Latest ‘Bad Facts’ FLP Case Emphasizes Poor Planning
Estate of Liljestrand v. Commissioner, T.C. Memo 2011-259; 2011 Tax Ct. Memo LEXIS 251 (Nov. 2, 2011) Here’s yet another case that proves the simple point that hiring an accredited appraiser can make a huge difference in estate planning. After retiring in 1978, a doctor exchanged his interest in a Hawaiian hospital for several real [...]
Tax Court judges’ panel highlights Georgetown Law/BVR On-line Tax Symposia
This and other questions continue to bedevil estate and gift tax practitioners with clients who own businesses. Business appraisers whose valuations support these clients’ claims are being challenged more frequently than ever. For example: are the guideline public company method and its use of comparable entities/transactions under heightened scrutiny by the Tax Court? And what [...]
FLPs with passive assets are still the most vulnerable
Recent cases concerning the viability of taxpayers’ transfers to family limited partnerships (FLPs) as “bona fide” for legitimate, non-tax business purposes have been fairly successful in the Tax Court of late—even when the transfers have involved assets that don’t require active management. Estate of Black, for instance, upheld an FLP in which the partners held the [...]
Another blow to IRS: 9th Circuit upholds defined value clause
As reported in prior BVLaw Alerts, the Tax Court delivered a first blow to the IRS’s long-held opposition to formula-defined value clauses in Estate of Petter v. Commissioner. The government appealed, and earlier this month the 9th Circuit might have buried the “void for public policy” argument, as the IRS didn’t even assert this angle, [...]
Judge Morrison derives his own value in US Tax Court FLP case
In Estate of Giustina v. Commissioner, T.C. Memo. 2011-141 (June 22, 2011), the estate reported its 41.1% limited partnership (LP) interest in a family owned, timberland holding company at just over $12.6 million; the IRS said it was worth closer to $36 million and assessed a penalty of over $2.5 million. In finding that the “correct” [...]
Recently added to BVLaw valuation case law database
Enpat, Inc. v. Budnic, 2011 WL 768092 (M.D. Fla.)(Feb. 28, 2011) Federal court denies plaintiff’s request to pro-rate past patent infringement damages from actual prior licenses without additional evidence that the parties’ would have used a similar pro-ration during hypothetical negotiations. Experts: none Judge: Fawsett State/Jurisdiction: federal Court: U.S. district court, Florida Type [...]
How can your tax client impress the IRS? The answer may surprise you…
Credible data, well-supported conclusions, compliance with applicable professional standards: It almost goes without saying that these are the minimal qualities that any business appraisal must meet to support estate and gift tax planning. But what’s the first thing that happens after a field agent refers an appraisal to an IRS BV specialist? “We will read [...]
US Tax Court Judge Laro and Shannon Pratt hit the market with their updated Business Valuation & Federal Taxation
This is the must-have text in the field from Judge David Laro and Shannon Pratt. Besides the essentials the 2nd Edition (the first came out in 2005) includes coverage of: Personal versus enterprise goodwill New materials on transfer pricing and customs valuations and how recent markets have affected both the income and market approaches Coverage [...]
Fractional interest in estate tax turns on type, timing of gift
Estate of Adler v. Commissioner of Internal Revenue, T.C. Memo. 2-11-28, 2011 WL 300144 (U.S. Tax Court)(Jan. 31, 2010) A father owned a California ranch on more than 1,000 acres. In 1965, he gifted undivided one-fifth interests to his five children as tenants-in-common, reserving his own “full use and control” of the property throughout his [...]
Best way to gift property: FLPs or fractional interest?
A father owned over 1,000 acres of California ranch land, worth $6.4 million at his death. The estate applied a 48% combined discount for lack of marketability and lack of control, because thirty years before, the father had gifted equal, undivided interests to his five children as tenants-in-common, reserving “full use and control” of the [...]
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