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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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Extraordinary Estate Planning Opportunities are Created by New Tax Act

March 2011 | Issue 51

Estate planners are beginning to digest the planning implications of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (“2010 Act”), which was enacted December 17, 2010.  What they are finding is that, for the period between now and December 31, 2012, taxpayers have been given an unprecedented opportunity to undertake certain strategies that can substantially reduce their federal estate taxes.  One planner has described the period during which the 2010 Act will be in effect as “two years that can last a lifetime.

Under the new act, the estate tax, gift tax and GST tax rates are reduced to 35%.

A new $5 million per person exclusion for estate, gift and GST creates the opportunity to make substantial gifts, either outright or through entities such as GRATS, grantor trusts, CLATS and freeze partnerships.

Valuation Discounts

Valuation discounts continue to be permitted under current law.  It should be pointed out, however, that the Obama Administration’s Fiscal Year 2012 Revenue Proposals, released February 14, 2011, do seek to modify provisions related to valuation discounts on family-owned entities, such as family limited partnerships and family limited liability companies.  The Administration wishes to strengthen Sec. 2704(b) of the Internal Revenue Code by modifying it to create a new class of restrictions called “disregarded restrictions” that must be ignored when valuing such entities.  Examples of such restrictions would be (i) limitations on a holder’s right to liquidate his interest in a family-controlled entity and (ii) restrictions on the ability of a transferee to be admitted as a full partner to a partnership.

Future Outlook

Commencing January 1, 2013, unless Congress acts, the estate, gift and GST tax provisions that existed before 2002 will be reinstated.  No one can reliably predict what Congress will do, or foresee what kind of estate tax regime will come into effect after that date.  All that can be said for certain is that for the present, the planning opportunities that exist now should be given a close look.

IRS CIRCULAR 230 DISCLOSURE

To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication is not intended to be used, and cannot be used, for the purpose of (a) avoiding penalties under the Internal Revenue Code or (b) promoting, marketing or recommending any transaction or matter addressed herein.