Page 29 - Business Valuation for Estates & Gift Taxes

case. Valuation analysts must perform their analyses based on the unique factors of the particular as-
signment with the understanding that established case law may not necessarily apply to their engage-
ment because the facts and circumstances are different or no established precedent exists in their juris-
diction.

To illustrate how much variation exists from court to court, a roundtable of various Tax Court judges
that convened in 2011 indicated that tax-affecting an earnings stream might be appropriate if the right
facts and circumstances along with a supportable opinion of value, which includes the proper support of
the application of taxes, was presented to them. fn 9 Court decisions and memorandum cases that have
been decided subsequent to the roundtable suggest the fact-and-circumstance approach is widely used in
practice. Valuation analysts should note that, as of the date of this publication, the Gross case is the only
case that has been appealed and therefore only the 6th Circuit Court of Appeals has issued an opinion on
this issue.

Conclusion

This chapter touches on some of the prevailing valuation issues in the tax and district courts, but it in no
way addresses all possible issues. Each case is fact-specific and so the valuation analyst should conduct
his or her own search for relevant cases that may provide guidance on what the courts look for when de-
ciding on the legitimacy of FLPs and transfers of interests in the same to beneficiaries. Furthermore,
consideration should be given on the need to consult with subject matter experts in both the financial
and legal professions. A list of additional cases of interest is provided in appendix B, “Common Acro-
nyms Used in This Practice Aid.”

fn 9
Judges Roundtable: View from the Bench, November 3, 2011 (Business Valuation Resources).

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