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Steven Leichter acknowledged receipt of the distribution of the
Harlee stock.
On July 22, 1996, 1 day before the estate tax return was
due, the estate requested a 6-month extension until January 23,
1997. The request was granted, and the estate’s tax return was
timely filed. The return reflected that the unit value of the
20,000 shares of Harlee, which represented all of the issued and
outstanding stock, was $104.59, for a total value of $2,091,750.
Because the value of Harlee stock exceeded 35 percent of the
adjusted gross estate, the estate elected the section 6166(a)(1)2
benefit of paying $722,421 of estate tax in installments over 10
years.
The $2,091,750 reported value stems from an appraisal
report, dated November 15, 1995. It was prepared by Lawrence F.
Sherman of WIN Corporate Finance, Inc., who was hired by the
estate to value the business. In his valuation of Harlee
(Sherman Appraisal), Mr. Sherman relied on Harlee’s October 31,
1995, interim financial statement. This statement reflected that
a $1,253,021 note payable by Harlee to the Leichter Family Trust
had been converted to equity on or before decedent’s date of
death. The note payable had shown an annual interest rate of 10
2 Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect as of the date of decedent’s
death, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
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