Professional Research Document
Valuation Discounts in IRA-LLC Structures: A Legal and Strategic Framework
A comprehensive analysis of the legal basis, IRS guidance, Tax Court precedent, and compliance framework for applying DLOC and DLOM discounts to IRA-owned LLC interests in the context of Roth conversions.
~30
Pages
11
Tax Court cases
1
Legal opinion
Developed to provide CPAs, financial advisors, estate planning attorneys, and other qualified professionals with the legal and analytical foundation needed to evaluate this strategy for client situations. Includes supporting legal opinion from tax counsel.
What’s Inside
- §01Legal foundation: Swanson v. Commissioner (1996) and the IRS's acknowledgment of IRA-LLC structures
- §02Tax law framework: the FMV standard, IRS Interpretive Letter EP:R:9, and how conversion income is determined
- §03The two discounts explained: DLOC and DLOM mechanics and the sequential application method
- §04IRS published guidance: Rev. Rul. 59-60, the 2009 DLOM Job Aid, IRM 4.48.4
- §0511-decision Tax Court case table with combined discounts, key principles, and citations
- §06Operating agreement analysis: section-by-section review of provisions that legally drive the discount
- §07Legal opinion summary from Kent Savage, Esq. — estimated discount basis and conclusions
- §08IRS challenge history: published cases, audit exposure analysis, and §2704 regulatory history
- §09Compliance framework: discount range tables, documentation requirements, statute of limitations
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