Cavallaro v. Commissioner – Faulty assumption causes court to discard petitioners’ appraisal

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Abstract: A recent Tax Court case demonstrates that a valuation is only as reliable as its underlying assumptions. A faulty assumption can undermine the credibility of an appraiser’s testimony and leave the court to rely solely on the opposing expert’s conclusion. This article discusses the facts and circumstances that led the Tax Court to discard the petitioners’ appraisal and explain how a merger between two family businesses resulted in constructive gifts to the petitioners’ sons. William Cavallaro, et al. v. Commissioner, T.C. Memo 2014-189, Sept. 17, 2014