‘Cite McCord at your peril,’ say the experts

BVWireIssue #49-2
October 11, 2006

“Some in the business valuation community have publicly noted that the recent McCord reversal sheds no light on the valuations of family limited partnership interests,” observes William Frazier, ASA (HFBE, Houston), the taxpayers’ valuation expert in the original case (McCord v. Commissioner, Tax Court, 2003). “They are wrong.”

Two of the most important issues which rise from the 5th Circuit’s recent reversal of McCord are, Frazier says: (1) the current validity (if any) of the “Bajaj Method” for determining marketability discounts; and (2) the use of REITs to determine minority interest discounts for non-distributing FLPs that hold real estate.

Frazier and John Porter, (Baker Botts, Houston), the taxpayer’s appellate attorney, will be discussing these topics and more in the BVR telephone conference October 18th, “McCord Reversal.” (To register, click on the link to the right.) In the meantime, anyone who argues that the Tax Court’s original methodology is valid “does so at his or her peril,” Frazier says. Adds attorney Porter: “I do not believe the original McCord decision has any precendential value.” Their comments will also be featured in the November issue of the Business Valuation Update™.

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