Bona Fide Claim Requirement under 26 U.S.C. §2053(a)(3) Reinforced:
Estate of Spizzirri v. Commissioner

1. Introduction

Estate of Richard D. Spizzirri v. Commissioner of Internal Revenue, decided on May 16, 2025 by the Eleventh Circuit, examines whether certain post-nuptial transfers to a decedent’s stepchildren can be deducted as “claims against the estate” under 26 U.S.C. § 2053(a)(3). The decedent, a wealthy individual who remarried late in life, entered into a prenuptial agreement (and later five modifications) providing for $9 million in cash payments—$6 million to his wife and $3 million to her adult children—“in lieu of” any spousal rights. After his death, the estate paid $1 million to each stepchild, claimed the amounts as deductible claims, and triggered a deficiency notice from the IRS. The Tax Court denied the deductions, holding the stepchildren’s claims were neither “contracted bona fide” nor “for an adequate and full consideration.” The Eleventh Circuit affirmed.

Key issues:

Does a post-death transfer to stepchildren under a prenuptial modification qualify as a deductible “claim against the estate”?
Must the transfer be “contracted bona fide” and supported by “adequate and full consideration in money or money’s worth” under § 2053(c)(1)(A)?
How should courts analyze intrafamily transfers for donative intent and arm’s-length negotiation?

Parties:

Petitioner-Appellant: Estate of Richard D. Spizzirri, by its Personal Representative, John H. McAtee, Jr.
Respondent-Appellee: Commissioner of Internal Revenue

2. Summary of the Judgment

The Eleventh Circuit upheld the Tax Court’s determination that the stepchildren’s $3 million claim was not deductible under 26 U.S.C. § 2053(a)(3). The court emphasized:

The decedent’s prenuptial modifications occurred while he and his wife were married, with the primary motive of placating his spouse and preserving the marriage—strong evidence of donative intent.
The post-death obligation to the stepchildren was “in lieu of” the spouse’s statutory rights, linking the stepchildren’s claim directly to inheritance expectations.
Under Treas. Reg. § 20.2053-1(b)(2), five guiding factors for bona fide claims all weighed against the estate: lack of arm’s-length bargaining, relation to spousal inheritance rights, absence of any performance obligation by the stepchildren, failure to report the income consistently, and absence of an ordinary-course-of-business context.
The estate also failed to introduce “credible evidence” under § 7491(a) to shift the burden of proof to the IRS.

Conclusion: The payment was a disguised bequest, not a bona fide claim, and the deductions were properly disallowed.

3. Analysis

3.1 Precedents Cited

United States v. Stapf, 375 U.S. 118 (1963): Established that estate tax deductions for claims must not serve as a “cloak for a gift.”
Estate of Kosow v. Commissioner, 45 F.3d 1524 (11th Cir. 1995): Held that an agreement made in anticipation of divorce, supported by arm’s-length bargaining, could qualify as a bona fide claim (though the bona fide issue was not adjudicated on appeal).
Estate of Huntington v. Commissioner, 16 F.3d 462 (1st Cir. 1994): Emphasized that intrafamily transactions must be scrutinized for hidden donative intent.
Estate of Herrmann v. Commissioner, 85 F.3d 1032 (2d Cir. 1996): Focused on the relevant donative intent at the time of the agreement.
Treasury Regulation § 20.2053-1(b)(2): Lists five non-exclusive factors to determine whether a family-member claim is “contracted bona fide.”

3.2 Legal Reasoning

Statutory Framework: 26 U.S.C. § 2053 allows an estate to deduct “claims against the estate” if such claims are “contracted bona fide” and supported by “adequate and full consideration in money or money’s worth.” Section 2053(c)(1)(A) seeks to prevent the transformation of testamentary gifts into deductible debts.

Burden of Proof: Under § 7491(a), the taxpayer initially bears the burden of proving entitlement to a deduction. The estate may shift that burden only by producing “credible evidence.” Here, the estate’s testimony of “keeping [the wife] happy” and “showing largesse” fell short of arm’s-length evidence.

Regulatory Factors: Treas. Reg. § 20.2053-1(b)(2) establishes five non-exclusive factors to test bona fide character in family settings:

Ordinary-course, arm’s-length negotiation free from donative intent;
No relation to inheritance expectations;
Origination from a genuine decedent–claimant agreement;
An obligation by the claimant to perform;
Consistent tax reporting by both sides.

Every factor here weighed against deduction:

The stepchildren’s claims arose from a marital-preservation pact, not an arm’s-length bargain.
They were explicitly “in lieu of” spousal inheritance rights.
No mutual obligation or consideration flowed from the stepchildren in exchange for the payments.
There was no evidence of consistent reporting of the payments as income.

3.3 Impact on Future Cases and Estate Planning

The Eleventh Circuit’s decision reinforces a strict reading of § 2053(c)(1)(A) for intrafamily claims. Estates and advisors should note:

Any provision for family members “in lieu of” spousal or inheritance rights will draw close regulatory scrutiny for donative intent.
To qualify as a bona fide claim, obligations should arise from genuine, negotiated contracts—preferably entered into prior to marriage or divorce contexts—and each claimant should perform measurable services or provide consideration.
Consistent tax reporting by both the estate and claimants is critical to substantiate bona fide character.
Prenuptial or postnuptial agreements should carefully segregate spousal waivers from third-party payments to avoid the characterization of those transfers as disguised bequests.

Tax professionals must ensure that “claims” against an estate are accompanied by documentation of arm’s-length negotiations, demonstrable performance by beneficiaries, and clear, contemporaneous tax filings.

4. Complex Concepts Simplified

“Claim against the estate”: A debt or obligation of the decedent that, if proved, reduces the taxable estate; not to be confused with a gift or bequest.
Bona Fide Claim: A genuine, enforceable obligation arising from a real, arm’s-length transaction, not a hidden testamentary gift.
Adequate and Full Consideration: Something of value (financial or otherwise) that the claimant actually provides in exchange for the promise or debt.
Burden-Shifting under § 7491(a): The taxpayer must produce credible evidence to shift the burden of proof on factual issues (like deduction entitlement) to the IRS.
Donative Intent: The mindset of making a gift rather than entering into a contractual obligation; courts look at the circumstances when the agreement was made.

5. Conclusion

Estate of Spizzirri v. Commissioner reaffirms that intrafamily transfers “in lieu of” spousal rights cannot be disguised as deductible estate claims unless they meet the strict bona fide claim standard of § 2053(c)(1)(A). The decision underscores:

The paramount importance of arm’s-length negotiation free from donative intent.
The need for genuine consideration or performance by beneficiaries.
The critical nature of consistent, contemporaneous tax reporting by both parties.

Moving forward, estate planners, tax professionals, and courts will apply these principles rigorously to prevent the subversion of estate taxes through creative family agreements. This case stands as a landmark reaffirmation of the Internal Revenue Code’s anti-abuse provisions in the estate tax context.