In Uncategorized on 01/25/2013 at 09:31

No, not the 1956 movie about the World War II impostor, but rather about the legal fictitious person, the “willing buyer” and his (or in the modern world, her) counterpart, the “willing seller”, each armed with all reasonably available knowledge concerning that which is to be sold and bought, and neither one of them under any compulsion to buy (or sell), and both looking to get the best deal they can.

Of course, the lawyers and judges recognize that these criteria apply to none of the parties to the case at hand, and are designed to represent the hypothetical ideal, nevertheless the appraisers and the triers of fact must follow the lead of these mythical beings, rather like those deceived by Ewen Montagu’s fictitious “Major William Martin, R.M.”

So we have yet another appraisal case (they seem to gravitate to Tax Court, just as the mythical Major Martin drifted ashore in Spain). Case in point: Estate Of Shirley C. Giovacchini, Deceased, Donor, Lisa Lekumberry, Executor and Trustee, 2013 T. C. Memo. 27, filed 1/24/13.

See my blogpost “Such Rarefied Heights of Pure Mathematics”, 6/25/11.

The reason I’m a day late (but not a dollar short) is that it took a while to digest 114 pages of Judge Wherry’s prose.

The late Shirley was a granddaughter of the pioneers who settled the Lake Tahoe region of Nevada. Before joining the aforesaid ancestors, Shirley sold, gifted, settled and bequeathed the last large plot, piece or parcel of land in the Lake Country, hedged round with scenic, environmental, and governmental restrictions, but still of immense value.

The varied environmental and governmental authorities offered telephone numbers to the late Shirley for her 2500 acres of Rocky Mountain High, and backed up the same with made-to-order appraisals, designed to pry the maximum cash from the public fisc to secure in perpetuity the magnificent land unspoiled by those whose money was being thus expended. The appraisers ignored their own rules, but they claimed it was in a good cause.

The late Shirley did a sale of some 1700 acres with the governmentals and not-for-profts, but kept some 500 or so acres, which she put in the usual trust and LLC mix-and-match for her descendants, at the behest of the family’s trusted CPA, Randal S.  (“Kuckie”) Kuckenmeister (great name!), who prepares the Form 709 and the Form 706.

Shirley joins the ancestral pioneers, and then begins the fun. IRS assesses gift and estate tax deficiencies based on the made-to-order appraisals.

Enter the next class of appraisers. IRS agrees that the burden of proof is on IRS, a rare occurrence, and trots out its own appraiser.

As value for gift tax and estate tax purposes is the same–“fair market value”. “As a general concept, fair market value is well defined. It is “the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell, and both having reasonable knowledge of the relevant facts”. 2013 T. C. Memo. 27, at p. 32 (Citations omitted).

Valuation is ultimately a question of fact. So Judge Wherry weighs and measures the dueling appraisers. If you’re into the theory and practice of real estate appraisal (with a detour, explaining how the Federal government can effectively confiscate private property by making access thereto virtually impossible), read it.

Finally, Judge Wherry, in a quasi-Solomonic moment, cuts the appraisals in pieces, and constructs a valuation greater than Executor and Trustee Lisa’s crew would wish, but less than IRS wanted. Judge Wherry does deny the Section 6662 panoply (including, but without in any way limiting the generality of the foregoing, as the high-priced lawyers say)  the 40% substantial undervaluation, because Executor and Trustee Lisa reasonably relied on her appraisers and Kuckie.

Long live the non-existent “willing buyer and willing seller”.

  1. All these posts, and reading 114 pages. Do you have a job? 🙂


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