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Friday, March 07, 2003


The Estate of Natalie M. Leichter, Deceased, Steven Leichter, Co-Special Administrator and Jeffrey L. Leichter, Co-Special Administrator claimed on its return that a business that she inherited from her husband a few months before she died was worth $2,091,750. The IRS said it was worth $2,718,358, and assessed a $344,635 deficiency. By the time this case got to court, the IRS admitted the business was worth $2,150,000, and the estate was claiming it was only worth $800,000. Tax Court considered the figure on the return to be an admission by the estate, and stated that while the estate�s attacks on the assessment report that it had relied upon in preparing the return did show that the report �needed proofreading�, it found the report substantively sound. Tax Court was not impressed at all with the estate�s two experts, who, among other sins, included discounts twice (one for the loss of Natalie�s owner-manager husband and one for a decrease in �marketability�), and accounted for �negative goodwill� without explaining why a hypothetical buyer would not simply liquidate the company. Meanwhile, although Tax Court thought the IRS�s expert was more reasonable than the estate�s, it was not impressed with his methodology of projecting future income using guideline companies that, in his own opinion, were not similar to the estate�s business. Result: Tax Court ruled the value of the business was $2,091,750, the amount originally on the return.

At least one of the lawyers in this case was an ass unreasonably obstinate. It should have been settled.

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