Estate of Dieringer v. Comm'r

146 T.C. No. 8, 146 T.C. 117, 2016 U.S. Tax Ct. LEXIS 9
CourtUnited States Tax Court
DecidedMarch 30, 2016
DocketDocket No. 21992-13
StatusPublished
Cited by2 cases

This text of 146 T.C. No. 8 (Estate of Dieringer v. Comm'r) is published on Counsel Stack Legal Research, covering United States Tax Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Estate of Dieringer v. Comm'r, 146 T.C. No. 8, 146 T.C. 117, 2016 U.S. Tax Ct. LEXIS 9 (tax 2016).

Opinion

ESTATE OF VICTORIA E. DIERINGER, DECEASED, EUGENE DIERINGER, EXECUTOR, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Estate of Dieringer v. Comm'r
Docket No. 21992-13
United States Tax Court
146 T.C. 117; 2016 U.S. Tax Ct. LEXIS 9; 146 T.C. No. 8;
March 30, 2016, Filed

Decision will be entered for respondent.

Decedent (D) and some family members owned DPI, a closely held real property management corporation. D was a majority shareholder in DPI, owning 425 out of 525 voting shares and 7,736.5 out of 9,920.5 nonvoting shares.

During her life D established Trust (T) and Foundation (F). Her son G was sole trustee of T and F. D's will left her entire estate to T. Pursuant to the terms of the trust agreement, $600,000 went to various charitable organizations and D's children received minor amounts of her personal effects. The remainder of her estate, consisting primarily of DPI stock, would be distributed to the acting trustee of F to be administered in accordance with the terms of the trust agreement.

An appraisal for purposes of determining the date-of-death fair market value (FMV) of D's property valued D's DPI nonvoting and voting shares at $14,182,471. The appraisal valued the voting stock at $1,824 per share with no applicable discount. The nonvoting stock was valued at $1,733 per share, including a 5% discount to reflect the lack of voting power at shareholder meetings.

Numerous events occurred after D's death but before D's bequeathed property was transferred to F. Seven months after D's death DPI elected S corporation status. DPI also agreed to redeem all of D's bequeathed shares from T. DPI and T amended and modified the redemption agreement, with DPI agreeing to redeem all 425 of the voting shares but only 5,600.5 of the nonvoting shares. In exchange for the redemption, T received a short-term promissory note for $2,250,000 and a long-term promissory note for $2,968,462 (as amended). At the same time as the redemption, pursuant to subscription agreements, three of D's sons, including G, purchased additional shares in DPI. F later reported that it had received three noncash contributions consisting of the short-term and long-term promissory notes (as amended) plus nonvoting DPI shares.

An appraisal of D's DPI stock for purposes of the redemption and subscription agreements determined that D's DPI voting shares had a FMV of $916 per share and the nonvoting shares, of $870 per share. The appraisal of the voting stock included discounts of 15% for lack of control and 35% for lack of marketability. The appraisal of the nonvoting stock included the lack of control and marketability discounts plus an additional 5% discount for the lack of voting power at stockholder meetings.

The parties dispute the amount of the charitable contribution. The estate (E) argues that the charitable contribution should not depend upon or be measured by the value received by F. Respondent ® argues that the amount of the charitable contribution should be determined by postdeath events.

Because R found that the value of E's charitable contribution was lower than reported on its Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, R determined that additional estate tax is due. R also determined that E is liable for an accuracy-related penalty under I.R.C. sec. 6662(a) for an underpayment attributable to negligence or disregard of rules or regulations within the meaning of I.R.C. sec. 6662(b)(1).

Held: E's charitable contribution is less than the date-of-death fair market value of the bequeathed property because numerous events occurred after D's death that changed the nature and reduced the value of the property that was actually transferred to F.

Held, further, R properly allocated the proportionate share of additional estate tax due to each of the specific bequests and reduced the charitable contribution deduction attributable to those bequests respectively.

Held, further, E is liable for an accuracy-related penalty under I.R.C. sec. 6662(a) for an underpayment attributable to negligence.

*9 Marc Kellogg Sellers, for petitioner.
Randall G. Durfee, Janis B. Geier, and Jeffrey D. Rice, for respondent.
KERRIGAN, Judge.

KERRIGAN

*119 KERRIGAN, Judge: Respondent determined a deficiency of $4,124,717 in the Federal estate tax of the Estate of Victoria E. Dieringer (estate) and an accuracy-related penalty under section 6662(a) of $824,943.

Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the date of decedent's death, and all Rule references are to the Tax Court Rules of Practice and Procedure. All monetary amounts are rounded to the nearest dollar.

The issues for consideration are: whether the estate is entitled to a charitable contribution deduction equal to the date-of-death fair market value of stock bequeathed to the Bob and Evelyn Dieringer Family Foundation (foundation); and whether the estate is liable for a section 6662(a) accuracy-related penalty due to negligence or a disregard of rules or regulations.1

FINDINGS OF FACT

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Cite This Page — Counsel Stack

Bluebook (online)
146 T.C. No. 8, 146 T.C. 117, 2016 U.S. Tax Ct. LEXIS 9, Counsel Stack Legal Research, https://law.counselstack.com/opinion/estate-of-dieringer-v-commr-tax-2016.