Here’s How Couple Shielded A $37M Estate From The IRS Decades Before Gay Marriage
By: James Fanelli - January 19, 2018
It was a marriage of necessity — that came with a hitch.
When nightlife impresario, theater owner and gay rights advocate Bruce Mailman was dying of an HIV-related illness, he and his companion of 29 years scrambled to find a way to shield their vast wealth from the IRS.
It was 1994, and Mailman and his longtime lover, Dr. John Sugg, didn’t have the option of marrying one another or transferring their assets tax-free to a spouse. The Supreme Court wouldn’t legalize gay marriage for another 20 years.
Instead, the two came up with an ingenious plan to preserve their fortune — which included art by Andy Warhol and Keith Haring.
Mailman would marry their longtime female friend, Lucienne Reed, allowing him to capitalize on the federal tax exemptions that were then afforded to married opposite-sex couples.
When Mailman died six months later, Reed married Sugg so he could acquire Mailman’s assets.
Reed and Sugg were married in name only, and lived in separate states. Still, their bond lasted until he died in Manhattan last year with more than $37 million.
And that unusual arrangement has led to a showdown in court.
Reed has accused an employee and acquaintance of Sugg of refusing to hand over to her an East Village loft apartment and scores of paintings valued in the millions of dollars that Sugg and Mailman owned.
Reed says that the employee, Stephen Pevner, came forward months after Sugg died claiming that Sugg had leased him a Lafayette St. apartment at a bargain rate. The lease also included the transfer of scores of artwork, including two works by Haring, a collage of “Studio 54” by Warhol and photos by Robert Mapplethorpe.
Reed filed a petition in Manhattan Surrogate’s Court on Oct. 30, accusing Pevner of forging the lease and noting she wasn’t listed in the document as a co-landlord.
She is demanding that Pevner hand over the art so she can establish a collection of the works in memory of Mailman and Sugg.
In her filing, Reed explained her role as a two-time widow and her unusual nuptials with Mailman and Sugg.
Lucienne Reed wants Stephen Pevner to return works by Andy Warhhol (left) and Keith Haring so she can establish a collection in memory of Bruce Mailman and Dr. John Sugg. The men, both now deceased, both married Reed in a bid to hold on to Mailman's vast estate.
“This case arises out of a nontraditional marriage based on a lifelong friendship and unconditional trust,” the petition says.
Mailman and Sugg plotted to outsmart Uncle Sam in 1994.
“Their plan, while perfectly legal, had one problem — whom could they trust to be their bride? Who could be trusted to inherit millions of dollars and still fulfill the second part of the plan by marrying Dr. Sugg?” the petition says. “The answer: Lucienne Reed.”
At the time, Reed, a divorcee, had known Sugg for 40 years, since he and her first husband were medical students at Vanderbilt University.
Sugg had been present at the birth of each of Reed’s six children and was the godfather to her son John.
When John moved to New York City in the 1980s, he lived with Sugg and Mailman. When John contracted HIV, Reed stayed with Sugg and Mailman so she could care for her son until he died.
“In light of these experiences, Dr. Sugg and Mr. Mailman asked Ms. Reed to help them execute Mr. Mailman’s estate plan,” the petition says.
Arthur Leonard, a lawyer who focuses on sexual orientation discrimination, said he had never heard of such an arrangement.
There have been cases of gays and lesbians adopting their companion to avoid some of the death tax burden. A double marriage was something new, Leonard said.
“I have not previously heard of a case like the one you describe, of undertaking such a marriage for purposes of wealth transfer,” he said.
The real estate empire that Mailman built in the East Village was worth protecting. He had turned buildings into the Astor Place Theater and the New York Theater Workshop, and owned a loft building on Lafayette St.
He also had run-ins with the IRS before the marriage.
He made headlines in 1992 when he said the taxation agency had targeted him and others for prosecution because of their sexual orientation. The charges against Mailman were eventually dropped.
Reed, who declined to comment for the story, married Mailman on Feb. 18, 1994. He died four months later. She and Sugg wed on Sept. 6, 1996.
“As a symbol of their unique relationship, as well as their unconventional family, Ms. Reed bought wedding rings for her and Dr. Sugg that each consisted of three interlocking silver bands, representing Ms. Reed, Mr. Mailman and Dr. Sugg,” the petition says.
After they exchanged vows, Reed remained in Tennessee while Sugg returned to New York. He managed Mailman’s assets and paid her medical insurance, and prepared their joint tax returns.
From time to time, Reed would ask Sugg if he wanted to end the marriage.
“Each time, Dr. Sugg would respond, in words or substance, ‘Don’t worry, I will take care of you,’ ” the petition says.
Before his death on Aug. 7, 2016, Sugg named Reed as his sole beneficiary of a $37 million fortune and his artwork, according to the petition.
But she accuses Pevner of getting Sugg to sign an apartment lease with him under “suspicious circumstances.”
According to the petition, Pevner claims the lease gives him the option of buying the Lafayette St. apartment for the bargain price of $750,000 — even though Sugg sold another unit in the building for $5.4 million in 2015.
Pevner, who has produced indie films, including 1997’s “In the Company of Men,” is the CEO of Saint at Large Inc., a nightlife production business that Mailman and Sugg founded.
Pevner did not respond to a request for comment.
Article Source: NY Daily News