Valuation of Stock in Closely Held Investment Companies

James V. Roberts (Attorney at Law, Glast, Phillips & Murray P.C.) has recently published his article entitled Jelke: Simplicity in Valuation of Closely Held Investment Companies, RPPT eREPORT (2008).

Here is the opening paragraph to his article:

The Eleventh Circuit’s decision in Jelke lays down a simple rule for valuation of corporate stock in closely-held investment companies. At issue is the extent to which built-in capital gain tax liability should be taken into account. In reaching its decision, the Court provides, in an easy to read, well written opinion, a short history of valuation of investment companies. The Eleventh Circuit assumes that such corporations will always be liquidated on the date of death, and the tax liability paid, thus requiring a reduction of value by 100% of the tax attributable to the built-in capital gain, and providing an easy to understand method of valuation, similar to that mandated by the Fifth Circuit in Dunn But the dissent in the present case provides good reasons for caution against relying on the majority decision.