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Friday, March 30, 2012

Gerzog: Defined Value Clauses and FMV

Tax Analysts Wendy C. Gerzog (Baltimore), Defined Value Clauses and Fair Market Value, 134 Tax Notes 1685 (Mar. 26, 2012):

In [Hendrix v. Commissioner, T.C. Memo. 2011-133], the Tax Court considered the issues of whether defined value clauses were the result of arm’s-length transactions and whether they were void as against public policy. The underlying dispute was whether the taxpayers’ transfers of the John H. Hendrix Co. stock were valued at fair market value. With a decision favoring the taxpayers, the defined value clauses in both [Succession of McCord v. Commissioner, 461 F.3d 614 (5th Cir. 2006)] and Hendrix impede the accurate valuation of taxable gifts to family members and of deductible charitable gifts.

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In Wandry v. Commissioner, T.C. Memo. 2012-88 (Mar. 26, 2012), Judge Haines upheld a defined value clause.

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