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GRAT and Valuation Planning After CCA 202152018: What Practitioners Need to Know

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CCA 202152018, released on December 30, 2021 has critical impact on grantor retained annuity trusts (GRATs). The CCA addresses a common valuation challenge: what consideration should be given to a potential sale in valuing an asset? Often there is a long continuum from: no sale, to discussions with potential buyers, to a letter of intent, to a binding contract, etc.

Where the business is on this continuum will affect how an appraiser evaluates the possible implications of the potential sale. In the recent CCA, the possible sale had moved too far along the continuum towards an actual sale to have been ignored in the valuation (by use of a stale appraisal). As a result, the IRS extended the reasoning in the infamous Atkinson v. Commissioner, 115 T.C. 26, 32 (2000), aff’d, 309 F.3d 1290 (11th Cir. 2002) and held that the valuation was so wrong that the GRAT annuity was not a qualified annuity interest under Code Section 2702, resulting in a deemed gift of the entire value of the property involved.

What does this CCA mean to GRAT planning generally? What might this mean to the use of GRATs as valuation spillover receptacles in a defined value mechanism? Might this have implications on other aspects of defined value techniques? What might this CCA mean to valuations generally? Are there new steps and precautions practitioners might choose to take? Might this signal a broader application of the Atkinson principles to GRATs, CRTs, CLTs and perhaps any valuation generally, even applying those principles to impose valuation penalties?

This program will address all of these questions and include a detailed discussion of the CCA, analysis by an expert appraiser of the valuation implications, a discussion of Atkinson, and much more.

Lecturer Bios

Martin M. Shenkman, Esq.

Martin M. Shenkman, CPA, MBA, PFS, AEP (distinguished), JD, is an attorney in private practice in Paramus, New Jersey and New York City. Practice concentrates on estate and tax planning. He is the author of 42 books and more than 1,000 articles. He is active in many charitable causes and founded which educates professional advisers on planning for clients with chronic illness and disability. He has a Bachelor of Science degree from Wharton School, with a concentration in accounting and economics, an MBA from the University of Michigan, with a concentration in tax and finance, and a law degree from Fordham University School of Law.

To learn more about Marty visit his website

Jonathan G. Blattmachr, Esq.

Mr. Blattmachr is a Principal in ILS Management, LLC and a retired member of Milbank Tweed Hadley & McCloy LLP in New York, NY and of the Alaska, California and New York Bars. He is recognized as one of the most creative trusts and estates lawyers in the country and is listed in The Best Lawyers in America. He has written and lectured extensively on estate and trust taxation and charitable giving.

Mr. Blattmachr graduated from Columbia University School of Law cum laude, where he was recognized as a Harlan Fiske Stone Scholar, and received his A.B. degree from Bucknell University, majoring in mathematics. He has served as a lecturer-in-law of the Columbia University School of Law and is an Adjunct Professor of Law at New York University Law School in its Masters in Tax Program (LLM). He is a former chairperson of the Trusts & Estates Law Section of the New York State Bar Association and of several committees of the American Bar Association. Mr. Blattmachr is a Fellow and a former Regent of the American College of Trust and Estate Counsel and past chair of its Estate and Gift Tax Committee. He is author or co-author of five books and more than 400 articles on estate planning and tax topics.

Among professional activities, which are too numerous to list, Mr. Blattmachr has served as an Advisor on The American Law Institute, Restatement of the Law, Trusts 3rd; and as a Fellow of The New York Bar Foundation and a member of the American Bar Foundation.

Scott A. Nammacher, ASA, CFA

Scott is a Senior Managing Director of Empire Valuation Consultants, where he has worked since 1992. He is an Accredited Senior Appraiser (ASA) of the American Society of Appraisers and a Chartered Financial Analyst® (CFA) Charterholder.

He has extensive experience in financial consulting, business valuations and acquisitions/divestitures. Scott spent six years doing acquisitions, divestitures, special financing and general financial consulting for PepsiCo and Marigold Enterprises, a boutique management consulting and leveraged buyout firm. His background also includes experience with Arthur Andersen & Co., where he managed equity, debt, warrant/option, NOL and intangible asset valuations, along with general financial consulting engagements.

Scott has valued a wide variety of publicly and privately held companies for acquisitions, share repurchases, estate and gift tax reporting, recapitalizations and general corporate planning purposes. He has developed business plans and financing packages, and has been involved in completed transactions totaling over $2.0 billion. Scott has also been involved in the valuation of several hundred hedge and P/E fund interests, including carried interests and related derivatives. He has also valued entertainment and artistic-related assets and interests, from copyrights of most types and profit participation interests to music libraries and other royalty-related assets.

Scott has testified as an expert witness in U.S. Tax Court, U.S. Bankruptcy Court, and the Superior Court of Connecticut; has acted as a valuation consultant to the Superior Court of New Jersey; and has been involved in shareholder disputes in New York, New Jersey, Delaware and Louisiana. He has served as an expert witness in the U.S. District Court of the Eastern District of Wisconsin regarding high yield bond portfolio litigation. He has also lectured on various business and warrant valuation topics (including speeches at national and chapter level conferences), private equity/hedge fund valuations and high yield bonds before various organizations around the country.

Scott co-authored a book, Investing in Junk Bonds; Inside the High Yield Debt Market, John Wiley & Sons, New York, New York, 1987 (including a Japanese translation published in 1988), and several articles on junk bonds. He also received the prestigious "Graham & Dodd Scroll Award" from the Financial Analysts Journal, for outstanding financial writing related to an article published as a cover story in a magazine.

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