InKnowVision Blog

Tax Court’s Rejection of Valuation by IRS Didn’t Require it to Adopt the Estate’s Valuation

September 11th, 2007

The Tax Court didn’t care for either the estate’s or the IRS’s valuation, so it determined value using its own analysis. The estate must be regretting having appealed the decision – the taxpayer may just have to pay an accuracy related penalty equal to 40% of the underpayment. (WOW – a potential penalty in excess of $2 million) The Second Circuit questioned the Tax Court’s finding of reasonable cause as the basis for not imposing the penalty. The Court of Appeals wondered why the estate, when valuing a company located in New York, had hired a lawyer and an accountant from Alaska, both with little valuation experience, and the lawyer, who was “barely qualified” to do the valuation.  The Second Circuit affirmed the Tax Court’s valuation of the company, but remanded the case so that the Tax Court could take another look at the estate’s “good faith” reliance on its “expert.” This could mean big trouble for the estate for not using a qualified appraiser! Estate of Thompson v. Comm’r of Internal Rev., No. 06-0815, (August 23, 2007), http://caselaw.lp.findlaw.com/data2/circs/2nd/060815p.pdf

From: Randall Borkus

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