Gross v. IRS -- NFIB Fights Unfair Death Tax

Author: R Stell Date: January 30, 2006

NFIB joined an amicus brief in support of the Gross and Linnemann families. The case affected the ability of S corporations – many of which are small businesses – to use “tax affecting” when determining the value of the corporations’ stock. Tax affecting is an accepted valuation tool that ensures shareholders are fairly taxed during any transfer of S-corporation stock, whether it is as a gift or part of the estate left to heirs upon the death of the stockholder. In Gross v. Commissioner, the Internal Revenue Service suddenly changed longstanding precedent and prohibited tax affecting, increasing the supposed value of the business and thus increasing the amount of tax owed. The Sixth Circuit Court of Appeals upheld the Tax Court’s decision, which would result in a 40 percent increase in the families’ tax liability. NFIB’s brief argued that it was improper for the IRS to introduce a new standard for determining the value of S-corporation stock at trial and apply it retroactively.

Status: Decided. Amicus brief in support of Gross and Linneman families’ petitions for review filed July 19, 2002. Review denied by U.S. Supreme Court Oct. 7, 2002.

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