Hendrix v. Commissioner

In Hendrix v. Commissioner, T.C. Memo. 2011-133 (June 15, 2011), the Tax Court upholds defined value clause and held that the gift/sale transfer to trusts and charity was at arm’s length and was not contrary to public policy.

William H. Frazier, principal at HFBE, valued this company back in 1999. It held oil and gas, timber and a significant minority interest in a small bank holding company. The IRS challenged HFBE’s values in 2003—particularly the oil and gas assets.  While Frazier did not testify at trial, his report was his testimony and answers to some interrogatories. The judge, Elizabeth Paris, accepted HFBE’s values as filed. 

This case dramatically shows the critical importance of filing with a very high quality valuation report. As was the case in Hendrix, this may be the only evidence the judge sees from the appraiser.

Click here to view a summary of the Hendrix case by Steve R. Akers at Bessemer Trust.