Estate of Frazier Jelke III, Deceased, Wachovia Bank, N.A., f.k.a. First Union National Bank, Personal Representative - Page 26

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          agree with Mr. Shaked’s approach of discounting the built-in                
          capital gain tax liability to reflect that it will be incurred              
          after the valuation date.                                                   
               Because the tax liabilities are incurred when the securities           
          are sold, they must be indexed or discounted to account for the             
          time value of money.  Thus, having found that a scenario of                 
          complete liquidation is inappropriate, it is inappropriate to               
          reduce the value of CCC by the full amount of the built-in                  
          capital gain tax liability.  See Estate of Davis v. Commissioner,           
          110 T.C. at 552-553.12  If we were to adopt the estate’s reasoning          
          and consider future appreciation to arrive at subsequent tax                
          liability, we would be considering tax (that is not “built in”)             
          as of the valuation date.  Such an approach would establish an              
          artificial liability.  The estate’s approach, if used in valuing            
          a market-valued security with a basis equal to its fair market              
          value, would, in effect, predict its future appreciated value and           
          tax liability and then reduce its current fair market value by              
          the present value of a future tax liability.                                
               In that same vein, the estate argues that the Government, in           
          other valuation cases, has offered experts who computed the                 
          capital gain tax on the future appreciated value of assets and              
          discounted the tax to a present value for purposes of valuing a             
          corporation.  In one of those cases, the Court was valuing a                


               12 See also Bittker & Lokken, Federal Taxation of Income,              
          Estates and Gifts, par. 135.3.8, at 135-149 (2d ed. 1993 and                
          supp. 2004).                                                                




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