Supreme Court Ruling Impact on Corporate Estate Tax Planning
The U.S. Supreme Court unanimously ruled that life insurance proceeds a corporation receives to fund a share redemption agreement increase the corporation’s estate tax value. The case involved Crown C Supply, a small building supply company, and the IRS. The court stated that after the death of a shareholder, the value of their shares must reflect the corporation’s fair market value, including insurance proceeds meant to fund a share redemption. The decision affirms an earlier ruling in favor of the IRS, which had disagreed with the estate’s valuation of shares, leading to additional taxes for the estate. The Supreme Court concluded that the result is a consequence of how the shareholders chose to structure their agreement.