Tax Court’s revaluation is boon to Giustina estate

BVWireIssue #167-3
August 17, 2016

A short—but searing—critique by an appellate court triggered a revaluation by the Tax Court of an estate’s minority interest in a limited partnership that owned timberland. The Tax Court chopped down its original valuation from $27.5 million to $14 million, which vindicated the estate’s own valuation.

Two clear errors: The 9th Circuit Court of Appeals found the Tax Court made two clear errors: (1) it halved the company-specific risk premium the estate’s expert used without providing a good rationale; and (2) it gave some weight to the value of the assets even though a dissolution of the company was implausible.

The Tax Court’s revised valuation restored the estate expert’s company-specific risk premium (3.5%) and followed the appellate court’s order to use going-concern value, so it gave no weight to the assets of the company. This reduced the valuation difference by a whopping 93%.

The case is Estate of Giustina v. Commissioner, 2016 Tax Ct. Memo LEXIS 113 (June 13, 2016) (Giustina III). A case digest and the court’s opinion will be available in October at BVLaw. Digests of the two prior decisions and the courts’ opinions are already available at BVLaw.

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