FCG Valuation Case E-Flash Liljestrand v. Commissioner

Authored by John Walker and Chris D. Treharne, ASA, MCBA, BVAL of Gibraltar Business Appraisals, Inc. a member firm of FCG Issue 13:14

Estate of Paul H. Liljestrand, Deceased, Robert Liljestrand, Executor, Petitioner, v. Commissioner of Internal Revenue, Respondent
T.C. Memo. 2011-259, Docket No. 29397-08, Judge: Hon. Harry A. Haines, Filed November 2, 2011

In yet another bad facts case (from the taxpayer’s perspective), the value of assets contributed to an FLP were includable in the Decedent’s estate under IRC § 2036(a). In particular, the Decedent failed to provide a non-tax reason for the FLP’s formation, ignored partnership formalities, commingled funds, did not maintain sufficient assets outside the FLP for personal use, and made disproportionate distributions of Partnership assets to himself.

The Takeaway

Among the many reasons the taxpayer failed to prevail was his reluctance to rely on a business appraisal prepared by an independent business appraiser. Instead, he chose to rely on his own estimate of fair market value to establish the rate of return on his Class A limited partnership units. The court viewed his actions as self serving and not what would transpire in an arm’s length transaction.

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