Live today! SCOTUS arguments in the COLI valuation case

BVWireIssue #258-4
March 27, 2024

estate and gift taxation
estate and gift tax, estate & gift, conference, insurance

A live audio feed of oral arguments to the U.S. Supreme Court in the Connelly case will be broadcast today, March 27. The question to be resolved is: How should corporate-owned life insurance (COLI) designed to fund the redemption of a deceased shareholder’s stock impact the fair market value of the subject company and the value of the decedent’s gross estate?

Live from D.C.: A link to the live audio feed will be available on the homepage of the court’s website. The court generally hears two arguments a day starting at 10 a.m. (ET), and each case is allotted one hour for arguments. The oral argument audio and a transcript of the oral arguments will be posted on the court’s website following oral arguments each day. The docket number is 23-146.

In Connelly v. United States, the IRS argued that the insurance proceeds should be included for purposes of valuing the corporation for estate tax purposes. On appeal, the U.S. Court of Appeals for the 8th Circuit sided with the IRS, creating a split with the 11th Circuit, which, in the 2004 Blount case, ruled that it should not be included.

What to do: Regardless of what happens in the case, valuers can take some steps to better help their client business owners, many of whom could be sitting on ticking time bombs. Valuation experts should be part of a business owner’s advisory team regarding a variety of matters, not the least of which is exit planning. Not all team members (attorneys included) may be aware of the COLI issue, so the valuer should make sure he or she knows the issue exists so that it can be properly addressed. For more details, see the article, “What Valuers Should Do While SCOTUS Mulls Connelly,” in the February 2024 issue of Business Valuation Update (subscription required).

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