T.C. Memo. 2005-131
UNITED STATES TAX COURT
ESTATE OF FRAZIER JELKE III, DECEASED, WACHOVIA BANK, N.A.,
f.k.a. FIRST UNION NATIONAL BANK, PERSONAL REPRESENTATIVE,
Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 3512-03. Filed May 31, 2005.
D’s gross estate included a 6.44-percent interest
in a closely held corporation (C) whose assets
consisted primarily of marketable securities. C had
been in existence for many years, was well managed, and
had a relatively high rate of return in the form of
annual dividends coupled with capital appreciation of
approximately 23 percent annually for the 5-year period
before D’s death. Also during this 5-year period,
there was no intent to completely liquidate C, and its
securities turnover (sales) averaged approximately 6
percent annually. At the time of D’s death, the
securities had a market value of approximately $178
million and a built-in capital gain tax liability of
approximately $51 million if all of the securities were
to be sold on the valuation date. The net asset value
of C without consideration of the effect of the built-
in capital gain tax liability was approximately $188
million. The estate contends that the $188 million
value should be reduced by the entire $51 million
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