Submitted by: Kevin Gilboy
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The Tax Court upheld the IRS' valuation of a closely-owned electronics company in this estate tax valuation decision. The IRS's valuation expert acknowledged that a 35-percent liquidity discount had "come to be regarded as an average discount." However, the IRS allowed only a 10% lack of marketability discount because the IRS took into consideration an IPO which occurred 8 months after the date of death and which had been discussed at the board level before the date of death.
The Court also allowed the IRS' income valuation of the company to include an assumption of increased post death growth. According to the government's expert, the company's growth rate was "meteoric" when compared to a 25-percent growth rate in 1989 for the semiconductor industry.
IRS expert: Herbert T. Spiro
Taxpayer's expert: David L. Klemm