Estate of Cecil v. Commissioner – Tax Court permits tax affecting of S corp earnings

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Abstract: The debate about tax affecting when valuing pass-through entities for federal gift and estate tax purposes continues. “Tax affecting” refers to the practice of reducing a business’s projected future earnings for hypothetical corporate income taxes. This article explains why the U.S. Tax Court reluctantly allowed tax affecting in a recent case. Estate of Cecil v. Commissioner, T.C. Memo. 2023-24 (Tax Ct. Feb. 28, 2023). Gross v. Commissioner, T.C. Memo. 1999-254, aff'd, 272 F.3d 333 (6th Cir. 2001).