Fair Market Value on Date of Death, But if There is a Sale …

By Kathleen Ford Bay, Esq.  

Richards Rodriguez & Skeith LLP, Austin, TX

 

In Michael R .Levy, Exr. Estate of Meyer Levy v. U.S., 402 Fed. Appx. 979 (5th Cir. 2010) (09-51082, slip copy), aff'g 2008 WL 5504695 (W.D. Tex. 2008), a federal district court confirmed by the Fifth Circuit allowed the jury to consider and rely on a sale after death, a sale not in the works before death, and negotiated solely after death. The jury verdict valued the property at $25 million and did not allow any discount for lack of control and marketability. The Fifth Circuit stated that the admissibility of comparable sales is within the peculiar discretion of the trial judge and noted that a trial court did not abuse its discretion when admitting evidence about a sale three and a half years after the original valuation date. Jayson v. U.S., 294 F.2d 808, 810 (5th Cir. 1961). The Fifth Circuit also determined that the record supported the jury's denial of discounts for lack of control or marketability. The Estate (and, while alive, the decedent) controlled the general partnership interest and had nearly unfettered control over partnership assets. (In a footnote, the Fifth Circuit noted that in taxing the estate, a 30% discount had been applied.) The U.S. Supreme Court has denied certiorari to review the decision: cert. denied, 2011 AWL 1481312 (May 23, 2011).

 

For more information, in the Tax Management Portfolios, see Mezzullo, 812 T.M., Family Limited Partnerships and Limited Liability Companies, and Hood, 830 T.M., Valuation: General and Real Estate,  and in Tax Practice Series, see ¶6290, Valuation Generally.