This paper presents the evolution in Tax Court thinking that has led to the misguided 2014 Estate of Richmond decision.
It then presents the correct economic method to provide a proper answer to the value of built-in gain based on a future exit date. The question at hand is whether a speculative approach is appropriate.
Because it is based in fact, accrual based valuation has the fairest basis for built-in gain valuation, but the Richmond ruling demands that taxpayers be ready to defend against the Tax Court’s methodology with an economic rebuttal.
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