Estate of Richmond v. Comr., T.C. Memo. 2014-26

(decedent owned a 23.44 percent interest in a C corporation that functioned as a family personal holding company that was founded by her father; corporation held publicly-traded, dividend-producing stock and distributed all dividends, but sold nothing; stock had substantial built-in capital gain (BIG), and liquidation of corporation would trigger 39 percent capital gains tax rate (combined state and federal); issue before court was whether decedent's stock to be valued based on potential income stream derived from current investment strategy or via net asset value of stocks; either valuation approach to be combined with valuation discounts to reflect minority interest, lack of marketability and BIG tax; CPA valued decedent's interest via capitalization-of-dividends method, and produced draft report; report never finalized and decedent's interest reported on Form 706 at value of $3.15 million; IRS claims correct value is almost twice as much as reported value; after getting deficiency notice from IRS, estate hires expert appraiser; estate did not act with reasonable cause and in good faith in using unsigned draft report prepared by estate's CPA as basis for 706 value; CPA not a certified appraiser; estate later pushed for $5 million value at trial)