Holding companies with built-in capital gains – Tax Court case addresses key valuation issues

Description

Abstract: The Tax Court recently addressed a case in which the IRS and taxpayer started out more than $6.1 million apart. But this article explains how the court slowly worked through the major sticking points — including how to select the appropriate valuation methodology and how to handle the company’s built-in capital gains tax liability — to arrive at a value substantially higher than was originally indicated on the estate tax return. A sidebar discusses how hiring a “qualified appraiser” to perform a “qualified appraisal” can help taxpayers prove that they qualify for the IRS’s exception to its valuation misstatement penalties. Estate of Helen P. Richmond (T.C. Memo. 2014-26)