Estate of Frazier Jelke III, Deceased, Wachovia Bank, N.A., f.k.a. First Union National Bank, Personal Representative - Page 16

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          that a reduction for built-in capital gain tax liability is                 
          appropriate.  However, controversy continues with respect to                
          valuing such a reduction.  In two such cases involving the                  
          question of valuing reductions for built-in capital gain tax                
          liabilities, the Court of Appeals for the Fifth Circuit has                 
          reversed our holdings.  See Estate of Dunn v. Commissioner,                 
          supra; Estate of Jameson v. Commissioner, supra.                            
               In Estate of Jameson, the decedent held a controlling                  
          interest in a corporation that generated income primarily through           
          the sale of appreciated timber.  The corporation in Estate of               
          Jameson focused on future appreciation in value, and there was no           
          intent to liquidate the corporation as of the valuation date.               
          This Court held that the fair market value was best determined              
          using the asset approach because the company was a holding                  
          company rather than an operating company.  We also held that the            
          net asset value should be reduced for built-in capital gain tax             
          liability because of a section 631(a) election that ensured that            
          gain would be recognized irrespective of whether the corporation            
          was liquidated.  We further held that the amounts of capital gain           
          tax to be recognized in future years were to be discounted to               
          present values by assuming a 14-percent overall rate of return              
          and a 20-percent discount rate of future cashflows.                         
               The Court of Appeals for the Fifth Circuit reversed our                
          holding, commenting that the application of a 20-percent discount           
          rate while assuming no more than a 14-percent annual growth was             
          “internally inconsistent”.  Estate of Jameson v. Commissioner,              





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