## Facts

- H. David Boyter and Angela M. Boyter married in Maryland in 1966 and were domiciled in Maryland during the tax years at issue, 1975 and 1976.
- Both spouses earned substantial income from federal civil service employment.
- The Boyters learned that two-income married couples can incur higher aggregate federal income tax than similarly situated unmarried individuals (the “marriage penalty”).
- They understood that the Internal Revenue Code determines a couple’s marital status for income-tax purposes as of the close of the taxable year (December 31).
- To reduce their tax liability, the Boyters arranged to be divorced near year-end and remarried shortly after the new year.
- For 1975, they obtained a Haitian divorce decree on December 8, 1975, remarried in Maryland near the beginning of 1976, and filed separate 1975 federal returns as unmarried individuals.
- For 1976, they obtained a Dominican Republic divorce decree on November 22, 1976, remarried in Maryland near the beginning of 1977, and filed separate 1976 federal returns as unmarried individuals.
- The Commissioner issued deficiency notices for 1975 and 1976, asserting the divorces should be disregarded as sham transactions intended to avoid the marriage penalty.
- In the Tax Court, the Commissioner also argued (and the Tax Court ultimately relied on) the alternative ground that Maryland would not recognize the foreign divorces, meaning the Boyters remained married on December 31 of each year.

## Issues

1. Whether the Tax Court could sustain the deficiencies solely on the ground that Maryland law did not recognize the Haitian and Dominican Republic divorces, so the Boyters were married at the end of 1975 and 1976.
2. Whether the case should be remanded for the Tax Court to make findings on the Commissioner’s alternative theory that, even if valid under state law, the divorces were shams for federal income-tax purposes.

## Decision

- The Tax Court sustained the deficiencies on the ground that Maryland would not recognize the foreign divorces, and it did not reach the Commissioner’s sham-transaction theory.
- The Fourth Circuit concluded that Maryland authorities did not make the divorces’ invalidity sufficiently certain to rest the outcome solely on the state-law ground.
- The Fourth Circuit remanded to the Tax Court for further findings and a decision on the applicability of the sham-transaction doctrine.
- The Fourth Circuit expressly did not decide whether Maryland would recognize the foreign divorces and did not decide whether the divorces were shams; it directed the Tax Court to address the sham theory in the first instance.

## Legal Principles

- Federal income-tax filing status for a given year generally turns on whether the taxpayers are married at the close of that taxable year under the Internal Revenue Code.
- State law typically determines the existence of a marriage or divorce for federal tax purposes, but federal tax law may disregard formally valid steps when they lack real-world effect and exist only to reduce taxes (the sham-transaction doctrine).
- A court should not rely exclusively on an uncertain or unsettled point of state law when an alternative federal theory could control the tax result; fact-intensive questions tied to sham characterization are ordinarily for the trial court (here, the Tax Court) to find and decide first.
- If the Tax Court did not decide an alternative ground that could support the deficiency determination, an appellate court may remand for findings and a ruling on that ground rather than attempting to resolve it without trial-level factfinding.

## Conclusion

The Fourth Circuit held that the Tax Court’s reliance on Maryland’s treatment of the Boyters’ Haitian and Dominican Republic divorces was not sufficiently secure to end the case and remanded for the Tax Court to determine whether the year-end divorces and immediate remarriages should be disregarded as shams for federal income-tax purposes, without deciding the validity of the divorces under Maryland law.


Boyter v. Commissioner, 668 F.2d 1382 (1981)