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Sunday, March 22, 2015

Article Abstract: Can Post-Valuation Events Impact Estate Tax valuation?



Use  of Foreseeable Postmortem  Events  In Valuing  Estate


Audrey G. Young


Estate Planning Journal, April 2015



ABSTRACT (Key Points & Discussions)

    • There is disparate case law on whether post-death events are admissible in determining value at death for estate tax purposes. Examples of relevant cases include:
      • Estate of Gilford (Tax Court): “In general, property is valued as of the valuation date on the basis of market conditions and facts available on that date without regard to hindsight. However, we have held that postmortem events can be considered by the Court for the limited purpose of establishing what the willing buyer and seller's expectations were on the valuation date and whether these expectations were reasonable and intelligent.”
      • Bank of Kenosha (7th Cir.): Subsequent sales prices relevant to what a hypothetical buyer might have agreed to, absent any exogenous shocks.
      • Saltzman (2nd Cir): Sales price 7 months after valuation not admissible since sale was not foreseeable on the valuation date.
      • Trust Services of America, Inc. (9th Cir.): "reasonably foreseeable" analysis applied to exclude evidence of postmortem merger.
      • Okerlund (Federal Circuit): Subsequent events may be admissible even when of low probative value due to intervening events if the possibility of such events would have affected the price. “Valuation must always be made as of the donative date relying primarily on ex ante information; ex post data should be used sparingly. As with all evidentiary submissions, however, the critical question is relevance.”
    • There is a mismatch in allowing the IRS to consider post-death events for gross estate valuation purposes, but to disregard contingent or uncertain deduction amounts under Section 2053 regulations.
    • These issues are being raised in the estate administration of Michael Jackson, and involve some very big tax numbers - so litigation and new case law may be coming.




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