In his 5th annual address on Recent Developments in Federal Tax Valuations held in Portland, Ore., last week, Professor Jack Bogdanski (Lewis and Clark Law School) discussed three “big victories” for taxpayers in the courts this year:
- In Estate of Petter v. Commissioner, the 9th Circuit “validated defined value clauses as a defense against the IRS when it revalues property . . . to increase gift and estate taxes,” Bogdanski said. These clauses provide “a safe way to block revaluations by the government, even when the taxpayer’s valuation position is shaky.”
- Also in the 9th Circuit, Linton v. United States was a “surprising decision” in which the court reversed summary judgment for the IRS based on an application of the step transaction doctrine.
- Estate of Giustina v. Commissioner was also a solid win for taxpayers in the DCF valuation of a family limited partnership—including a 25% DLOM, but the Tax Court was “stingy with discounts,” Bogdanski said. As a result, the IRS is “making a big deal of this case,” especially regarding the valuation of timber companies and the application of any discounts.
“Tax affecting is not going anywhere,” Bogdanski also told the audience of attorneys and appraisers. “When valuing S corp stock, tweak the discount rate but don’t call it tax affecting.”
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