Too good to be true? Some courts are allowing multitiered valuation discounts

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Abstract: The Tax Court has upheld the concept of tiered valuation discounts in several high-profile recent cases, including Astleford v. Commissioner and Gow v. Commissioner. This article outlines some key points a valuator considers when supporting valuation discounts in a multitiered entity. The article describes how tiered discounts work, using recent cases to illustrate. It then notes that, to qualify for a discount and withstand Tax Court scrutiny, each tier must be reasonable and well documented and have a bona fide business purpose. Astleford v. Commissioner (T.C. Memo 2008-128); Gow v. Commissioner (T.C. Memo 2000-93); Estate of O’Connell v. Commissioner, T.C. Memo 1978-191, aff’d on this point, rev’d on other issues 640 F.2d 249 (9th Cir.1981).