Valuation of Subchapter C Corporations

James Roberts (Attorney, Glast, Phillips & Murray, P.C., Dallas, Texas) has written an article entitled Certiorari in Jelke Denied: Simplicity in Valuation .

Here is a summary of the article:

In the February 2008 edition of eReport, we reported on the Eleventh Circuit’s decision in Jelke1 which purports to lay down a simple rule for valuations experts, and others, to deal with the potential tax liability for built in gains in C corporations. Basically, the Eleventh Circuit said that investment companies, operated as C corporations, will be evaluated as though they were liquidated on the date of death, triggering the recognition of tax liability for the gains built into the assets of the corporation. And as a result, the value of the corporation will be reduced dollar for dollar by that tax liability.

The government disagreed with that decision and applied for writ of certiorari to the United State Supreme Court. On October 6, 2008, the Supreme Court denied the government’s application for writ, letting the Eleventh Circuit’s decision stand.