Tax Court Addresses Lack of Control and Marketability Discounts in Family LLCs

Tax Court Addresses Lack of Control and Marketability Discounts in Family LLCs

      In a recent decision from the United States Tax Court, there were reviewed the valuations of certain gifts in a pair of family LLCs. Grieve v. Commissioner of Internal Revenue, T.C. Memo. 2020-28 (March 2, 2022). 

      While the court’s review of the facts and the competing valuations are quite detailed, and should obviously be reviewed by anybody practicing in the area, the most interesting takeaways from the opinion are the discounts that were ultimately afforded. With respect to the lack of control discount, both 13.4% and 12.7% were approved, respectively, for each of the LLCs. In addition, each LLC was afforded a lack of marketability discount of 25%.

The Passing of Thomas Aquinas

The Passing of Thomas Aquinas

      Today marks the anniversary of the death, in 1274, of St. Thomas Aquinas (Tommaso d’ Aquino), the brilliant Dominican Friar whose whole life’s work constitutes the basis of Thomistic Theology.

      A student and protégé of St. Albert the Great (Albert Magnus), he is best known for his monumental (although it his death unfinished) Summa Theologica. 

      Thomas was canonized a Saint of the Catholic Church and holds the title of the Angelic Doctor.

Why I Teach

Why I Teach

      People sometimes ask me why I teach, primarily at the University of Kentucky Rosenberg College of Law. I tell them that it is time consuming and exhausting, but at least it doesn’t pay very much. That said, every now and then a former student says something that makes all of it worthwhile.

      HERE IS A LINK to a recent interview with Aurelia Skipwith, a graduate of the University Kentucky College of Law who took my Business Planning class; she is now the Director of the U.S. Fish and Wildlife Service.

Securities and Exchange Proposes to Relax Limits on Private Offerings

Securities and Exchange Proposes to Relax Limits on Private Offerings

     On March 4, the SEC released a (341 page long) proposal setting forth certain possible changes to the rules governing private offerings with the aim to make two of those forms, namely RegulationA+ and Crowdfunding, more available. 

     With respect to RegulationA+ offerings, the maximum size would be increased from $50 million to $75 million. RegulationA+ offerings are themselves in the nature of a small public offering, but they entail fewer disclosure obligations. That said, the increase to $75 million offerings would be restricted to “Tier 2” companies, and they are required to include audited financial statements in their RegulationA documentation. At the same time, the upper limit for Tier 1 RegulationA+ offerings would be increased from $15 million to $22.5 million.

     With respect to Crowdfunding, which has overall seen relatively little utilization, the maximum amount that could be raised would be increased from $1.07 million to $5 million. Also, the limit in any individual investor could devote to crowdfunding offerings would be increased.

     In another proposal in the release would allow companies to engage in further communications efforts with prospective investors before deciding upon which private offering approach they would utilize.

LLCs Are Not Corporations

LLCs Are Not Corporations

      

      On the Business Law Prof Blog, in a posting dated February 25 titled LLCs Are Not Corporations: A New Hero Emerges, Dean Joshua Fershee reviews a recent decision in which the plaintiff was called to task for identifying the purported plaintiff as a “limited liability corporation.” Of course, there is no such organizational form.

      HERE IS A LINK to that post.

The Ability of the Estate of a Deceased Limited Partner to Maintain A Derivative Action

The Ability of the Estate of a Deceased Limited Partner to Maintain A Derivative Action

      Peter Mahler, in his blog New York Business Divorce, on February 10 posted a piece reviewing a recent New York decision on a derivative action brought by a limited partner. After the action was initiated, that limited partner died. Which brought to the fore the question: can the estate of a limited partner, which itself is not a limited partner but rather an assignee, continue to prosecute a derivative action that, ab initio, must be brought and maintained by a limited partner? Particularly, this decision would turn upon a provision of the New York Limited Partnership Act that provides that the legal representative of the deceased partner may exercise the decedent’s rights “for the purpose of settling his or her estate or administering his or her property.” 

      In this instance, and in reliance upon prior law, it was held that substitution of the estate with the capacity to continue the derivative action would be denied.

      The title of Peter’s posting is Death of Limited Partner Disarms Derivative Action; HERE IS A LINK to that post.

Getting Materiality Right and Wrong

Getting Materiality Right and Wrong

      Professor Ann Lipton of Tulane has published on the Business Law Prof Blog Three Times Federal Courts Got Materiality Wrong, and One Time They Didn't. As is typical for anything that Ann writes, this is an insightful review of a confusing area, it made less confusing by her analysis. 

      HERE IS A LINK to that posting.