Section of Taxation Publications
  VOL. 59
NO. 1
FALL 2005
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Note: The following is an excerpt from the introduction to the article as published in The Tax Lawyer. Author citations have been omitted for brevity. Tax Section members may read the article in its entirety in Adobe Acrobat format.

Altering the Alter Ego Doctrine: Misapplication and Gender
Issues in Spotts v.United States

Pamela R. Shisler



The alter ego or nominee doctrine is applied in cases ranging from bankruptcy to tort law when determining whether it is appropriate to hold one entity responsible for the debts or liabilities of another. Although most commonly used in cases involving sham corporations or trusts, in Spotts v. United States the District Court for the Eastern District of Kentucky applied the alter ego doctrine to uphold a federal tax lien placed on a house owned by the taxpayer’s ex-wife, on the theory that the house had been transferred to taxpayer’s then-wife as his alter ego or nominee.

This Note takes the view that the Spotts court engaged in a troubling misapplication of the alter ego doctrine. Part I outlines the facts of the Spotts case and provides background information on the alter ego doctrine. Part II examines the court’s use of the alter ego doctrine in the Spotts case and concludes that the court failed to consider how the doctrine should be adapted when applied to a claim that one individual is the alter ego of another, as opposed to the typical situation in which a corporation or trust is asserted to be an alter ego. Part III further examines the Spotts decision and argues that even if the decision was correct under current alter ego law, it nonetheless creates an undesirable result in its legal implications for the spousal unit. Specifically, the decision over-zealously invalidates spouse-to-spouse transfers of property by failing to consider two possible means by which such transfers may be effected legitimately. The first possibility is that an interspousal transfer may be made as a true gift from one spouse to another and thus may constitute the sole property of the transferee spouse. The second possibility is that even if the transfer is not a gift, it may have been made in exchange for a contribution of nonmonetary, yet valuable, consideration, such as housework services. Finally, Part III argues that the Spotts decision will have a disparately negative impact on women. In most marriages, women do the majority of housework and on average earn less than men for work done outside the home. Consequently, married women are less likely to have earned income or accumulated material wealth that can be tendered as monetary consideration in exchange for property. Married women are thus more likely than their male counterparts to receive property in a spouse-to-spouse transfer either as a gift or in exchange for express or implied nonmonetary consideration. By failing to embrace the concepts of gift transfer and nonmonetary consideration as legitimate means of effecting spouse-to-spouse transfers of property, the Spotts decision is more likely to invalidate husband-to-wife transfers than wife-to-husband transfers. Furthermore, by neglecting to consider the possibility of housework as nonmonetary consideration for the exchange, the court reinforced the tendency within the legal system to disregard the productive and valuable nature of housework. Part IV presents the conclusions of this analysis and summarizes the tax and public policy implications of the Spotts opinion.


Published by
Section of Taxation, American Bar Association
With the Assistance of
Georgetown University Law Center


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