- 53 -
taxpayer establishes that there was reasonable cause for the
understatement and that the taxpayer acted in good faith. Sec.
6664(c).
The regulations provide that whether an understatement of
tax is made in good faith and due to reasonable cause will depend
upon the facts and circumstances of each case. Sec. 1.6664-4(b),
Income Tax Regs. In determining whether a taxpayer acted
reasonably and in good faith with regard to the valuation of
property, factors to be considered include: (1) Whether the
value reported on the tax return was based on an appraisal;
(2) the methodology and assumptions underlying the appraisal;
(3) the appraised value; (4) the circumstances under which the
appraisal was obtained; and (5) the appraiser’s relationship to
the taxpayer. Sec. 1.6664-4(b)(1), Income Tax Regs.
The estate contends that it acted reasonably and in good
faith in the valuation of the estate’s 20-percent TPC stock
interest, in filing its Federal estate tax return, and in
reporting thereon the value of the TPC stock.
The valuation herein of the estate’s 20-percent stock
interest in TPC was particularly difficult and unique. Companies
comparable to TPC were not found. Valuation of the estate’s 20-
percent TPC stock interest under the capitalization of income and
under the discounted cashflow methods involved a number of
difficult judgment calls. We believe it noteworthy and relevant
Page: Previous 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 NextLast modified: May 25, 2011