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NEW JERSEY COURT USES VALUATION DISCOUNT TO PUNISH “BAD BOY”

Introduction Richard and Steven Parker are brothers who ran a flower business in Scotch Plains, New Jersey.  Richard is the President of Parker Interior Plantscapes (“PIP”), which installs and services plants and flowers in commercial settings.  Steven is the President of Parker Wholesale Florists (“PWF”), which is a garden center.  Each are vice presidents of […] More...

Dell Appraisal Spawns a Multitude of Valuation Approaches

February 2017 | Issue 84 Introduction A Delaware Chancery appraisal case involving computer company Dell Inc. gave rise to a multitude of valuation measurements.  It is instructive to see how the court sorted through them in coming up with its final appraisal conclusion.  The case is In re Appraisal of Dell Inc., 2016 Del. Ch. LEXIS […] More...

Future Expected Investment Strategy Determines Value of FLP Interest

January 2016 | Issue 83 The estate of Helen P. Richmond held a 23.44% interest in Pearson Holding Co. (“PHC”), a family investment company.  The estate valued this holding at $3,150,000, later adjusted to $5,046,000.  The IRS valued it at $7,330,000.  This difference of opinion was aired in US Tax Court in a case called Estate […] More...

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Estate of Jelke Reversal is a Major Win for Taxpayers

November, 2007 | Issue 22

Background
In Estate of Jelke (T.C. Memo. 2005-131), the Tax Court circumscribed the amount that a taxpayer could deduct for built-in capital gains when valuing the stock of a C corporation which holds appreciated assets. The haircut was applied to reflect the fact that the built-in gain tax would be incurred at some date in the future, and therefore needed to be discounted to the present by an amount to reflect the time value of money.

The Appeal
Taxpayer appealed this decision to the 11th Circuit Court of Appeals, and last week, in Estate of Jelke v. Commissioner (November 15, 2007), the appeals court approved a “dollar-for-dollar” reduction for the entire built-in capital gains tax liability of a minority interest in a closely held corporation, overturning the Tax Court’s prior allowance of only a partial discount.

The Effect
This decision is a win for taxpayers, and should provide certainty to tax practitioners and appraisers alike. The decision derives from a simple yet logical analysis of the tax valuation issues involved.

More to Come
We want to get this information out to you quickly. We’ll follow up with a more detailed analysis soon. Meanwhile, have a nice Thanksgiving.