Administrative: Estate Tax-Corporate Value-Life Insurance Proceeds

Plaintiff’s estate appealed the judgment of the district court denying plaintiff’s appeal from the assessment of estate taxes. Michael and Thomas Connelly were the sole shareholders of their building materials company. The company took out life insurance policies on each brother to obtain proceeds to redeem the brother’s shares upon death. When Michael died, the IRS assessed the company’s fair market value as including the life insurance proceeds intended to redeem his stock. The district court denied plaintiff’s refund request, ruling that the Connellys’ stock purchase agreement did not affect the company’s valuation, which had to include the life insurance proceeds as a significant asset.

Where the company ignored the valuation mechanisms established in the stock purchase agreement, the district court properly included the life insurance proceeds in the company’s value since a buyer of the company would obtain control of the proceeds.

Judgment is affirmed.

Connelly v. U.S. Department of Treasury, Internal Revenue Service (MLW No. 79977/Case No. 22-3683 – 13 pages) (U.S. Court of Appeals, 8th Circuit, Gruender, J.) Appealed from U.S. District Court, Eastern District of Missouri, Clark, J. (Robert L. Devereux, of Frontenac, MO for appellant; Steven Andrew Ahillen, of St. Louis, MO and Jessica A. Gottsacker, of St. Louis, MO on the brief) (Norah Bringer, USDOJ, of Washington, D.C. for appellee; Jennifer Marie Rubin, USDOJ, of Washington, D.C. on the brief)