The IRS reached a settlement with the estate of Bill Davidson, who died in 2009 as one of the country’s wealthiest people. Georgia sports fans may have known Davidson as the owner of professional sports franchises in the NBA, WNBA and NHL. In 2013, Davidson’s estate filed an action in U.S. Tax Court challenging IRS tax assessments amounting to $2 billion. Per the settlement agreement, the estate will pay the IRS $388 million.
The IRS claimed that Davidson’s estate was delinquent in paying gift, generation-skipping and estate taxes. For perspective, the United States treasury took in $12.7 billion, total, in estate taxes in 2013. According to the IRS, the Davidson estate improperly valued certain assets, known as self-cancelling installment notes or SCINs, and undervalued stocks held in trust for the billionaire’s children and grandchildren.
SCINs are often used as tax-planning instruments, but the IRS argued that Davidson used them to make taxable gifts. Because the case settled, the court did not rule on the proper method of SCIN valuation. An attorney practicing in New Jersey speculated that the estate planning community might have benefited from such a ruling. Certain assets, like SCINs, are harder to value than others for tax purposes.
Asset valuation may be a point of contention in any estate tax case. An attorney with experience in tax law may be able to examine assets and liabilities and help individuals determine how to structure an estate to maximize the tax advantages of instruments like SCINs. An attorney may also communicate or negotiate with the IRS or argue the client’s case in court.