Post-death events taken into account in property valuation.

• Author: Beavers, James A.

The Tax Court held that the IRS had properly taken into account events that occurred after the decedent's death in determining for purposes of an estate's charitable deduction the value of property the estate transferred to a private foundation set up by the decedent.

Background

Victoria Evelyn Dieringer was married to Robert Dieringer, who predeceased her in 2007. Evelyn and her husband had owned a retail grocery store. Evelyn and some of her family members also owned Dieringer Properties Inc. (DPI), a closely held real property management corporation that manages a combination of commercial and residential properties in Portland, Ore. DPI also owns and manages a Wendy's restaurant property in Texas. DPI primarily earns rental income with ancillary income generated from loans provided to developers or builders. Evelyn was a majority shareholder in DPI, owning 425 out of 525 voting shares and 7,736% out of 9,920% nonvoting shares.

During her life, Evelyn established the Victoria Evelyn Dieringer Trust and the Bob and Evelyn Dieringer Family Foundation, which qualified as a tax-exempt private foundation under Secs. 501(c)(3) and 509(a). Her son Eugene was sole trustee of the trust and foundation, and her son Patrick was an advisory trustee of the trust. Evelyn's will left her entire estate to the trust. Pursuant to the terms of the trust agreement, $600,000 went to various charitable organizations, and her children received minor amounts of her personal effects. The remainder of her estate, consisting primarily of DPI stock, was to be distributed to the acting trustee of the foundation 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 Evelyn's property valued her 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 Evelyn's death but before the estate transferred her bequeathed property to the foundation. Seven months after her death, DPI elected S corporation status. DPI also agreed to redeem all of her bequeathed shares from the trust. DPI and the trust amended and modified the redemption agreement, with DPI agreeing to redeem all 425 of the voting shares but only 5,600% of the nonvoting...