BVWire News
BVWire News
Fourth tax case to uphold defined value clause Posted: 24 Jun 2011 10:18 AM PDT
In a long-awaited decision (two and a half years after trial), the U.S. Tax Court just upheld the defined value formula clauses that set the fair market value of transfers of private company stock in a gift/sale transaction. The defined value clauses—which limit gift tax exposure from the transfers—were not contrary to public policy, the court found (defeating the IRS’s long-entrenched position) and were arm’s length transactions.If the IRS was ‘down,’ it may now be ‘out.’ “This is now the fourth case that has upheld defined value transfer provisions (the others being McCord, Christiansen, and Petter),” comments Steve Akers (Bessemer Trust) in his latest tweet for Wealth Strategies Journal 2.0 (Beta). The case involves a “McCord-type clause,” Akers also notes—and is appealable to the 5th Circuit, which also decided McCord but was not presented with the public policy and arm’s length arguments that appeared in this most recent case. As to those issues, the Tax Court held that the defined value clause do not “immediately and severely frustrate any national or state policy,” Akers writes, and “having negotiations and adverse parties is not essential to the existence of arm’s length transactions.” If the court decision in Petter (8th Circuit, 2009) and Christiansen (Tax Court 2009), delivered a “one-two punch” to the IRS’s long-held resistance to formula value clauses, as Akers wrote for the BVWire, then this latest case may have knocked it out completely. Look for the complete digest Hendrix v. Commissioner, T.C. Memo. 2011-133 (June 15, 2011) in the August 2011 Business Valuation Update; the Tax Court’s opinion will be posted soon at BVLaw.
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Curtis D. Harris, BS, CGREA, REB
Bachelor of Science in Real Estate, CSULA
State Certified General Appraiser
Real Estate Broker
ASTM E-2018 Commercial Real Estate Inspector
HUD 203k Consultant
HUD/FHA Real Estate Appraiser/Reviewer
FannieMae REO ConsultantCTAC LEED Certification
The Harris Company, Forensic Appraisers and Real Estate Consultants
*PIRS/Harris Company and the Science of Real Estate-Partners*1910 East Mariposa Avenue, Suite 115
El Segundo, CA. 90245
310-337-1973 Office
310-251-3959 CellWebSite: http://www.harriscompanyrec.com Resume: http://www.harriscompanyrec.com/rESUME2011.pdfCommercial Appraiser Blog: http://harriscompanyrec.com/blog/IT'S THE LAW-Designation Discrimination is Illegal [FIRREA, Sec. 564.6]: Professional Association Membership http://www.orea.ca.gov/html/fed_regs.shtml#Statement7 Membership in an appraisal organization: A State Certified General Appraiser may not be excluded from consideration for an assignment for a federally related transaction by virtue of membership or lack of membership in any particular appraisal organization, including the appraisal institute.CONFIDENTIALITY/PRIVILEGE NOTICE: This transmission and any attachments are intended solely for the addressee. The information contained in this transmission is confidential in nature and protected from further use or disclosure under U.S. Pub. L. 106-102, 113 U.S. Stat. 1338 (1999), and may be subject to consultant/appraiser-client or other legal privilege. Your use or disclosure of this information for any purpose other than that intended by its transmittal is strictly prohibited and may subject you to fines and/or penalties under federal and state law. If you are not the intended recipient of this transmission, please destroy all copies received and confirm destruction to the sender via return transmittal From: [email protected] [mailto:[email protected]] On Behalf Of BVWire News
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BVWire News
Fourth tax case to uphold defined value clause Posted: 24 Jun 2011 10:18 AM PDT
In a long-awaited decision (two and a half years after trial), the U.S. Tax Court just upheld the defined value formula clauses that set the fair market value of transfers of private company stock in a gift/sale transaction. The defined value clauses—which limit gift tax exposure from the transfers—were not contrary to public policy, the court found (defeating the IRS’s long-entrenched position) and were arm’s length transactions.If the IRS was ‘down,’ it may now be ‘out.’ “This is now the fourth case that has upheld defined value transfer provisions (the others being McCord, Christiansen, and Petter),” comments Steve Akers (Bessemer Trust) in his latest tweet for Wealth Strategies Journal 2.0 (Beta). The case involves a “McCord-type clause,” Akers also notes—and is appealable to the 5th Circuit, which also decided McCord but was not presented with the public policy and arm’s length arguments that appeared in this most recent case. As to those issues, the Tax Court held that the defined value clause do not “immediately and severely frustrate any national or state policy,” Akers writes, and “having negotiations and adverse parties is not essential to the existence of arm’s length transactions.” If the court decision in Petter (8th Circuit, 2009) and Christiansen (Tax Court 2009), delivered a “one-two punch” to the IRS’s long-held resistance to formula value clauses, as Akers wrote for the BVWire, then this latest case may have knocked it out completely. Look for the complete digest Hendrix v. Commissioner, T.C. Memo. 2011-133 (June 15, 2011) in the August 2011 Business Valuation Update; the Tax Court’s opinion will be posted soon at BVLaw.
You are subscribed to email updates from BVWire News
Thanks!
Curtis D. Harris, BS, CGREA, REB
Bachelor of Science in Real Estate, CSULA
State Certified General Appraiser
Real Estate Broker
ASTM E-2018 Commercial Real Estate Inspector
HUD 203k Consultant
HUD/FHA Real Estate Appraiser/Reviewer
FannieMae REO ConsultantCTAC LEED Certification
*PIRS/Harris Company and the Science of Real Estate-Partners*1910 East Mariposa Avenue, Suite 115
El Segundo, CA. 90245
310-337-1973 Office
310-251-3959 CellWebSite: http://www.harriscompanyrec.com Resume: http://www.harriscompanyrec.com/rESUME2011.pdfCommercial Appraiser Blog: http://harriscompanyrec.com/blog/IT'S THE LAW-Designation Discrimination is Illegal [FIRREA, Sec. 564.6]: Professional Association Membership http://www.orea.ca.gov/html/fed_regs.shtml#Statement7 Membership in an appraisal organization: A State Certified General Appraiser may not be excluded from consideration for an assignment for a federally related transaction by virtue of membership or lack of membership in any particular appraisal organization, including the appraisal institute.CONFIDENTIALITY/PRIVILEGE NOTICE: This transmission and any attachments are intended solely for the addressee. The information contained in this transmission is confidential in nature and protected from further use or disclosure under U.S. Pub. L. 106-102, 113 U.S. Stat. 1338 (1999), and may be subject to consultant/appraiser-client or other legal privilege. Your use or disclosure of this information for any purpose other than that intended by its transmittal is strictly prohibited and may subject you to fines and/or penalties under federal and state law. If you are not the intended recipient of this transmission, please destroy all copies received and confirm destruction to the sender via return transmittal From: [email protected] [mailto:[email protected]] On Behalf Of BVWire News
Sent: Saturday, June 25, 2011 7:23 AM
To: [email protected]
Subject: BVWire NewsEmail delivery powered by GoogleGoogle Inc., 20 West Kinzie, Chicago IL USA 60610
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