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The determination of whether an individual is married shall
be made as of the close of the taxable year. Sec. 7703(a)(1).
Marital status for Federal tax purposes is defined by State law.
Lee v. Commissioner, 64 T.C. 552, 556-559 (1975), affd. 550 F.2d
1201 (9th Cir. 1977).
In general, we give full faith and credit to a determination
of marital status by a State court possessed of jurisdiction over
the subject matter and parties. E.g., Stark v. Commissioner,
T.C. Memo. 2003-47. We are, however, only bound to follow
interpretations of State law as announced by the highest court of
that State. Commissioner v. Estate of Bosch, 387 U.S. 456, 465
(1967). Accordingly, we conclude that in the unusual
circumstances of this case we are not bound by the decision of
the Texas State court regarding petitioners’ marital status.
Id.; Graham v. Commissioner, 79 T.C. 415, 419-421 (1982).
Indeed, petitioners’ actions perpetrated a fraud on the Texas
State court, and we believe that the Texas Supreme Court would
not enforce such a decree against third parties (such as
respondent in this case).
Ms. Yeager’s marriage to Mr. Williams was dissolved in 1994.
As of the close of 1994, 1995, and 1996, and through the time of
trial, petitioners lived together as husband and wife and
represented themselves to others as being married. Petitioners
never intended to and never did physically separate from each
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