Navigate the ‘matrix’ of tax-related discounts with new free download

BVWireIssue #120-3
September 26, 2012

A new discussion on LinkedIn asks for the citation to any cases in which the Tax Court adopted a combined minority and marketability discount “of 40% or higher on a 50/50 partnership interest.” One commentator suggests Estate of Bailey v. Commissioner, T.C. Memo 2002-152, in which the court applied a 50% combined discount (20% DLOC, as agreed by the parties, and 30% DLOM, as cobbled by the court from the respective appraisals).

After a quick search of BVLaw—which contains Bailey as well as an additional 280 tax-related valuation cases—we came up with an array of additional decisions regarding various levels of percentage interests, from Furman v. Commissioner, T.C. Memo 1998-157 (40% combined discount) to Keller v. United States, 2009 WL 2601611 (S.D.Tex.) (47.5% combined discount), which is currently on appeal to the 5th Circuit. N.B.: Only Tax Court opinions as well as those by federal district and circuit courts are binding precedent; tax court memoranda are fact-specific and bind only the parties.

Based on this case law as well as market realities, even the IRS recognizes that “discounts for lack of marketability and lack of control related to FLP interests are ‘real,’” writes John Porter (Baker Botts), in a recent BVUpdate article,“FLP Appraisals: Plan for the New Matrix.” The article also includes a convenient chart summarizing all estate and gift tax decisions related to discounts. To help BV appraisers navigate this legal “matrix,” we’ve just posted the article to our free downloads page.

Get current on the future of discounts. Join Porter on Tuesday, October 2 as he launches BVR’s 5th Annual Symposium on Estate & Gift Tax with his presentation “Family Limited Partnerships: The Current Landscape.” In this 100-minute webinar, Porter will present a complete regulatory and case law update as well as an overview of the most recent Tax Court decisions in which the taxpayer has sustained “substantial” discounts on FLP values.

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