An Odd Tax Court Case Today:

H and W1 married in NY in 1955. After separating from W1, H obtained a "quicky divorce" in Mexico. H then "married" W2 in 1967. In 1974 W1 sued to have H's marriage to W2 declared null and void. W1 prevailed. H and W1 did not live together at any time after that. H and W2 eventually went their separate ways. Cut to 12 years later: H and W1 sought, and obtained, a get (divorce) from an Orthodox Rabbincal Court in New York. H and W3 presented evidence of the get to Israeli authorities. H and W3 obtained a ketubah and were married in Israel in 1987. They then returned to New York. Three must have been the charm: H and W3 remained married for 27 years and raised two children in NY until H died in 2014. All of which might have been only a fertile source for salacious gossip and nasty innuendo, except that H died with a taxable estate of about $87 million... most of which passed to W3 on his death. The estate took a full marital-spousal deduction for W3s share of the estate. (Eliminating estate tax exposure) "But wait!" Says the IRS - "The estate can't claim the spousal deduction b'cuz W3 wasn't H's spouse." The Service sent a bill for $37 Million, plus $7 Million in penalties. Appeals and Litigation Ensued. The story has a happy ending - for H's estate and W3, at least. The Tax Court overruled the Service's tortured logic (the Service did everything but waterboard the statute) to rule that: 1] State law determines whether people are married, and 2] New York law unequivocally recognizes the legitimacy of both the Rabbinical Court get, and the subsequent Israeli and Rabbinically sanctioned overseas marriage. 3] New York law on this point is unchanged for about 140 years. Summary Judgement Granted for Plaintiff W3! Yay, Team! As a practitioner, I'm left to ponder how this case ever made it to Tax Court in the first place.* Presumably, the Service observed all the usual checks and balances between Examiner, Supervision, Appeals, Counsel Review, Pre-Trial Conference and Discovery --- But no one ever said; "Hey wait just a gol-darn sec' here???" It's nice to see taxpayers win so convincingly once in awhile - but "Golly M Wizard, it'd be nice if there was a real case and real issues here." * The Service doesn't usually initiate or actively pursue "Well, Duh!" cases. The "Well, Duh!" cases that end up in Tax Court are usually taxpayer plaintiff cases, often argued pro-se by the plaintiff-taxpayer (possibly because no legitimate counsel could argue them with a straight face). In a weird way, it's nice to see the Service is actually prone to human error on occasion. If nothing else - it gives practitioners hope.

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