Estate Planning

Tax Discounts Alive and Well - For Now

By Gregory Herman-Giddens

The U.S. Tax Court issued an opinion on January 29, 2009 in the Estate of Marjorie deGreeff Litchfield v. Commissioner (T.C. Memo. 2009-21).  The case involved the determination of appropriate (estate tax) discounts for built-in capital gains tax liabilities, and lack of control and lack of marketability for minority interests in two closely held family corporations, including one that had recently converted to a subchapter S corporation. The court allowed a discount of 91% for the built-in capital gains tax for the C corporation, and 52% for the S corporation.  The minority interest (lack of control) discount was determined to be 14.8% for the C corporation and 11.9% for the S corporation.  The lack of marketability discounts were established at 25% and 20%, respectively, for the two entities.  The FMV Valuation Alert offers a nice summary.

This case involved farmland and marketable securities.  Discounts for transfers of entities owning marketable securities and cash will be history if HR 436, the Certain Estate Tax Relief Act of 2009, passes.

Full post as published by North Carolina Estate Planning Blog on February 05, 2009 (boomark / email).