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Tax Court Holds 'Bigamous' Estate Can Claim $79 Million Marital Deduction

An interesting application of New York's little-referenced “place of celebration rule.”

In Estate of Semone Grossman, the Tax Court held that the decedent, Semone Grossman, was validly married to Ziona Grossman at the time of his death for federal estate tax purposes (for example, for purposes of qualifying property bequeathed from Semone to Ziona for the federal estate tax marital deduction under Internal Revenue Code Section 2056(a)). The Internal Revenue Service contended that Semone’s marriage to Ziona was null and void, because Semone had not validly divorced his first wife, Hilda, under New York law at the time of his marriage to Ziona. Grossman’s estate is estimated to be worth $79 million. 

Procedural History

Semone and Hilda were married in New York in 1955. They separated in 1965, and Semone attempted to end the marriage by obtaining a unilateral divorce decree issued in Mexico. In 1967, Semone participated in a civil marriage ceremony with a second wife in New Jersey. By 1974, Semone’s relationship with his second wife had ended, and in the same year, Hilda prevailed in a suit against Semone and his second wife claiming that the Mexican divorce decree relating to Semone’s and Hilda’s marriage was invalid, and therefore Hilda was still Semone’s lawful wife. In 1986, Semone became engaged to Ziona. At this time, Semone and Hilda obtained a religious divorce from the orthodox rabbinical court in New York. Semone and Ziona subsequently traveled to Israel to be married, and presented the religious divorce decree to authorities in Israel and were validly married there under Israeli law, before returning to New York permanently.  They lived in New York as husband and wife for the following 27 years until Semone’s death in 2014.  Semone left the majority of his estate to Ziona at his death, and his estate claimed a corresponding marital deduction under IRC Section 2056(a).  

Who’s the Surviving Spouse?

The Tax Court reiterated that it has held that identification of a decedent’s surviving spouse as a federal issue should be determined by applying state law (citing Estate of Goldwater). Here, because Semone, Ziona and Hila all resided in the State of New York at all relevant times, the Court applied New York law to determine the dispositive issue at hand – whether Semon’s wife, for purposes of the marital deduction under IRC 2056(a), was Ziona at the time of his death.  

The IRS argued that Hilda is the surviving spouse under New York law, due to the fact that Semone and Hilda never attained a valid divorce under New York law. Under the IRS’ line of reasoning, it logically follows that no subsequent marriage by Semone (for example, Semone’s marriage to Ziona) would be valid. Semone’s estate argued that New York’s “place of celebration rule” instead controlled. 

The place of celebration rule holds that a marriage is considered valid if it’s valid where it’s entered into. The Court noted that the New York Court of Appeals (the highest court in New York) has recognized the place of celebration rule since at least 1881. Here, Semone and Ziona presented their evidence of Semone’s religious divorce from Hilda, and proceeded to validly enter into marriage, in Israel.  Therefore, Semone’s estate argued, under the place of celebration rule, their marriage continues to be valid in New York. The Court agreed. 

The IRS argued that, notwithstanding the place of celebration rule applying to validate Semone’s and Ziona’s marriage, two exceptions applied such that the marriage was invalidated: (1) The marriage was void as against public policy because it is bigamous, and (2) the marriage directly contravenes a provision of the New York State constitution which provides that no “divorce [shall] be granted otherwise than by due judicial proceedings.” Regarding the first argument , the court held that because Israel viewed Semone and Hilda as being validly divorced and capable of remarrying, and New York law requires the court to defer to the place of celebration on whether one of the parties was validly divorced, the marriage wasn’t bigamous. The Tax Court ruled that the provision cited under the second argument was inapplicable, as it doesn’t purport to have extraterritorial effect (citing the Van Hoorhis, Thorp and Matter of May cases).   

The Tax Court held that Semone and Ziona were validly married outside of New York; therefore, Ziona was Semone’s surviving spouse for estate tax purposes, and granted partial summary judgment to Semone’s estate on this issue. The place of celebration rule, which presupposes that a marriage validly entered into elsewhere outside of New York is valid there, controlled on the issue, notwithstanding the lack of a judicial dissolution of marriage In New York prior to the extraterritorial nuptials. 

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