Boyter v. Comm'r of Internal Revenue

• Decision Date: 06 August 1980
• Docket Number: 11446-77.,Docket Nos. 11445-77
• Citation: 74 T.C. 989
• Parties: H. DAVID BOYTER, PETITIONER v. COMMISSIONER of INTERNAL REVENUE, RESPONDENTANGELA M. BOYTER, PETITIONER v. COMMISSIONER of INTERNAL REVENUE, RESPONDENT
• Court: U.S. Tax Court

74 T.C. 989

H. DAVID BOYTER, PETITIONER

v.COMMISSIONER of INTERNAL REVENUE, RESPONDENTANGELA M. BOYTER, PETITIONER

v.COMMISSIONER of INTERNAL REVENUE, RESPONDENT

Docket Nos. 11445-77

11446-77.

United States Tax Court

Filed August 6, 1980.

Petitioners lived in and were domiciled in Maryland. In order to render themselves unmarried on Dec. 31, petitioners traveled to Haiti in December of 1975 and obtained a Haitian divorce decree. They then returned to Maryland and remarried in January of 1976. Petitioners went through essentially the same divorce/remarriage procedure at the end of 1976 and the beginning of 1977, except this time they obtained a divorce decree from the Dominican Republic. Petitioners filed their income tax returns for 1975 and 1976 as single individuals. Held: The determination of marital status must be made in accordance with State law. Under Maryland law, the foreign divorce decrees would not be recognized as valid to terminate petitioners' marriage because at all times petitioners remained domiciled in Maryland. Therefore, the foreign tribunals lacked subject matter jurisdiction over the divorce proceedings. Petitioners may not file as single individuals for 1975 and 1976. Marvin J. Garbis and Paula M. Junghans, for the petitioners.

Charles B. Zuravin, for the respondent.

WILBUR, Judge:

Respondent determined a deficiency in income tax due from petitioner H. David Boyter for the years 1975 and 1976 in the amounts of $580.36 and $1,221, respectively. Respondent determined a deficiency in income tax due from petitioner Angela M. Boyter for the years 1975 and 1976 in the amounts of $617.98 and $716, respectively. The cases have been consolidated for trial, briefing, and opinion since they involve the same issue, namely, whether petitioners were unmarried at the end of the tax years in question and thus entitled to use the corresponding single person's rate schedule, or whether they were in fact married to each other and thus ineligible to use the rate schedule applicable to single individuals.

FINDINGS OF FACT

Some of the facts have been stipulated. The stipulation of facts and the attached exhibits are incorporated herein by this reference.

Petitioners Angela M. Boyter and H. David Boyter resided in Ellicott City, Md., at the time the petitions were filed in this case. Each filed his or her Federal income tax return for 1975 and 1976 as a single person.

Petitioners were married in Baltimore, Md., on April 2, 1966. For the years 1966 through 1974 inclusive, they filed Federal income tax returns as a married couple, filing either jointly, or as married individuals filing separately. Petitioners reside in a home which they purchased as tenants by the entirety on October 26, 1967. Petitioners also acquired real property located in Calvert County, Md., as tenants by the entirety on December 23, 1969.

Petitioners discovered that their tax liability would be lowered if they filed their returns as single persons and investigated the possibility of obtaining yearend divorces. Petitioner Angela Boyter went to a library in Baltimore, Md., located the name of seven Haitian attorneys, and contacted each seeking estimates. Petitioners traveled to Haiti in late 1975. They obtained a divorce decree from the Republic of Haiti on December 8, 1975. Angela Boyter was the complainant in the proceedings and appeared personally in the Haitian court with her lawyer. David Boyter filed a submission to jurisdiction with the Haitian court. The Haitian court found that Angela Boyter was living and domiciled at 37 Old Annapolis Road, N. Linthicum, Md. The Haitian court found that David Boyter was living and domiciled at 3914 MacAlpine Road, Ellicott City, Md. The ground upon which the divorce decree was based was incompatibility of character. After returning from Haiti, petitioners obtained a marriage certificate from Howard County, Md., on January 9, 1976.

In November of 1976, petitioners traveled to the Dominican Republic. They obtained a divorce decree from the Dominican Republic on November 22, 1976. This time, David Boyter was the complaining party; he personally appeared with his attorney, and Angela appeared through her attorney. The ground upon which the decree was based was incompatibility of temperaments making life together unbearable. The Dominican court found that David Boyter was domiciled in Maryland and that Angela Boyter was domiciled in Ellicott City, Md. On February 10, 1977, petitioners again obtained a marriage certificate from Howard County, Md. Petitioners sought and obtained their divorce decrees solely in order to render themselves unmarried as of December 31 for the years 1975 and 1976 so that they could file income tax returns as unmarried individuals. Petitioners never intended to and never did physically separate from each other prior to or subsequent to either of the divorces. Rather, they have continued to reside together in the home they purchased in 1967. At all times during 1975 and 1976, petitioners were domiciled in Maryland.

Petitioners have been Federal Civil Service employees for several years prior to 1975 until the present time. Under the Federal Civil Service system, the petitioners were entitled to the benefits of survivor annuities pursuant to 5 U.S.C. sec. 8301 et seq., and to disability benefits pursuant to 5 U.S.C. sec. 8101 et seq., so long as they were lawfully married. Prior to November 19, 1976, neither petitioner had executed a last will and testament. On November 19, 1976, each petitioner executed a last will and testament.

OPINION

We are called upon to decide a rather unique and controversial case involving two individuals who availed themselves of perfunctory yearend divorces in foreign countries in order to render themselves unmarried for the purposes of the tax law. The monetary savings from such an endeavor stem from the differing rate schedules for married persons and single persons and the interplay of a progressive tax structure with income aggregation for married couples.

A married couple filing a joint return are taxed on their total combined income and, as for all taxpayers, the marginal tax rate increases as total income increases. Reflecting income splitting enacted in 1948, the rate schedule for married couples filing jointly is somewhat lower than it is for single persons. Consequently, if one partner of the marriage produces all or most of the income, he or she pays less tax than if single. However, if both spouses work, the second income is piled on the first, and is thus in a higher marginal tax bracket than if it stood alone. Because the higher tax bracket can more than negate the lower rate schedule for couples filing jointly, when two people who earn somewhat comparable salaries decide to marry, they unhappily discover that their total tax bill is higher than it was before they were wed.¹

Not surprisingly, this marriage penalty is viewed by many people, including the petitioners, as onerous and unfair. After calculating just how much matrimonial bliss was costing them and after petitioning Congress in vain to remedy the situation, petitioners decided that they would take advantage of section 143(a) and section 6013(d)(1)(A)² which provide that the marital status of an individual is to be determined at the end of his or her tax year—in this case, on December 31.³ Thus, the Boyters journeyed to Haiti in December of 1975 and obtained a Haitian divorce decree. Angela appeared in court as the complainant, with her lawyer, and David filed a consent to jurisdiction and a power of attorney. They then returned to Maryland and remarried in January of 1976. Petitioners went through essentially the same divorce/remarriage procedure at the end of 1976 and the beginning of 1977, except this time they obtained the divorce decree from the Dominican Republic, and David appeared in court as the complainant. For both 1975 and 1976, they filed Federal income tax returns as single persons, thereby reducing their total tax liability.

The precise issue for our decision is whether petitioners are entitled to file as single individuals for the tax years 1975 and 1976. Respondent contends that petitioners were married individuals for those years because: (1) The foreign divorces would not be recognized as valid in Maryland, the State in which petitioners reside, since the foreign courts did not have subject matter jurisdiction over the divorce proceedings; (2) the divorces would not be recognized as valid in Maryland because petitioners made material misrepresentations to the foreign courts, thereby perpetrating a fraud on the courts; and (3) even if the divorce decrees are recognized as valid for State law purposes, they should be disregarded for Federal income tax purposes because a yearend divorce whereby the parties intend to, and do in fact, remarry early in the next year is a sham transaction that may be disregarded for Federal income tax purposes.⁴

Conversely, petitioners maintain that they are entitled to file as single individuals because they obtained valid foreign divorces, recognizable in Maryland, which rendered them unmarried on December 31 of both years. Furthermore, petitioners argue that the divorces were not shams because there are substantial nontax effects emanating from their divorced status, and that, in any event, the cases dealing with sham transactions are inapplicable to the determination of marital status. We agree with respondent that Maryland would not recognize the foreign divorces as valid because the foreign courts lacked subject matter jurisdiction over the divorce proceedings.⁵

We also agree with the assertion emphatically made by respondent on brief that “the Tax Court is bound by state law rather than federal law when attempting to construe marital status.” Except in a few specific situations, ⁶ the definition of “husband and wife,” or “marriage” is not addressed in the Internal Revenue Code, even though the...