Tax Legal Services · Primary-source case analysis

Lucas v. Earl: A Contract Cannot Shift Tax on Salary Away From the Earner

By Aneeta Mishra and Timothy Chan

Published September 13, 2026

Lucas v. Earl is the foundational earned-income assignment case: contractual allocation did not change who earned the compensation for federal income-tax purposes.

The spouses had a preexisting contract

Their agreement stated that earnings and other property would be owned jointly as received.

The income statute focused on the earner

Salary and professional fees remained compensation for the taxpayer's personal services.

Anticipatory assignment did not control

The Court refused to permit earned income to be taxed to a different person merely because a contract redirected ownership before receipt.

The assessment was restored

The taxpayer, not the contractual recipient, bore tax on the whole amount he earned.

Key takeaways

• Identify who performed the services that generated the income.
• Distinguish assigning income from transferring income-producing property.
• Review timing and substance, not only contract labels.
• Coordinate income-tax treatment with any separate gift or property consequences.