Albert and Joanne Wandry had made various gifts or partnership/LLC interests to their children and grandchildren over several years. When making the gifts, the Wandry’s provided specific language in the gift documentation noting a gift of a fixed dollar amount. It is difficult to value a partnership interest based upon a fixed dollar amount until after the books are closed and a valuation is performed.
As you can guess, the IRS audited these gift tax returns and assessed additional tax against the Wandry’s. The Tax Court in a ruling back in March found the taxpayers. The IRS had several novel arguments:
The IRS just announced formally that they disagree with the ruling and will not be bound by it. There has been several other fixed value adjustment cases regarding charitable gifts or estates and the IRS has lost most if not all of those cases. Absent a law change, it seems the IRS is facing a losing battle.
Paul Neiffer, CPA