U.S. Tax Court Update
Part I of this article highlights notable 4th Quarter 2015 U.S. Tax Court Cases that will be of interest to valuation practitioners and business advisors. Estate of Purdue reminds us that taxpayers need to address 2036(a) concerns and establish a non-tax reason. In addition, the case reminds us that gifting an equity or LLC interest may not qualify as a present interest for gift tax purposes. Estate of Newberger involves the proper valuation of artwork, yet its holding is applicable to a business valuation opinion. Sumner Redstone v. Commissioner involves a family succession saga and highlights the importance of filing a gift tax return since the statute of limitations is left open. Readers should download the opinion to read about the valuation methodology employed and court’s critique of the expert’s report. In Part II, we will discuss DNA Pro Ventures, Inc. ESOP and Kardash. DNA Pro Ventures serves to stress the importance of following plan language and obtaining qualified appraisals in connection with ESOPs. Finally, Kardash v. Commissioner, involves a highly unusual Rule 161 motion where the U.S. Tax Court addresses insolvency and fraudulent transfers. This latter case is a decision that QuickRead covered in 2015 where the QuickRead article focused on how the expert established insolvency. In both parts, we have included excerpts here where the U.S. Tax Court discusses its views on what is a valuation.