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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...

Do Attached Strings Affect the Value of a Gift?

October 2015 | Issue 82 Steinberg v. Commissioner, 145 T.C. No. 7 (Sept. 16, 2015) explores how a contingent liability accepted by a donee can impact the value of a gift for gift tax purposes. Introduction In 2007, Petitioner Jean Steinberg, age 89, entered into a net gift agreement under which she gave her four […] More...

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IRS Redefines Gross Valuation Misstatement

September, 2006 | Issue 8

Current law provides for heavy penalties for taxpayers who “substantially” or “grossly” misstate the value of property given in a charitable donation or reported in a gift or estate tax return. There’s a 20% penalty for a substantial valuation misstatement and a 40% penalty for a gross misstatement.

Definitions Tightened
The Pension Protection Act of 2006, signed August 17, 2006, tightens up the definitions of “substantial” and “gross” for purposes of determining whether these penalties apply. Under the new law, for income tax purposes, if you overstate the property’s value by 200% or more (instead of 400% as before), you have committed a gross misstatement. For estate and gift tax purposes (where people are tempted to understate values) a reported value of 65% or less of correct value is a substantial misstatement (the old limit was 50%) and a reported value 40% or less of correct value (rather than 25%), is a gross misstatement.

Good Appraisals are Important
These changes take effect for returns filed and appraisals submitted after August 17, 2006. Need it be said that it is more important than ever that taxpayers employ experienced and competent appraisers to help them to accurately determine these values.