Valuation Discounting Techniques: Terms Gone Awry

33 Pages Posted: 20 Oct 2008

See all articles by Wendy C. Gerzog

Wendy C. Gerzog

University of Baltimore - School of Law

Date Written: October 17, 2008


Fair market value is defined in the section 2031 Regulations. For its validity, that definition of fair market value relies on the normal definitions of its significant terms: a seller is someone who is seeking the highest price for her product and a buyer is someone who wants to obtain the lowest price for his purchase. It is only that tension that creates the realistic, and fair, market value of that asset. Indeed, without that conflict, the definition is comprised of hollow words. In the context of family limited partnerships, terms have been misused. By utilizing the limited partnership shell, liquid assets become illiquid in order to discount those assets and to pay less transfer tax. There are already regulations in the income tax loss context that deny losses for the intentional destruction of property values. They can serve as models for Treasury to refine the fair market value definition to conform to a more realistic and public policy supported meaning of value when terms in the general definition of fair market value have gone awry.

Keywords: valuation, fair market value, family limited partnership, FLP, estate tax, gift tax, section 2031

JEL Classification: H10, H20, K34

Suggested Citation

Gerzog, Wendy C., Valuation Discounting Techniques: Terms Gone Awry (October 17, 2008). Tax Lawyer, Vol. 61, No. 3, 2008, University of Baltimore School of Law Legal Studies Research Paper No. 2009-16, Available at SSRN:

Wendy C. Gerzog (Contact Author)

University of Baltimore - School of Law ( email )

1420 N. Charles Street
Baltimore, MD 21218
United States
410-837-4522 (Phone)

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