Authored by Dustin Crespin and Chris D. Treharne, ASA, MCBA, CVA of Gibraltar Business Appraisals, Inc. a member firm of FCG Issue 16:1
Estate of Helen P. Richmond, Deceased, Amanda Zerbey, Executive Petitioner v. Commissioner of Internal Revenue, Respondent
TC Memo 2014-26, Docket No. 21448-09, Filing date February 11, 2014, Judge Gustafson
To determine the value of the decedent’s 23.44% interest in Pearson Holding Co. (“PHC”) at the time of death, the court resolved the following disputes:
- Whether the capitalization-of-dividends method or net asset value (“NAV”) method should be used, and
- The appropriate discounts applicable to the NAV method.
The 20% accuracy-related penalty under section 6662(a), (b)(5), and (g) could have been avoided if the estate demonstrated that it acted with reasonable cause and in good faith with respect to the under valuation. However, using an unsigned draft report prepared by its accountant as its basis for value failed to meet the burden of proof for exclusion from the penalty because the accountant did not have any appraisal certifications, was not used as an expert at trial, and the taxpayer did not demonstrate the accountant was qualified as a valuation expert.