Tax Court Weighs in on Defined Value Language and Tiered Valuation DiscountsTax Court Weighs in on Defined Value Language and Tiered Valuation Discounts

Nelson v. Commissioner, T.C. Memo. 2020-81, proved to be one of the most important valuation-related decisions of 2020. In Nelson, the Tax Court decided important issues related to the use of defined value language within transfer documents and tiered valuation discounts. 

The case focused on whether the transfer of limited partner (LP) interests should be characterized as a transfer of: (1) specific dollar amounts that were stated in the transfer documents, or (2) specific ownership percentages that were to be determined based on the analysis of a qualified appraiser. 

The court also focused on the appropriateness of valuation discounts within a tiered ownership structure when a holding entity owns a noncontrolling interest in another hol...