- 70 -
the property that each decedent transferred to the corporation
exceeded the fair market value of the stock and debt that they
each received in return. The Court determined the fair market
value of that stock noting that a marketability discount inhered
in it and that a premium for control also inhered in the fair
market value of the decedent/husband’s shares. Consistent with
the test applied in this case by the majority, the executrix
argued that the excess values were not gifts from each of the
decedents to the common shareholders because the decedents’
proportionate interests in all of the property transferred to the
corporation did not exceed their interests in the total
consideration that the subscribers had received in return. The
Court disagreed. The Court held that the excess values were a
gift from the decedents to the common shareholders in that the
excess values accrued to the benefit of the common shareholders
and increased the value of the interests received by them.
With but a passing reference to language in Estate of Stone
v. Commissioner, T.C. Memo. 2003-309, the majority declines to
address whether valuation discounts are taken into account for
purposes of valuing the consideration received by the decedent
from the Bongard Family Limited Partnership (BFLP). See majority
op. pp. 37-38. Nor does the majority mention that this
referenced language was recently rejected by a majority of a
panel of the Court of Appeals for the Third Circuit in Estate of
Page: Previous 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 NextLast modified: May 25, 2011