In Uncategorized on 02/28/2023 at 18:11

That’s the story of Estate of Richard D. Spizzirri, Deceased, John J. McAtee, Jr., Personal Representative, T. C. Memo. 2023-25, filed 2/28/23. Rich was a lawyer and biotechie who built up a gross estate north of $81 million, while having three wives, four kids with Wife One, and two kids, each with a different Mom while estranged from Wife Four, with whom he had an expensive, extensive, and much-amended Prenup, dealing with Rich’s Manhattan penthouse, Aspen house, Miami condo (which he owned with yet another lady), and Hamptons hangout.

I can’t say Judge Patrick J (“Scholar Pat”) is envious, but he carefully catalogues all the ladies to whom Rich paid heavy-duty cash, with not a 1099-MISC nor W-2 in sight, making all same gifts and thus part of estate.

Ol’ Rich was quite a lad. Until the end. Whereupon follows litigation with Wife Four in CO (Rich was a wee bit casual in complying with Prenup), his ex’r’s second request for extension to file Form 706 hits Section 6081(a), so late filing add-on; as estate isn’t individual, no Boss Hossery needed.

The various payments to Wife Four and her three (count ’em, three) kids from previous marriage fail for want of consideration. Waiving support is good consideration, but Section 2043(b) prevents turning taxable gifts into support obligations. The Prenup carefully divides all the various rights that Wife Four waives, and Judge Scholar Pat is not going to smoosh them together and redraft the Prenup. 

 “The Estate responds that the claims at issue were supported by [Wife Four]’s waivers of spousal support and equitable distribution, asserting that the value of the waivers exceeded the value of the claims at issue. The Prenup refutes the Estate’s argument, expressly specifying the property that [Wife Four] would receive in the event of a dissolution of marriage ‘in consideration of her relinquishment of any rights she has or might have at such time to maintenance or support and any claims she has or might have to equitable distribution.’ The property promised to [Wife Four] in Article V in consideration for the waiver of her spousal rights in the case of divorce is distinct from the property settled on [Wife Four] and her children in Article IV (as modified) in exchange for inheritance rights. We see no reason to redraft the parties’ agreement to reallocate the consideration that they specified for the relinquishment of certain rights.” T. C. Memo. 2023-25, at p. 15. 

Testimony for what the various ladies did for the cash they got isn’t enough for Judge Scholar Pat.

The ex’r couldn’t establish that repairing the decks at Aspen was necessary to preserve structural integrity (hence deductible), and not to fix up the house for sale (not deductible).

As for the late filing add-on, “(T)he Estate finally contends that the net amount due on the date prescribed for payment was zero because it remitted an overpayment before the filing deadline and that the penalty should be based on that amount. The penalty for the late filing of estate tax returns applies, however, even when full payment is made on time.” T. C. Memo. 2023-25, at p. 19. But IRS goofed on the deficiency number, omitting a timely payment the ex’r made, so the add-on gets reduced.

Now we tax geeks get the rap that we’re all about the numbers, recordkeeping, OCD types. But I can’t imagine even the geekiest among us handing out a 1099 after.


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