Opinion ID: 25542
Heading Depth: 2
Heading Rank: 2

Heading: The Family Settlement Agreement.

Text: The Estate argues that the Tax Court clearly erred in disregarding the share value set forth in Andrew and Dinah's Family Settlement Agreement. It notes that even the Tax Court recognized that the two negotiated at arm's length. The Estate asserts that Estate of Warren v. Comm'r, 981 F.2d 776 (5th Cir.1993), controls. “In general, comparable sales constitute the best evidence of market value.” United States v. 320.0 Acres of Land, 14 605 F.2d 762, 798 (5th Cir.1979) (holding that courts should liberally admit evidence of comparable sales and allow the factfinder to evaluate them). The more comparable a sale is in characteristics, proximity, and time, the more probative it is of value. Id. Courts have observed, however, that agreed valuations near in time to a decedent’s death are not conclusive. United States v. Simmons, 346 F.2d 213, 216 (5th Cir.1965) (holding that a decedent’s tax settlement with the IRS did not establish the value of his estate’s claim against the IRS as a matter of law); First Nat'l Bank of Kenosha v. United States, 763 F.2d 891, 895 (7th Cir.1985) (admitting evidence of an agreement valuing property after the decedent’s death, but observing that such evidence was not conclusive). In United States v. Certain Land in City of Fort Worth, 414 F.2d 1026 (5th Cir. 1969), a jury valued a landowner’s condemned property at $82,000. The government appealed, arguing that the jury instructions should have placed greater weight on the fact that the landowner bought the property for $50,000 just thirteen months before the condemnation. Id. at 1027. Rejecting the government’s argument, this court noted that land values could fluctuate considerably in thirteen months. It also observed that a prior sale of a property is not entitled as a matter of law to greater weight than sales of comparable property. Id. at 1028 (citing Hickey v. United States, 208 F.2d 269, 273 (3rd Cir.1954)). Thus, finders of fact may in some cases disregard recent sales of 15 even the very property at issue. Under these general principles, the court was not required to credit the values premised in the Family Settlement Agreement. Further, despite the Estate’s contentions, Warren does not control. In Warren, the decedent bequeathed part of her estate to a charity. The charity altered the will distributions through a settlement with the heirs. The IRS and the estate disputed the size of the charitable deduction that the estate could claim. This court concluded that the assets received by the charity under the bona fide settlement qualified for the deduction under the applicable statute. Warren, 981 F.2d at 782-84. Warren concerned the binding status of a settlement of litigation in probate court on the value of a charitable deduction, not, as here, the persuasive effect of an out-of-court settlement on the issue of an asset's value. Warren is not directly relevant to this case. Here, Andrew and Dinah entered into an agreement valuing Johnco shares more than two years after Helen’s death. The Tax Court disregarded the valuation principally because it appeared to derive from the assumption that a buyer would liquidate Johnco’s Timber Property quickly. Because we have found the court’s outright rejection of the liquidation model to be incorrect, its rejection of the siblings’ negotiated value may also be incorrect. As a precaution, this finding is vacated and remanded for further consideration. 16