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Financial Valuation: Applications and Models, + Website, 3rd Edition by James R. Hitchner

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Chapter 13

Estate, Gift, and Income Tax Valuations

Selected Internal Revenue Code Provisions, Treasury Regulations, and Revenue Rulings

In this world nothing is certain but death and taxes.

—Benjamin Franklin, American patriot, 1789

The avoidance of taxes is the only pursuit that still carries any reward.

—John Maynard Keynes, British economist, 1942

While “nothing is certain but death and taxes,” one also might argue that given human nature, an additional certainty is that taxpayers will seek to minimize their taxes. For estate, gift, and income tax planning purposes, minimization of taxes is one of the primary objectives for owners of closely held businesses. This chapter presents a general overview of the guidelines for estate, gift, and income tax valuations as set forth in the Internal Revenue Code, Treasury Regulations, and Internal Revenue Service (IRS) Revenue Rulings. Detailed discussions of valuation considerations such as approaches, methods, and discounts are discussed elsewhere in the book. Chapter 15 presents a more complete discussion of relevant Tax Court cases. Detailed checklists/ready reference of Revenue Rulings 59-60, 77-287, and 93-12 that analysts can use in their valuations are presented at the end of this chapter.

VALUATIONS IN ESTATE AND GIFT TAXES

General guidelines for estate and gift valuations are primarily set forth in the Internal Revenue Code (IRC), Treasury Regulations, and Revenue Rulings (Rev. Rul.). Additional guidance is also found in the ...

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