Estate of Charles a. Boratello, Deceased, C. Norman Borgatello and Josephine E. Donnelly, Co-Executors, and C. Norman Borgatello, Successor Trustee to the Charles A. Borgatello Living Trust, (2000)

Extract

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Estate of Charles a. Boratello, Deceased, C. Norman Borgatello and Josephine E. Donnelly, Co-Executors, and C. Norman Borgatello, Successor Trustee to the Charles A. Borgatello Living Trust, (2000)

T.C. Memo. 2000-264

UNITED STATES TAX COURT ESTATE OF CHARLES A. BORGATELLO, DECEASED, C. NORMAN BORGATELLO AND JOSEPHINE E. DONNELLY, CO-EXECUTORS, AND C. NORMAN BORGATELLO, SUCCESSOR TRUSTEE TO THE CHARLES A. BORGATELLO LIVING TRUST, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 24756-97. Filed August 18, 2000.

John W. Ambrecht and Gregory Arnold, for petitioners. Donna F. Herbert, for respondent.

MEMORANDUM OPINION WELLS, Chief Judge: Respondent determined a deficiency of $3,424,504 in the Federal estate tax of the estate of Charles A. Borgatello (the estate). After concessions, the issues we must decide involve the fair market value of stock representing an 82.76-percent interest in Valley Improvement Co., Inc. (VIC)1 as of January 12, 1994. To value the 82.76-percent shareholder's interest in VIC, we must first decide the fair market value of two shopping centers owned by VIC, Montecito Village North (MVN) and Montecito Village South (MVS), as of January 12, 1994. The parties agreed on the value of VIC's other assets. Some of the facts have been stipulated and are incorporated herein by this reference. Unless otherwise noted, all section references are to the Internal Revenue Code, and all Rule references are to the Tax Court Rules of Practice and Procedure. Charles Borgatello died a resident of California. Mr. Borgatello died on July 12, 1993. Background For the purpose of valuing Mr. Borgatello's assets, the estate's executors elected the alternate valuation date of January 12, 1994. On the alternate valuation date, VIC owned 100 percent of MVN and MVS. VIC also owned other assets with a total value (pursuant to the parties' stipulations) of $3,188,000 (rounded).2 Per the parties' stipulations, on the alternate valuation date, VIC had total liabilities of $2,543,000. The net value of VIC's assets3 on the alternate valuation date equaled the values of MVN and MVS, plus $645,000 (assets of $3,188,000 minus liabilities of $2,543,000).

(...continued) 1562 Alamo Pintado outside of Solvang 475,000 Seven Properties zoned M-1 in Santa Barbara 130 Nopalitos 140,000 126 Nopalitos 61,595 710 Kimball Street 87,785 712 Kimball Street 101,850 718 Kimball Street 101,850 713 Carpinteria Street 101,850 119 Powers Avenue 91,180

Total $2,081,110

Tangible Pe...

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