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THE JUDGE WOULDN’T IGNORE THIS “ROUNDING ERROR”

June 2017 | Issue 86 Background Constellis Group,  Inc. is a private security firm.  In December 2013, the Company formed an Employee Stock Ownership Plan (“ESOP”), which purchased 100% of Constellis’s voting stock.  Wilmington Trust NA was named Trustee of the ESOP.  Less than a year after the ESOP was created, the ESOP sold all […] More...

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

March 2017 | Issue 85 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.  […] 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...

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Wandry Appeal Withdrawn by IRS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.