## Facts

- Bernard Shapiro and Cora Jane Chenchark cohabited unmarried for about 22 years; Chenchark provided homemaking and household-management services while Shapiro paid living expenses and gave her an allowance.
- Chenchark alleged an agreement to pool resources and share assets equally, with assurances she would be “taken care of.”
- In 1999, Chenchark sued Shapiro in Nevada state court for breach of contract (express and implied), breach of fiduciary duty, and quantum meruit.
- Shapiro died in 2000 while the suit was pending; the estate continued the defense.
- A Nevada jury found no express or implied contract; Chenchark appealed and also pursued a will contest.
- While the appeal was pending, the estate settled Chenchark’s claims (including the will contest) for about $1 million.
- The estate paid federal estate taxes and later sought an estate-tax deduction under I.R.C. § 2053 for the settlement amount as a “claim against the estate” supported by “adequate and full consideration in money or money’s worth.”
- The IRS disallowed the deduction, treating the payment as not based on a bona fide, consideration-supported claim.

## Issues

1. Whether Nevada law can treat an unmarried cohabitant’s homemaking and household-management services as legally sufficient consideration for an express or implied cohabitation contract.
2. Whether a settlement of such a claim may qualify as a deductible “claim against the estate” under I.R.C. § 2053(c)(1)(A) as supported by “adequate and full consideration in money or money’s worth.”
3. Whether summary judgment was proper on the theory that the claim’s date-of-death value was zero as a matter of law.
4. Whether judicial estoppel (or related consistency doctrines) barred the estate from asserting deductibility after having prevailed at trial on “no contract” in state court.

## Decision

- The Ninth Circuit reversed the grant of summary judgment for the United States as to deductibility of the settlement related to Chenchark’s claim and remanded for further proceedings.
- The court held the district court erred by treating homemaking services as incapable, as a matter of law, of constituting contractual consideration under Nevada law.
- The court held a factual dispute existed regarding the value of Chenchark’s claim as of Shapiro’s date of death, precluding a zero-value determination at summary judgment.
- The court rejected the government’s broad judicial-estoppel argument on the record presented.
- The court affirmed the district court on other, noncentral matters not tied to the cohabitation-claim deduction.

## Legal Principles

- State law governs whether a claimant has an enforceable right against the estate; federal law then determines the tax consequences, including whether a qualifying claim is deductible under I.R.C. § 2053.
- Domestic services (e.g., cooking, cleaning, household management) may constitute contractual consideration between unmarried cohabitants under Nevada contract principles; courts should not impose a categorical rule that such services are mere “love and affection.”
- For § 2053(c)(1)(A), a claim is not assigned zero value as a matter of law solely because the asserted consideration consists of homemaking services; the relevant inquiry is the claim’s economic value at the decedent’s date of death.
- A post-death settlement may be evidence of a claim’s value but does not automatically establish the date-of-death value.
- Judicial estoppel requires clearly inconsistent positions and other equitable predicates; prevailing in one proceeding does not automatically bar a different, tax-focused characterization where the circumstances do not meet those requirements.

## Conclusion

The Ninth Circuit held that Nevada law could recognize homemaking services as consideration for a cohabitation agreement and that, because such services can support a potentially enforceable claim, the estate was entitled to a factual determination of the claim’s date-of-death value for purposes of an estate-tax deduction under I.R.C. § 2053.


Estate of Shapiro v. United States, 634 F.3d 1055 (9th Cir. 2011)