Estate of Frazier Jelke III, Deceased, Wachovia Bank, N.A., f.k.a. First Union National Bank, Personal Representative - Page 13

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          appropriate in this case and that the tax liability for the                 
          capital gain should be calculated on the basis of CCC’s                     
          established history of securities turnover.  We agree with                  
          respondent.  However, before we delve into the parties’ arguments           
          and their experts’ opinions, it is helpful to review the legal              
          history of the effect of built-in capital gain tax liability in             
          the valuation of corporations.                                              
               Before 1986, this Court recognized that gain on appreciated            
          corporate assets could be avoided at the corporate level under              
          the principles of the General Utilities doctrine.7  That doctrine           
          was based on the holding in Gen. Utils. & Operating Co. v.                  
          Helvering, 296 U.S. 200 (1935), that there would be no                      
          recognition by the distributing corporation of inherent gain on             
          appreciated corporate property that was distributed to                      
          shareholders.  Accordingly, a corporation could distribute its              
          appreciated property to shareholders or liquidate without paying            
          capital gain tax at the corporate level.                                    
               On the basis of that understanding and before 1986, this               
          Court consistently rejected taxpayers’ attempts to discount the             
          value of a corporation on the basis of any inherent capital gain            
          tax liability on appreciated corporate property.  See, e.g.,                
          Estate of Piper v. Commissioner, 72 T.C. 1062, 1087 (1979);                 

               7 The General Utilities doctrine, as codified in former                
          secs. 336 and 337, was repealed by the Tax Reform Act of 1986,              
          Publ. L. 99-514, sec. 631(a), 100 Stat. 2269.                               





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