FCG Valuation Case E-Flash Executrix v. Commissioner

Authored by Chris D. Treharne, ASA, MCBA, BVAL and John Walker of Gibraltar Business Appraisals, Inc., a member firm of FCG Issue 12:2

Citation
Estate of Charlene B. Shurtz, Deceased, Bonnie K. Case, a.k.a. Bonnie Cathleen Case, Executrix, v. Commissioner,
T.C. Memo. 2010-21, Docket No. 6076-07, February 3, 2010

Comments
As with Estate of Black v. Commissioner (133 T.C. No. 15), Estate of Shurtz shows that proper financial and legal planning can be invaluable to the taxpayer. Additionally, actively managing operations and properly administering the partnership contributed to a favorable ruling. The case is another clear victory for use of the FLP in estate planning.

Overview
With proper estate planning, the Estate was able to avoid paying tax on an estate valued at more than $8.7 million dollars.

  • Transfers of assets (including LP interests and timberland) from the gross estate to a FLP were:
    • bona fide sales
    • for full and adequate consideration an
    • therefore not includable in the gross estate.
  • Only the fair market value of the Decedent’s interest in the FLP, rather than the fair market value of the assets contributed to the FLP, was includable in her gross estate.
  • The FLP entities were created for legitimate and significant nontax reasons:
    • protection from litigious environment
    • preservation of the family busines
    • management efficiency in an actively managed entity
  • Because there was no estate tax deficiency, the Estate was not liable for an addition to tax under 6651(a)(1).
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