Estate Taxes

Estate of Gallagher V. Commissioner

A recent decision from the U.S. Tax court tackles a myriad of issues pertaining to private company appraisal, most notably the issue of tax-affecting. The case involves the business valuation of a decedent’s minority interest in a privately held newspaper publishing company. The taxpayer’s expert made tax affected adjustments by assuming a 39-percent income tax rate in calculating the company’s future cash flows before discounting the company’s future earnings to their present value. He also assumed a 40 percent marginal tax rate in calculating the applicable discount rate. [Read more…] about Judge Invalidates Tax-Affecting in Estate Business Valuation

Estate of Emilia W. Olivo

In a recent estate case, the US Tax Court held that an unrecorded caretaker expense was not deductable from the estate. Mr. Olivia had taken care of Emilia Olivo, his elderly mother, who had numerous health issues and required assistance in the performance of daily tasks for about ten years until her death in April, 2003. Mr. Oliver subsequently became the estate administrator and claimed a deduction of $1,240,000 as a debt that the estate owed him for the care he provided. According to his testimony, his mother agreed to pay him $400 per day with payment deferred until after her death. Mr. Oliver failed, however, to record the agreement in writing, and the deduction was therefore disallowed by the Court. [Read more…] about Estate Deduction for Caretaker Expense Disallowed by IRS