Trusts and Estates
Ca. Trs. & Estates Quarterly 2020, Volume 26, Issue 4
Content
- Chairs of Section Subcommittees
- Editorial Board
- From the Chair
- From the Editor-in-chief
- Inside this Issue:
- It’S a Gift If You Do. It’S a Gift If You Don’T. What Lurks In the Shadows When An Interested Fiduciary Acts
- Litigation Alert
- Tax Alert
- The California Throwback Tax Applicable To Distributions of Previously Untaxed Accumulated Trust Income To California Resident Beneficiaries
- Tips of the Trade: North To Alaska For An Ante-mortem Probate
- Undue Influence: Pressure Brought To Bear Directly On the Burden of Proof
- Grieve V. Commissioner: Death of the Minority Premium Model (Taxpayers Dodge a Bullet)
GRIEVE V. COMMISSIONER: DEATH OF THE MINORITY PREMIUM MODEL (TAXPAYERS DODGE A BULLET)
By Bruce Givner, Esq.*
I. INTRODUCTION
At least as far back as 2011, the Internal Revenue Service began postulating the so-called "minority premium model" for fractional interest valuation.1 The minority premium model flips traditional fractional interest valuation on its head by focusing not on what discount is applicable to a transferred fractional interest, but rather what premium would apply to a minority interest if the majority owner sought to obtain total control of the entity. Conceptually, the minority premium model is perhaps best summarized by Judge James Halpern of the United States Tax Court, who opined, in essence, why would a 99% interest holder be willing to sell at a 30% discount when they could instead pay a small premium to the 1% interest holder and then own everything? Wouldn’t the 99% owner rather pay a little to own everything than lose a lot to sell the 99% interest at a discount?2