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Windsor v. U.S.: Married Same-Sex Couples Can Take Advantage of Marital Deduction for Estate Tax

The United States District Court for the Southern District of New York has ruled that legally married same-sex couples can take advantage of the estate tax marital deduction. Windsor v. U.S., 109 AFTR 2d 2012-870 (DC N.Y. 6/6/2012).

In this case, the taxpayer’s claim was essentially that the definition of marriage under the Defense of Marriage Act (DOMA) violated the equal protection clause of the U.S. Constitution. The court found the DOMA definition unconstitutional under the “rational basis” standard of review which requires that laws have a rational basis for any of their classifications.

The court determined that the rationale of protecting the institution of marriage, child-rearing and procreation, along with generating consistency and uniformity in the administration of federal benefits, were not rationally served by the DOMA definition of marriage. The court thus ordered that a refund in the amount of $363,053.00 be paid to the taxpayer.

This ruling could have far-reaching tax implications, even beyond the realm of estate taxes. While an appeal of the case is very likely because of contradictory rulings in other Circuits, if upheld married same-sex couples might think about filing refund claims before any applicable statute of limitations expire. This could potentially apply both in the income tax and transfer tax (estate, gift, GST) arenas.