Discount for Potential Capital Gains Tax Liability in Valuing S Corporation Stock?

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2009-03-06
Authors
Harl, Neil
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Abstract

The discounting of C corporation stock for potential built-in capital gains tax liability has become well-established in recent years1 although the courts, until 1998, had consistently held that potential income taxes (capital gains tax, recapture tax and tax on ordinary income) that would be incurred on corporate liquidation did not reduce the value of closely-held corporation stock when the fact of liquidation was speculative or uncertain.2

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