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statements and a summary of liabilities to Higgins, Marcus &
Lovett, Inc., who prepared the appraisal (Higgins appraisal) of
decedent’s interest in LKHP. The Higgins appraisal was filed
with the estate tax return.
The Higgins appraisal was conducted on behalf of the estate
by Thomas E. Higgins (T. Higgins), an Accredited Senior Appraiser
of the American Society of Appraisers, and by Mark C. Higgins
(M. Higgins), an Accredited Member of the American Society of
Appraisers. Both T. Higgins and M. Higgins specialize in the
business valuation discipline. The appraisal was dated June 22,
1998, but valued the partnership interest as of June 5, 1997.
The estate’s attorney, Richard Albrecht (Albrecht), instructed
the appraisers to value the interest as a limited partnership
interest. The Higgins appraisal reported that the fair market
value of decedent’s 99.95-percent limited partnership interest in
LKHP on June 5, 1997, was $2,266,000, after discounts for lack of
marketability and for lack of control. On the estate tax return,
decedent’s gross estate was reported as $2,543,378. On
February 3, 1999, respondent commenced an examination of the
estate tax return.
Examination
On February 4, 1999, the IRS sent an audit letter to Maurice
Polner, the accountant for the estate. On May 23, 2001, Hillgren
responded to questions that were posed by IRS estate tax attorney
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