Jan 29th, 2008
Jelke Overruled: 11th Cir.Approves 100% Discount For Imbedded Capital Gains
The 2005 Jelke v. Commissioner decision has been described as “poor” for the taxpayer (by Shannon Pratt in the BVU) and frustrating for the appraiser. The Tax Court declined to follow the leading case, Estate v. Dunn (5th Cir. 2002), and adopt a dollar-for-dollar discount for a holding company’s built-in capital gains tax liability. After receiving the disappointing result in Jelke, the taxpayers almost did not want to appeal, according to their original appraiser, Will Frazier (see BVWire #62-3). “Their advisors and I had to beg them.”
But they ended up hiring attorney John Porter (Baker Botts, Houston), “a good choice on their part,” Frazier said. (Porter led the reversal of McCord v. Comm’r by the Fifth Circuit in 2006.) The effort evidently paid off, as the Eleventh Circuit opinion provides an exhaustive but excellent review of precedent in support of its decision. We’ve abstracted the case in some detail to give appraisers a full understanding of the context for the Jelke decision and its ultimate findings.
