THE VALUATION SPECTRUM – A WINNING VALUATION DISCOUNT STRATEGY

by Owen G. Fiore, Esq.^*

Recent enactment of the 2001 tax bill (H.R. 1836)¹ underscores the importance of a winning transfer tax valuation strategy in which valid state law entities set the stage for entity equity interest valuation adjustments (discounts). The tax act includes no adverse provision on valuation. In fact, the scheduled increases in unified credit exemption equivalents no doubt will result in more, not less, leveraging through entities. So let us review recent developments in valuation in this article.

I. INTRODUCTION AND SCOPE

Tax practitioners and estate planners recognize that entity-based valuation adjustments or "discounts" often are driven to a large extent by the perceived federal transfer tax savings where multi-generational transfers are part of the plan.² Also, popularization of installment sale transactions, including sales to "defective grantor trusts," has underscored the interest of clients in valuation-based wealth preservation. Recent developments in valuation strategic planning point up the mixed factual and legal nature of the world of transfer tax valuation.