BIG deal – Tax Court rejects dollar-for-dollar discount, embraces NAV method

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Abstract: The debate over the appropriate valuation discount for the built-in gain (BIG) tax continues, with the U.S. Tax Court recently opposing a dollar-for-dollar discount. In Estate of Richmond, the Tax Court also explained that the net asset value (NAV) method is more appropriate than an income capitalization approach when valuing a marketable securities holding company. This article discusses the issues at stake. A sidebar explains why the estate was assessed a 20% penalty on its underpayment of tax.