Recent Developments


o LLC's:

It doesn't always pay to be a pig (or boar!). A New York Court recently held that a member of a NY LLC has standing to sue derivatively on behalf of the company. The case addressed alleged diversions of funds by the controlling members of the LLC to another entity in which they had greater ownership interests, and hence would benefit from the earnings so diverted. This is another example of how LLC law continues to develop, and how corporate law concepts have and are applied to LLCs. Bischoff v. Boar's Head Provisions Co. Inc. 06 Civ. 106 NYLJ 7/11/06, page 1.


o Valuation:

Score one for the taxpayers. The Tax Court upheld the valuation of stock in a manufacturing company on an estate tax return. The Court noted the importance of a valuation report conforming to Uniform Standards of Professional Appraisal Practice (USPAP)…Read - you want this in any report you hire a business appraiser for. The appraiser must understand the business involved and demonstrate this. The IRS expert ignored the company's dividend history which was the primary return shareholders realized.  Kohler v. Commr. T.C. Memo. 2006-152, 7/25/06.


o Conservation Easements:

The Tax Court disallowed a deduction a developer sought for a conservation easement that would limit development to 30 houses on the tract instead of the 60 he planned. Applicable zoning restrictions limited development to 30 houses without the purported easement. With land prices so high many are pushing the envelope on conservation easements and other techniques to make the numbers work. This plan cost the taxpayer a 20% penalty tax! Turner Est. v. Commr. 126 TC No. 16; No. 5165-04.

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