Section of Taxation Publications
  VOL. 56
NO. 2
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 Note: The following is an excerpt from the introduction to the article as published in The Tax Lawyer. Author citations have been omitted for brevity. Tax Section members may read the article in its entirety in Adobe Acrobat format.

The Applicability of a Market Approach Valuation Analysis That Employs Only a Single Comparable: Heck v. Commissioner
Marc Samuel


In Estate of Heck v. Commissioner, the Tax Court refused to adopt the Service’s application of the market approach as part of a closely held company’s valuation where the expert relied on only one comparable company. Instead, the court relied exclusively on the discounted cash flows (DCF) method to arrive at the company’s valuation and the resultant deficiency in a decedent-shareholder’s estate tax return. This Note concludes that the court should not have articulated a bright line rule against using only one comparable company because courts often employ the market approach as one of many valuation techniques and not as a comprehensive valuation mechanism.

This Note offers a set of examples where a court should consider including the valuations derived from a single comparable analysis in its final valuation of a company. Part I of this Note summarizes the relevant tax law and the facts of Heck and Part II analyzes the Tax Court’s decision. Although Heck confronts the comprehensive valuation of a company, Part III focuses on the court’s refusal to apply the market approach to a single comparable and recommends an alternative analysis.


Published by
Section of Taxation, American Bar Association
With the Assistance of
Georgetown University Law Center


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