FCG Valuation Case E-Flash Estate of Riese v. Commissioner

Authored by John Walker and Chris D. Treharne, ASA, MCBA, BVAL of Gibraltar Business Appraisals, Inc. a member firm of FCG Issue 13:3

Estate of Sylvia Riese, Deceased, Ellen C. Grimes and Judith A. Zipp, Executors, Petitioner, v. Commissioner of Internal Revenue, Respondent
T.C. Memo 2011-60, March 15, 2011

Although the Decedent’s qualified personal residence trust terminated six months before her death, the Tax Court determined that her personal residence was not includable in her estate under IRC § 2036. In addition, because the Court determined that the residence had transferred to trusts that benefited the decedent’s daughters, the estate was able to take a deduction for accrued rent expense for the decedent, even though no lease agreement had been signed. However, the estate itself was not entitled to a deduction for rent expense because the estate had no need to occupy the residence and no lease agreement was entered into even though all parties were capable of doing so. Finally, the estate failed to explain how it was entitled to $125,000 in investment management fees, and the claimed deduction was disallowed.

The Takeaway
Proper documentation of legal and financial advice can assist estates in receiving deductions, even if the official paperwork for the transactions and deductions is not complete at the time of death.

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