the termination of the marriage contract with its accompanying legal duty of support, the transfer is a taxable event. If, instead, the transfer is for the purpose of conveying title to property to the name of the former wife in recognition of her property interest in property standing in petitioner’s name, the transfer is a nontaxable division of property. Such determination is based upon the law of the State under which the divorce is granted. United States v. Davis, supra; George F. Collins, Jr., 46 T.C. 461 (1966); Collins v. Commissioner, 388 F. 2d 353 (C.A. 10, 1968); Collins v. Commissioner, 412 F. 2d 211 (C.A. 10, 1969).
The Davis case involved a divorce granted under Delaware law and the Supreme Court looked in vain for a property interest in the wife which was being recognized by the transfer of property by the husband.
The IT.S. Court of Appeals for the Tenth Circuit, to which an appeal in the instant case would be made, endeavored to make the same inquiry in Collins v. Commissioner, supra, when the Commissioner appealed the decision of this Court. It found no such property interest in the wife after its examination of the Oklahoma statutes and case law. Following the decision of the Supreme Court of Oklahoma in Collins v. Oklahoma Tax Commission, 446 P. 2d 290 (Okla. 1968), the Court of Appeals reexamined the Oklahoma law and found that the wife did possess a property interest under State law and the transfer provided in the property settlement agreement constituted a nontaxable division of property. As the Court of Appeals stated (412 F. 2d at 212) :
It is contended that when the Court in Davis discussed such factors as right of control, descendable interest, and the like, federal criteria were established that must be met before the rights conferred by state law can be said to constitute co-ownership. The language of Davis will not support that interpretation. The Court merely discussed certain general characteristics of co-ownership in an attempt to determine whether the wife possessed the rights of a co-owner under state law. In so doing, the Court determined that “regardless of the tags, Delaware seems only to place a burden on the husband’s property rather than to make the wife a part owner thereof.” 370 U.S. at 70, 82 S. Ct, at 1103. Collins v. Oklahoma Tax Commission proclaims that in Oklahoma the wife is made “a part owner thereof,” consequently, there is no need to search state law for indications of other factors that might-signify the nature of the wife’s property interest.
In sum, we look to the law of the state, as the Supreme Court did in Davis and as this court did in Pulliam v. C. I. R., 329 F. 2d 97 (1961), and conclude that the transfer of stock was a nontaxable division of property between co-owners.
In my view the majority applies an erroneous interpretation of Davis which was specifically rejected by the Court of Appeals as set forth above.
The application of State law involves a concept known as jointly acquired property. Briefly the concept may be described as a property right created by divorce statutes in both spouses to property or the enhancement in the value of property brought about by the joint industry of the husband and wife during their marriage. If property is found to be jointly acquired property, it is immaterial in whose name any of the property is held at the time it is divided by the divorce court. In granting a divorce the jointly-acquired-property concept requires the court to recognize three classes of property which must be divided: His property, her property, and their property, regardless of title. Only three States have statutes providing for the division of jointly acquired property upon divorce — Oklahoma, Kansas, and Minnesota.
The instant case involves the transfer of corporate stocks from petitioner to his former wife in recognition of her interest in jointly acquired property under Kansas law. Petitioner and his former wife agreed in their property settlement agreement that they would divide the total of all the property in half in recognition of their respective jointly held property interests, regardless of title. This being the fact and not subject to dispute because the instant case was fully stipulated, the opinion of the majority at page 63 of its opinion confuses title with the concept of jointly acquired property. A division of property must necessarily involve the transfer of title from one spouse to another. This is even true in the division of property pursuant to a divorce in a community property State.
I believe further that the majority has misinterpreted Kansas law. The Oklahoma statute which the Court of Appeals interpreted in Gollins had its origin in Kansas and the statutes of both States were identical until'1964. The landmark case of the Supreme Court of Kansas describing the concept of the wife’s property interest in a divorce proceeding is Putnam v. Putnam, 104 Kan. 47, 177 Pac. 838 (1919). la that case the husband attempted to convince the court in a divorce action that the wife had no property interest in property acquired by joint industry during coverture to which the Supreme Court .replied (177 Pac. at. 840) :
But a wife lias certain rights and interests in property acquired by tbe bus-band during tbe existence of tbe marriage relation wbicb, with tbe aid of tbe staiute, tbe courts upon proper occasion will recognize and protect. Without such statute these rights of tbe wife would be imperfect and unenforceable, tut they would morally exist nevertheless, and they only need such statute to give them legal vitality. * * *
* * * In pioneer times tbe family usually commenced life with little or no property. Land was cheap and easily acquired. Tbe combined efforts and economies of tbe husband and wife for a long stretch of years usually resulted in prosperity, in tbe accumulation of tbe familiar forms of Kansas property. During the years of mutual industry, self-denial, and domestic harmony of tbe married couple, it would not ordinarily be important whether each succeeding tract of land or other property acquired by their joint efforts was taken in the name- of the husband or wife. If they lived together happily both would enjoy the property, and upon the death of one of them, the other’s half interest would completely mature, and the statute of wills and of descents and distributions would protect it. If their marital partnership — for the joint accumulations of property by a husband and wife are slightly analogous to that of a partnership— is wrecked by marital discord and their troubles become tbe concern of a divorce court, the court may equitably divide the property accumulated during the marriage relation. * * *
The Supreme Court of Kansas has continued to recognize the concept of the wife’s interest in jointly acquired property and has set her property apart to her in a divorce action even though it refused to grant a divorce. Perkins v. Perkins, 154 Kan. 73, 114 P. 2d 804 (1941); Zeller v. Zeller, 195 Kan. 452, 407 P. 2d 478 (1965).
The concept of jointly acquired property is deeply imbedded in the divorce law of Kansas and is probably best described in the more recent opinion of the Supreme Court of Kansas in Garver v. Garver, 184 Kan. 145, 334 P. 2d 408 (1959). The following'quotations from that opinion most aptly describe the nature of such property interest:
We are of the opinion that alimony and property division are completely separate and that a wife who prevails in a divorce action is entitled to both alimony and division of property. The right to alimony is separate and distinct from the right to division of property jointly acquired by the parties during the marriage. The doctrine of alimony is based upon the common law obligation of the husband to support his wife, which obligation is not removed by her obtaining a divorce for his misconduct. Division of property, on the other hand, has for its basis the wife’s right to a just and equitable share of that property which has been accumulated by the parties as a result of their joint efforts during the years of the marriage to serve their mutual needs. In this sense, the marital relationship is somewhat analogous to a partnership, and vrhen the relationship is dissolved the jointly acquired property must be divided, regardless of which party has been at fault. (Putnam v. Putnam, 104 Kan. 47,177 P. 838). The distinction between alimony and property division has long bee» recognized in this jurisdiction. * * * [p. 410]
In Cummings v. Cummings, 138 Kan. 359, 361, 362, 26 P. 2d 440, 442, the court said:
“The law of this state recognizes that a wife has an interest in property accumulated by husband and wife while the marriage relation existed. The interest is distinct from alimony. Hardesty v. Hardesty, 115 Kan. 192, 222 P. 102; Hendricks v. Hendricks, 136 Kan. 69, 12 P. (2d) 804. Alimony has for its basis right to maintenance only. Division of property has for its basis right to a just and equitable share of property. Bowers v. Bowers, 70 Kan. 164, 167, 78 P. 430.” [p. 411]
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It is clear to us that when a divorce is granted the wife for the fault of the husband she is entitled to three things: (1) restoration of all the property owned by her prior to the marriage or acquired by her in her own right after the marriage, (2) such alimony as the court shall deem reasonable, and (3) a division of the property acquired jointly by the parties during the marriage. While the mentioned statute is not a model of clarity, it is apparent the legislature intended that the sentence dealing with division of jointly acquired property apply both to cases where the divorce is granted the wife for the fault of the husband and to eases where the husband is granted the divorce for the fault of the wife. A contrary conclusion would put a premium on the misconduct of the wife. It would mean that property acquired as a result of the joint efforts of the partners in marriage would be retained by the husband where his misconduct resulted in a divorce, while the property would be equitably divided between the parties where the wife’s misconduct led to divorce. Such a conclusion cannot be justified in theory or in reason. * * * [pp. 411-412.]
I conclude, therefore, that Kansas statutory and case law as it existed in 1963 was no different from the Oklahoma law which compelled the Court of Appeals to hold the division of jointly acquired property to be nontaxable. Collins v. Commissioner, 412 F. 2d 211 (C.A. 10,1969).
In 1963 Kansas amended its civil code which, included a change in its section on division of property in a divorce proceeding. The divorce court is no longer required to set aside the wife’s separate property to her but now such property is subject to division by the court as is the jointly acquired property. This change which became effective on January 1, 1964, is embodied in Kan. Stat. Ann. sec. 60-1610(b) (Supp. 1971), and is reproduced in full at page 60 of the majority opinion. The code, as amended, applies to the instant case.
In my view, the change in Kansas law does not affect the property concept of jointly acquired property which existed before the amendment.
The similarity of the Oklahoma law and the Kansas law was recognized when the Court of Appeals first decided Collins v. Commissioner, 388 F. 2d 353 (C.A. 10,1968). See Huff, “Federal Income Tax— Divorce Property Division as Taxable Disposition,” 37 J.B. Assn. Kan. 45.
The Supreme Court of Kansas, in comparing the former statute (which was identical to that of Oklahoma) and the statute as revised in 1964 stated:
The signiicant change in the law regarding division of property is that the court is no longer required to set aside to the wife the separate property which she brough; to the marriage or acquired with her own funds after the marriage. The court now is given authority to divide all of the property owned by the parties, regardless of the source or manner in which acquired, in a just and reasonable manner.
Zeller v. Zeller, supra at 484.
The amendment to the statute was for the purpose of enlarging the trial court’s power to divide the property of the spouses. Harrah v. Harrah, 196 Kan. 142, 409 P. 2d 1007 (1966). I conclude, therefore, that under Kansas law when the petitioner transferred the stocks to his former wife, it was a division of their jointly acquired property and was, therefore, nontaxable.
Because I would hold the transfer to be nontaxable it is not necessary to comment upon the valuation issue.
Fat and Featheeston, Jagree with this dissent.