IRS requests reconsideration in Jelke

BVWireIssue #64-3
January 23, 2008

Last week the Internal Revenue Service filed a motion with the 11th Circuit Court of Appeals to reconsider en banc the decision in Estate of Jelke v Comm’r (November 15, 2007) (see BVWire™ #62-3).  Its basic argument: Valuation is a question of fact, and the Court’s holding that permits dollar-for-dollar discounts for embedded capital gains as a matter of law violates this basic tenet.

“There’s no timetable for the Court to address the motion, which will go to the Chief Judge,” according to attorney John Porter, who provided the update during the BVR teleconference last week on the Jelke reversal.  “If there is a groundswell of support [among 11th Circuit justices], then the Court will reconsider it,” he said.  If the Court grants the motion, then it can request additional briefing from the parties or decide based solely on the current record.  “If it denies the motion, the government can still petition the [U.S.] Supreme Court” to hear the case, Porter added, “but I’d be surprised if they did that, and I’d be surprised if the Supreme Court accepted it.”   But the appeals decision would be up to the IRS.

Free case law overview.  The teleconference panel—including Michael Paschall and Will Frazier, the taxpayer’s appraiser in the original Jelke proceedings—put together extensive ancillary reading materials, including Paschall’s spreadsheet of all calculations in the case (net asset value, minority and marketability discounts) and Porter’s cogent, comprehensive overview of the 11th Circuit’s decision, from its antecedents in tax legislation to precedent in the 2nd and 5th Circuits.  We’ve posted Porter’s presentation as a Free Download at For anyone who missed the teleconference—including a lengthy Q&A covering the applicability of the discount to S Corps, real estate holding companies, the income approach, and more—the CD recording plus all reading materials are available here.

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