Month: September 2013

Tax Implications of SCOTUS’ DOMA Decision

Tax Implications of U.S. Supreme Court’s Decision on Same Sex Marriage (DOMA)

Surviving Spouse of Same-Sex Marriage Sues U.S. Government over Taxes

Edith Windsor and Thea Spyer were lawfully married in 2007 in Ontario, Canada but lived in New York. Spyer died two years later and left her estate to Windsor. Windsor attempted to claim a the “surviving spouse” exemption from the death tax when Spyer passed. The Defense of Marriage Act (DOMA), however, prevented her from taking the exemption. The term “spouse,” according to DOMA, applies only to the marriage between a man and woman. The IRS relied upon DOMA to rule that the surviving spouse exemption did not apply to Windsor, no matter where she married. Windsor ended up with a $363,053 death tax bill, causing her to sue the federal government.

U.S. Supreme Court Strikes Down DOMA’s Definition of “Spouse”

SCOTUS’ DOMA Decision Provides New Tax Benefits for Same-Sex Couples

The U.S. Supreme Court heard Windsor’s case and ruled that DOMA’s definition of “spouse” violated a myriad of Constitutional principles. The Court’s decision authorized same-sex couples, who are legally married, to claim the surviving spouse exemption. The U.S. Treasury Department and IRS changed its tax policy as a result of the decision. They will recognize same-sex married couples as married for federal tax purposes.  This is true even if the couple moves to a state that doesn’t recognize same-sex marriage. This treatment applies to all federal taxes, not just the surviving spouses exemption.

Tax Implications of Federal Recognition of Married Same-Sex Couples

The U.S. v. Windsor case will provide a number of new tax benefits for same-sex couples:

  • Annual Gift Tax Exemption: An individual can give another person up $14,000 (as of 2013) without tax consequences. The gift can be cash, property, or other assets. Anything above $14,000 must be reported to the IRS. Married couples, however, may give unlimited amounts to their spouse without tax consequences.
  • Death Tax Exemption: An individual can leave a non-spouse up to $5.25 million upon their death without tax consequences. A married individual, however, can leave their spouse an unlimited amount without tax consequences.
  • Unified Credit: Tax law combines the annual gift tax exemption and death tax exemption to create the “Unified Credit.” Untaxed amounts given annually as a gift count towards the $5.25 million that is exempt from the death tax. Married couples, however, don’t face limits on annual or lifetime gifts or transfers of property to the spouse. This includes the Unified Credit limitation.
  • Portability of Marital Exemption: The unused portion of $5.25 death tax exemption passes from the deceased spouse to the surviving spouse. This means a surviving spouse can give up to $10.5 million before the death tax kicks in (depending on how much of the death tax exemption the deceased spouse used).
  • Gift Splitting: A gift by a married individual only counts 50% towards the annual gift tax exemption. The IRS treats the married couple as a single tax entity when it comes to this exemption. This means a married individual can give up to $28,000 without tax consequences. Their spouse, though, could not give any amount as a gift that particular year without facing tax consequences.

Ari Good, JD LLM, a tax, aviation and entertainment lawyer, is the Shareholder of Good Attorneys At Law, P.A. He graduated from the DePaul University College of Law in 1997 and received his LL.M. in Taxation from the University of Florida.
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Rapper’s Jailhouse Confessional Lyrics Used at Murder Trial

When Keeping It Real Goes Wrong: Khali Holmes’ Lyrics Used in Murder, Robbery Trial

“I catching slipping at the club and jack you for your necklace. **** parking lot pimping. Man I’m parking lot jacking, running through your pockets with uh ski mask on straight laughing.”

Nevada Supreme Court OK’s Use of Lyrics in Criminal Trial

The Nevada Supreme Court has upheld the murder and armed robbery conviction of rapper Deyundrea “Khali” Holmes. Prosecutors claimed at Holmes’ trial that he penned confessional lyrics while awaiting extraditions to Nevada. Those damning words (seen above) ultimately helped convince a jury to agree with the prosecution. The lyrics and the details of the murder and robbery had a lot in common.

The Murder and Robbery

Lyrics admitted at murder trial
Lyrics are Evidence at Murder Trial

According to facts brought out at trial, victim Kevin “Mo” Nelson operated a recording studio in Reno, Nevada. He also used the studio as front for drug dealing. Rapper Holmes knew of both of these details. Holmes plotted with others to steal drugs and money from Nelson. On a snowy November night, they set the scheme into motion. Accomplice Jaffar “G” Richardson called Nelson to arrange a fake meth deal. Nelson arrived shortly to the studio.

Two men wearing ski masks and black clothes (later identified as Holmes and Max Reed) attacked Nelson. Nelson’s pockets were “bunny-eared” (turned inside out) during the fight. An assailant also ripped off Nelson’s shirt and chain necklace, pistol whipped him, and then tried to drag him from the parking lot into the studio. The assailant, in a fit of rage, removed his ski mask and threatened to shoot Nelson. He then pulled the trigger. Nelson staggered, fell, and died. Reed would say that Holmes was the assailant. “Khali [Holmes] went off … and just started shooting him.”

Art Imitates Life

It’s not hard to the see the similarity between Holmes’ lyrics and the his alleged actions. This likeness surely helped convince the jury of Holmes’ guilt, too. But were Holmes’ lyrics just an artistic expression, puffing, that the jury shouldn’t have heard? The Court decided that because the lyrics were not general boasts, but included specific details of the murder and robbery, the jury should hear them. They were not so vague as to create an unfair bias against Holmes. It was up to the jury to decide whether a violent artistic expression had imitated life.

In the end, the First Amendment right to free speech is undoubtedly a treasured American principle. Holmes just likely wishes he hadn’t exercised that right.

Ari Good, JD LLM, a tax, aviation and entertainment lawyer, is the Shareholder of Good Attorneys At Law, P.A. He graduated from the DePaul University College of Law in 1997 and received his LL.M. in Taxation from the University of Florida.

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