Estate of Shapiro v. United States

Cora Chenchark lived with Bernard Shapiro for 22 years in a romantic, unmarried relationship. While the two were together, Chenchark provided homemaking services to Shapiro, such as cooking, cleaning, and generally managing their household matters. When the couple broke up, Chenchark sued Shapiro for palimony payments. Chenchark claimed that Shapiro had promised her that she would be taken care of even if something happened to him. Shapiro died while the lawsuit was pending. Shapiro’s estate (plaintiff) ultimately settled Chenchark’s claim for $1 million and deducted the claim as an expense. The federal government (defendant) determined that Chenchark’s claim was not based on a bona fide contract in which Chenchark had provided consideration in the form of money or something like money and, therefore, that Chenchark’s claim was not a deductible expense. The estate filed a lawsuit in federal district court claiming that Chenchark’s claim was a deductible expense under 26 U.S.C. § 2053(c)(1)(A) and seeking a tax refund based on the deduction. The district court granted summary judgment to the federal government. The court based its ruling on evidence that Chenchark had provided only herself, her love, and her affection to Shapiro, none of which increased Shapiro’s gross estate. Therefore, the district court ruled that Chenchark had not provided consideration in money or money’s worth to Shapiro and that Shapiro’s estate’s payment to Chenchark was a nondeductible gift to a romantic partner—not a deductible claim under a bona fide contract for monetary consideration. The estate appealed.