Allowing Sales Between Related Parties in Closely Held Corporations to Evidence Fair Market Value: A Departure From the Norm in: Morrissey v. Commissioner
Emily A. Whelan
In Morrissey v. Commissioner, the Court of Appeals for the Ninth Circuit reversed the Tax Court and held that in valuing an estate’s interest in a closely held corporation, sales of a minority interest in the corporation’s stock between distant family members were good evidence of fair market value. In holding for the estate, the court found that the Tax Court had no rational reason for disregarding the sales as evidence of fair market value.Part I of this Note discusses the circumstances of the case and the procedural history that led to the court’s decision. Part II explains the Ninth Circuit’s error in overruling the Tax Court’s determination that the factual evidence surrounding the sales between distant family members was insufficient to support reliance thereon for fair market value. Part III argues that the court’s holding will lead to inaccurate valuations of interests in closely held corporations and encourage tax avoidance.