- 14 - Here, the estate argues that it has a stronger case than the taxpayer in Estate of Davis because in that case, unlike this case, the taxpayer’s asset--the stock--could be marketed without paying the income tax liability associated with the sale of the underlying assets. The estate contends that “it is not merely likely, it is legally certain, that the IRA could not be sold at all, nor could the underlying assets be sold by Petitioner except by distributing the assets and paying the tax on that distribution.” The second portion of this statement is simply not true. The IRA trust agreements provide that the account holder may not sell their IRA interest; however, the agreements specifically provide that the underlying assets in the IRAs may be sold. See supra note 2. Because it is legally certain that the IRAs cannot be sold, the subject of a hypothetical sale between a willing seller and a willing buyer would not be the IRAs themselves but their underlying assets, which are marketable securities. The sale of the underlying marketable securities in the IRAs is not comparable to the sale of closely held stock because in the case of closely held stock, the capital gains tax potential associated with the potential liquidation of the corporation survives the transfer to an unrelated third party. The survival of the capital gains tax liability is exactly why a hypothetical buyer would take it into account. See Estate of Smith v. UnitedPage: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Next
Last modified: May 25, 2011