In a recent Tax Court Memorandum decision, the taxpayer undertook two inter vivos gifting transactions – one to a GRAT, and one to an irrevocable trust. The latter was a part sale/part gift transaction. The transferred items were LLCs holding securities, limited partnership interests, and promissory notes. The taxpayer’s transferred interests were 99.8% nonvoting class B member interests, with 0.2% of the member interests being voting class A interests retained by a management entity owned and controlled by the taxpayer’s daughter.
Traditional appraisal methodologies were applied to yield lack of control discounts in the 13-14% range, and lack of marketability discounts at 25%.
Rather than engage in a direct attack on these discounts, the IRS’ primary approach was . . .