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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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Wandry Appeal Withdrawn by IRS

November 2012 | Issue 61

On October 22, 2012, the IRS voluntarily withdrew its appeal of Wandry v. Commissioner – (T.C. Memo 2012-88 (March 26, 2012)).

Background

Readers may recall that the Tax Court, in its Wandry decision, provided encouragement to estate planners about the use of so-called “formula clauses” to keep the size of a difficult-to-value gift within the bounds of a gift tax exclusion.  What the Tax Court found acceptable in the Wandry case was a formula clause used by the taxpayer which defined the amount of a gift in terms of its dollar value rather than as a percentage interest.  The Wandry formula, unlike earlier versions of formula clauses, (Christiansen, Petter, and McCord), also did not require for its operation that excess value be given to charity.  See further discussion at Hempstead E-Letter No. 57.

The IRS Relents

The IRS, in August 2012, noticed an appeal from the Wandry decision to the 10th Circuit Court of Appeals.  In October, it voluntarily withdrew its appeal.

When the IRS filed its notice of appeal, many hoped that the issue of the acceptability of formula clauses would finally be settled in at least one federal jurisdiction.

Now we don’t know.

IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding any penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction(s) or tax-related matter(s) addressed herein.