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Estate of Bernard v. United States of America

February 22, 2011

ESTATE OF BERNARD SHAPIRO; CLYDE E. PITCHFORD; STEVEN R.
SCOW,
PLAINTIFFS-APPELLANTS,
v.
UNITED STATES OF AMERICA, DEFENDANT-APPELLEE.



Appeal from the United States District Court for the District of Nevada Robert Clive Jones, District Judge, Presiding D.C. No. 2:06-cv-01149-RCJ-LRL

The opinion of the court was delivered by: Silverman, Circuit Judge

FOR PUBLICATION

OPINION

Argued and Submitted

December 10, 2010-San Francisco, California

Before: Robert E. Cowen*, A. Wallace Tashima, and

Barry G. Silverman, Circuit Judges.

Opinion by Judge Silverman;

Partial Concurrence and Partial Dissent by Judge Tashima

*The Honorable Robert E. Cowen, Senior Circuit Judge for the Third Circuit, sitting by designation.

2721

OPINION

Bernard Shapiro and Cora Jane Chenchark lived together for twenty-two years, but they never married. Over those twenty-two years, Chenchark cooked, cleaned, and managed their household. When they broke up, she filed a palimony suit against him in state court. While the suit was pending, he died. In the context of this tax refund lawsuit filed by Shapiro's estate, the district court held that Chenchark's homemaking services did not, as a matter of law, provide sufficient consideration to support a cohabitation contract between Shapiro and Chenchark, and that therefore, an estate tax deduction for the value of Chenchark's claim was properly disallowed. Because the district court's holding was premised upon a misconstruction of Nevada law regarding contracts between cohabitating individuals, we reverse.

I. Background

Shapiro and Chenchark met in 1977 and began dating shortly thereafter. Chenchark moved in with Shapiro in 1978. They lived together for the next twenty-two years, but they never married. During the relationship, Chenchark provided homemaking services to Shapiro, including cooking, cleaning, and managing the household employees, such as the gardener and housekeeper. Shapiro paid for Chenchark's living expenses and provided her with a weekly spending allowance. Chenchark contributed no financial assets to the household.

In 1999, after learning that Shapiro was involved with another woman, Chenchark sued Shapiro in Nevada state court, claiming breach of express and implied contract, breach of fiduciary duty, and quantum meruit. According to Chen-chark's complaint, she and Shapiro had agreed to pool their resources and to share equally in each others' assets.

Shapiro died on February 12, 2000, while Chenchark's action was still pending. Shapiro's estate filed an estate tax return in May 2001 and paid $10,602,238 in estate tax and generation-skipping transfer tax. The Estate continued to defend against Chenchark's claim, and in September 2001 a jury returned a verdict in favor of the Estate, specifically finding that Shapiro and Chenchark did not enter into any express or implied contract. Chenchark appealed, and while the appeal was pending the parties settled Chenchark's claim, along with another lawsuit in which she contested Shapiro's will, for approximately $1 million.

In June 2003, some time after settling Chenchark's claim, the Estate filed an amended estate tax return seeking, among other adjustments, to deduct $8 million from the value of the taxable estate under 26 U.S.C. ยง 2053(a)(3) for Chenchark's claim. Based on the amended return, the Estate claimed a refund of approximately $3.5 million. The IRS disallowed any ...


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