Just last week, the Tax Court decided Dallas v. Commissioner (September 28, 2006), in which a father transferred over half of the non-voting shares in an S Corporation to his sons’ trusts. The taxpayer’s trial appraiser had tax-affected the transfers, claiming that: (1) he’d always done it that way; (2) an informal conference poll showed that 90-95% of attendees did it that way; (3) the ASA rejects certification unless applicants do it that way; and (4) in submitting ESOP valuations to the Department of Labor, his company had always done it that way.

But as savvy S Corporation appraisers know—there’s far more to tax-affecting than simply doing it and expecting the Tax Court to accept it—even in light of the recent Delaware Open MRI Radiology case, which is a “must-read” on the issue, according to Nancy Fannon, ASA, CPA*ABV (see BVWire #45-4). The Dallas Court declined to apply the Delaware rationale, which concerned fair value pricing for a merger, concluding that in a fair market value context, no hypothetical buyer and seller would tax affect this transaction. (For a copy of the full-text opinion, click here.)

So what is an appraiser to do? Try listening to the experts on BVR’s most recent Tax Affecting telephone conference, featuring panelists Nancy Fannon, George Hawkins, Michael Paschall, and Dan Van Vleet. To order a CD and/or transcript, click here.