May 01, 2004

Statistical Reasoning in Family Limited Partnership Appraisals (2004, 18:03)

Statistical Reasoning in Family Limited Partnership Appraisals: New Tax Court Scrutiny

Probate and Property, May/June 2004, Volume 18, Number 3

By Jeffrey B. Wolpin
Jeffrey B. Wolpin, CBA, CREA, CCRA, MBA, is the principal in Accredited Business Appraisals in Santa Clarita, California.

In two recent cases, Lappo v. Commissioner, T.C. Memo 2003-58, and Peracchio v. Commissioner, T.C. Memo 2003-280, the Tax Court criticized business appraisers for their inadequate statistical reasoning. In Lappo, the court noted:

We are not persuaded that [the taxpayer's appraiser's] guideline group is sufficiently large or made up of companies sufficiently comparable to the partnership.  "While we have utilized small samples in other valuations contexts, we have also recognized the basic premise that's similarity to the company to be valued decreases, the number of required comparables increases.


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