The Tax Court ruled that a minority interest discount and lack of marketability discount applied to the valuation of a family limited partnership (FLP) interest. In the case, the decedent, daughter, and son-in law formed an FLP and a limited liability company (LLC). When the decedent died, he owned a majority interest in the FLP and a one-third interest in the LLC. The estate hired a valuation expert to appraise the estate and FLP.
The expert applied a 53% discount based on several factors such as minority interest and lack of marketability. The IRS disputed the large discounts and assessed a deficiency against the estate of a net discount of 25%. In usual fashion, the Tax Court ruled a net discount of 35.5% was appropriate, reflecting minority shareholder status and lack of marketability.
Points of Interest
- Once again, the governing bodies and professionals now find themselves with another proliferation of technology, i.e. the Internet.
- State sales tax rates and rules vary widely. Some states have no sales taxes, while others have combined state, county, and local taxes adding up to about 10%.
- . . . several states are passing laws requiring Internet based businesses that have very minimal contacts with particular states to collect and submit sales taxes . . .
By: Basi & Basi at the Center for Financial, Legal and Tax Planning for Transworld M&A Advisors