December 31, 2021

In order to determine the fair market value of a closely-held business, both the potential buyer and seller are assumed to be aware of all facts relevant to the business. In CCA 202152018[1] the IRS determined that the attempt to setup a GRAT (grantor retained annuity trust) by a taxpayers business valuation didn’t factor in the high probability that the entity could very well be involved in a profitable merger sometime in the near future.

IRC §2702 governs the values of certain interests transferred in trust:

Solely for purposes of determining whether a transfer of an interest in trust to (or for the benefit of) a member of the transferor’s family is a gift (and the value of such transfer), the value of any interest in such trust retained by the transferor or any applicable family member (as defined in section 2701(e)(2)) shall be determined as provided in paragraph (2).[2]

Read the full article here.