By: A.J. Cook


It was true love for Byrnece Green and Maxwell Richmond.

Well, it seemed that way anyway. Within weeks of meeting each other, they planned to marry. A few months later Richmond had a surprise for Green. He said he had a "mental problem" about marriage. He pleaded with her to function as his wife without the legal niceties and promised to leave everything to her when he died.

She reluctantly agreed.

For nine years they maintained separate living quarters, but she was his wife otherwise. She watched his diet, cared for him when he was ill and kept a record of his appointments. She went with him on business trips and social events. Green, a stock broker, advised Richmond on finances and every afternoon reported on market activities at his Boston radio station.

Although she never saw his will – a big mistake-he assured her he had provided for her. She realized he hadn't, after he died. His estate, valued at $7 million, went to his sister and brother-in-law.

Green sued Richmond's estate and settled for $900,000.

She didn't include this as income on her tax return, claiming in a statement attached that it was a gift. But the Internal Revenue Service disagreed, saying she worked for it.

Gifts aren't taxable to the recipient, but compensation is. The reason for the transfer distinguishes one from the other. Generally, if the transfer is for past services, it is considered income; if made because of admiration, affection or charity, it is a gift.

Green went to the Tax Court. The judge looked to her earlier lawsuit against Richmond's estate. There she had claimed he owed her for services rendered as a wife. Now she argues, the court noted, the money should be treated as a gift.

The judge rejected her gift theory. He ruled the $900,000 was taxable as compensation income.

The Moral: Sometimes you don't get as good as you give.

A.J. Cook is a lawyer and CPA. His tax column appears weekly in numerous newspapers. Why isn't it published in your hometown newspaper? Ask its Business Editor to subscribe.

Copyright © 1987-2001 A.J. Cook All Rights Reserved
This information is not intended for use without professional advise.
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Released 10-19-98