Connelly v. United States
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A short, plain-English overview of Connelly v. United States.
In Connelly v. United States, the Supreme Court addressed the valuation of a decedent's shares in a closely held corporation for federal estate tax purposes. The Court determined that life-insurance proceeds payable to a corporation are an asset that increases the corporation's fair market value, and a contractual obligation to redeem shares does not offset these proceeds. Consequently, the estate's valuation of Michael Connelly's shares was adjusted, resulting in additional taxes owed.
Holding
The single most important “bottom line” of what the Court decided in Connelly v. United States.
The Court held that a corporation's contractual obligation to redeem shares does not reduce its value for federal estate tax purposes.
Key Quotes
Short excerpts from the syllabus in Connelly v. United States that support the summary and concepts above.
A corporation's contractual obligation to redeem shares is not necessarily a liability that reduces a corporation's value for purposes of the federal estate tax.
The value of a decedent's shares in a closely held corporation must reflect the corporation's fair market value.
Life-insurance proceeds payable to a corporation are an asset that increases the corporation's fair market value.
