Abstract

In five decisions, sufficient evidence was not presented to the tax court regarding the valuation of Subchapter S corporations. Not surprisingly, in all five decisions, the tax court declined to deduct income taxes from corporate earnings when calculating the value of the S corporations for gift and estate tax purposes. These decisions, beginning with the case of Gross v. Commissioner,1 have emboldened the Internal Revenue Service (IRS) into taking groundless positions and have hampered the ability of small businesses to transition ownership.