Tax Imposition on Wives Receiving Distributed Property

In Japan, the topic of taxing those who distribute their property has been actively discussed.2)However, when it comes to the tax imposition on those who are receiving distributed property, the discussion has been quiet. What is more, laws regulating the taxation of recipients of distributed property cannot be found. The tax imposition on those who are receiving distributed property should be handled in accordance with the law under a logical interpretation of such laws. Also, it is oftentimes the wives in a relationship who receive distributed properties. As such, taxing women may hinder their efforts at financial autonomy. It is desirable for women not to be taxed when a property is distributed so that they can attain self-reliance after a divorce. The liquidation of community property, which is one of the components of distribution of property, may generate an occasional income to the individual receiving the property. However, it is considered that wives have a latent right to community property and that this right becomes manifest as a result of a divorce. Therefore, this article makes the argument that wives are not subject to taxation on their occasional income as the divorce does not mean that they have acquired a new right to distribution of property. However, judicial precedents in Japan have interpreted the distribution of property as a non-gratuitous transaction in which the obligation to divide property is extinguished, and that this constitutes as a “transfer of assets" as defined under Article 33 (1) of the Income Tax Act.3) Thus, one cannot deny the possibility that the distributed property could be considered to have generated an occasional, or onetime, income for the recipient for which they could be subject to taxation. In general, many wives who are on the receiving end of distributed property are often in an unfavorable economic position. In order to support women in keeping their economic self-reliance after a divorce, it is desirable that women should not be taxed for their occasional income when a property is distributed. This article presents two legislative theories that would prevent women from being taxed. These should be used as a guide to legislate a system in which women are not burdened with taxation upon distribution of property.