Estate of Mitchell v. Commissioner

250 F.3d 696 (2001)

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Estate of Mitchell v. Commissioner

United States Court of Appeals for the Ninth Circuit
250 F.3d 696 (2001)

Facts

Paul Mitchell owned 49.04 percent of John Paul Mitchell Systems (JPMS) when he died. Mitchell’s estate (plaintiff) filed an estate-tax return valuing the stock at $28.5 million. The Internal Revenue Service (IRS) (defendant) on audit calculated the value of the stock to be $105 million at the time of Mitchell’s death and issued the estate a notice of deficiency. Mitchell’s estate filed a petition with the United States Tax Court to challenge the IRS’s notice of deficiency. At trial, the IRS’s own experts established that the IRS’s initial valuation of $105 million for the stock was erroneously inflated by treating Mitchell as owning a controlling interest in JPMS. Mitchell’s estate filed a motion with the Tax Court seeking a ruling that the burden of proof had shifted to the IRS. The Tax Court denied the motion and conducted the trial as if neither party carried a burden of proof as to the amount of tax owed. Rather, the Tax Court weighed the evidence of both sides to find that the stock was properly valued at approximately $ 41.5 million. Among the issues the estate raised on appeal was the Tax Court’s denial of the estate’s motion as to the burden of proof.

Rule of Law

Issue

Holding and Reasoning (Wardlaw, J.)

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