- 11 -
their distribution. The logic of the estate’s argument is that
the IRAs themselves are not transferable and therefore are
unmarketable. According to the estate, the only way that the
owner of the IRAs could create an asset that a willing seller
could sell and a willing buyer could buy is to distribute the
underlying assets in the IRAs and to pay the income tax liability
resulting from the distribution. Upon distribution, the
beneficiary must pay income tax. Therefore, according to the
estate, the income tax liability the beneficiary must pay on
distribution of the assets in the IRAs is a “cost” necessary to
“render the assets marketable” and this cost must be taken into
account in the valuation of the IRAs.
In support of its argument, the estate cites caselaw from
three different areas of estate valuation that allow a reduction
in value of the assets in an estate for costs necessary to render
an estate’s assets marketable or that have otherwise considered
the tax impact of a disposition of the estate’s assets in other
contexts. The first line of cases allows consideration of a
future tax detriment or a future tax benefit to the assets in the
estate. The second line of cases allows a marketability discount
in connection with assets that are either unmarketable or face
significant marketability restrictions. The third line of cases
allows for a reduction in value to reflect the cost of making an
asset marketable, such as the costs associated with rezoning and
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011