Estate of McClatchy v. Commissioner
United States Court of Appeals for the Ninth Circuit
147 F.3d 1089 (1998)
- Written by Daniel Clark, JD
Facts
Charles McClatchy was the chairman and chief executive officer of McClatchy Newspapers, Inc. (the corporation). McClatchy owned common stock in the corporation. By virtue of his role within the corporation, McClatchy was legally an affiliate of the corporation for the purposes of federal securities law. As an affiliate, McClatchy was subject to certain restrictions on his ability to transfer his stock. These restrictions made the shares in McClatchy’s hands less valuable than they would have been in the hands of someone who was not subject to the transfer restrictions. McClatchy died, and the shares went to his estate (plaintiff). The estate was not an affiliate of the corporation and was not subject to the transfer restrictions. Accordingly, the shares had a higher value in the hands of the estate than they did in McClatchy’s hands when McClatchy died. The estate included the shares in the gross estate at the value they had in McClatchy’s hands. The Internal Revenue Service (IRS) (defendant) determined that the shares should be included at the value they had in the estate’s hands. The United States Tax Court ruled in favor of the IRS, and the estate appealed.
Rule of Law
Issue
Holding and Reasoning (Tashima, J.)
Dissent (Nelson, J.)
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