Valuation Dispute Leads to Charitable Donation

Ms. Petter transferred $22 million of UPS stock to an LLC, and claimed a 51% discount from the market value of the stock. The IRS and Ms. Petter eventually settled on a 36% discount. Ms. Petter specified that if a valuation dispute arose, the extra money would automatically go to her chosen charity, not the IRS. The IRS later claimed that Ms. Petter owed gift tax on the discount drop from 51% to 36%.

In Estate of Petter v. Commissioner, Tax Ct. No. 25950-06 (2011), the Ninth Circuit ruled against the IRS, and the exaggerated valuation discount alleged by the IRS automatically went to Ms. Petter’s charity.

See Robert W. Wood, Fancy Appraisals Can Defeat IRS, Forbes, Sep. 30, 2011; William Alan Nelson II, Do Appraisals as Contemporaneously as Possible, Wealth Strategies Journal, Oct. 3, 2011.

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this article to my attention.