Key Tax Court Cases on Valuation of Pass-Through Entities: The Early Years

After the U.S. Tax Court decided Gross v. Commissioner¹ in 1999, the Internal Revenue Service proceeded to win six additional pass-through entity valuation cases through 2011. In each of these cases, the court disallowed the tax-affecting of the earnings of S corporations (S corps) and partnerships for valuation purposes. However, beginning in 2019, courts have taken steps to allow tax-affecting, but only if certain conditions are met. The following commentary