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New Tax Case Tackles Key Aspects of Private Company Value

Posted 12:00 AM by
Estate of Gallagher v. Commissioner, T.C. Memo. 2011-148, 2001 WL 2559847 (U.S. Tax Court) (June 28, 2011)

In the case of the estate of Gallagher v. Commissioner, the decedent owned 15 percent in a private Subchapter S corporation that held various newspaper assets. When she died in July 1994, her estate valued her 15 percent share at $35 million based on an appraisal by its CEO, but the Internal Revenue Service (IRS) said it was worth closer to $50 million. At trial before the Tax Court, both sides enlisted new appraisers and closed the gap slightly: $28 million for the taxpayer versus $41 million for the IRS. In particular, they disputed four broad aspects of the valuation. 

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