Dec 1, 2008 12:00 PM

, By Scott Andrew Bowman

By Scott Andrew Bowman

One of the questions that practitioners ponder is how to properly discount the value of stock in a closely held C corporation to reflect the future income tax liability on the corporation's unrealized built-in gains (BIGs). For transfer-tax purposes, this is known as the built-in gain discount (the “BIG discount”).

The proper computation of the BIG discount has perplexed courts and practitioners alike. Many had hoped that the Supreme Court would solve the mystery. But, on Oct. 6, 2008, the High Court denied the Internal Revenue Service Commissioner's petition for writ of certiorari in Estate of Jelke,¹ a case that raised this very question. Perhaps the Supremes found the task of traversing this BIG unknown as daunting as lower courts have. Regardless, practitioners are now left to choose among conflicting precedent in navigating the uncertainty.