Insight · Estate & Gift Valuation

The threshold moved. The valuation problem didn’t.

OBBBA raised the federal estate-tax exemption to $15 million per person. It did not repeal the rules that decide whether a discount survives review. Two recent cases, one from the Supreme Court and one from the Tax Court, show why the work matters more, not less.

Brian Allen · Founder, LHM Valuation Group 10–minute read · March 2026

Public Law 119-21, the One Big Beautiful Bill Act, was signed on July 4, 2025. Section 70106 amended IRC § 2010(c)(3) to set the basic exclusion amount at $15 million per person for estates of decedents dying and gifts made after December 31, 2025, with the inflation reference reset to calendar year 2025. The IRS later confirmed the $15 million figure for 2026, up from $13.99 million for 2025 decedents. That changes who is federally taxable, but not how an appraiser determines fair market value for a minority interest in a property-rich entity.

The fiscal context isn’t small. CBO estimated OBBBA would increase deficits by about $3.4 trillion over FY2025–FY2034, with roughly $4.5 trillion less revenue partly offset by $1.1 trillion lower direct spending. CBO separately attributed about $210 billion of revenue reduction over 2026–2034 to the higher estate and gift exemptions. But none of that answers the question that still controls an appraisal engagement: what interest is being valued, under what standard, with what support for any discount.

What actually changed and what didn’t

Figure 1
The exemption shifted, and the framework around it did not.
2025 Decedents
$13.99M
per person, federal basic exclusion
  • USPAP and IRS valuation principles unchanged
  • Bona fide sale defense unchanged
  • § 2036 retained-interest doctrine unchanged
  • State estate & inheritance regimes unchanged
2026 Decedents · OBBBA
$15.00M
per person, federal basic exclusion
  • Federal taxable population narrows
  • State exposure unchanged in many jurisdictions
  • Buy-sell & redemption mechanics unchanged
  • Discount supportability still controls outcomes
A higher exemption changes who files, not what survives review when an estate does file, when state tax is in play, or when a non-tax dispute over value arises.

Where discounts still matter

The federal taxable population just got smaller, but the settings where a defensible discount analysis still matters did not.

Figure 2
Six settings where discount supportability still controls the outcome.
Large Estates
$15M is a high bar but not an infinite one, especially with appreciated real estate, operating businesses, and insurance-funded buy-sells.
State Tax
Several states retain separate estate or inheritance tax regimes. Multistate property holdings keep the exposure live.
Family Entities
FLP/LLC discounts still rest on pooling, governance, liquidity, and bona fide nontax purpose, not on a percentage selection.
Buy-Sell Planning
After Connelly, entity-level liquidity that funds redemptions can increase reported value rather than offset it.
Litigation
Shareholder disputes and divorce courts continue to expect coherent DLOM and minority support, as in Rosenblum and Nelson.
Charitable & Transactional
Same entity-level facts that drive FMV in tax controversies drive it in planning, fairness opinions, and negotiation.
A higher exemption does not make governance documents, transfer restrictions, cash-flow rights, or exit realities irrelevant. It only narrows where they trigger federal estate tax.

Two cases worth keeping in front of you

Two recent decisions frame what still gets tested. One is the Supreme Court reminding planners that entity-level cash matters. The other is the Tax Court reminding them that bad facts kill good models.

Supreme Court · June 2024
Connelly v. United States
Facts
Crown C Supply, a closely held building-supply corporation, carried $3.5M of life insurance on each brother to fund a possible redemption. Michael held 77.18%, Thomas 22.82%. After Michael’s death, Crown redeemed his shares.
Outcome
Estate reported $3M. IRS valued Crown at $6.86M by treating insurance proceeds as a corporate asset; Michael’s shares at ~$5.3M; +$889,914 in estate tax. Supreme Court agreed with the government’s logic.
Why It Still Matters
Entity-level cash and rights matter. A redemption obligation does not automatically cancel the proceeds funding it. Planning structure now drives valuation outcome more visibly than before.
Tax Court · T.C. Memo. 2024-90
Estate of Anne Milner Fields
Facts
Acting under POA, ~one month before Ms. Fields’s death, ~$17M was transferred into a new partnership. GP contributed $1,000. Ms. Fields ended up with 99.9941% LP interest. Estate appraised at ~$10.8M after 15% lack-of-control and 25% DLOM.
Outcome
Court held § 2036(a)(1) and (a)(2) applied. Bona fide sale defense lost. Final result: $4,241,575 deficiency + $848,315 penalty under § 6662(a) negligence.
Why It Still Matters
The problem here was not the discount mechanics but the facts: timing, pooling, depleted outside liquidity, and the absence of real economic purpose collapsed the discount before any DLOM debate began.

Cases are rarely lost on discount mechanics. They are lost on the facts underneath.

Outside tax court: Rosenblum and Nelson

The estate-and-gift world isn’t the only place valuation discipline gets tested. Rosenblum v. Treitler, decided by New York’s First Department in 2025, affirmed a 15% DLOM on real-estate-holding LLCs. The court credited an expert who relied on protracted litigation, the absence of an operating-agreement withdrawal process, and the friction created by an “unwillingness to compromise” as risks a third-party investor would face. The opinion sounds enterprise-focused; some of the supporting facts read as member-level. That ambiguity is what made the case useful for the side that won, and what makes any DLOM presentation in real-estate-holding LLCs a careful exercise.

In Iowa, In re Marriage of Nelson, decided February 2025, affirmed a $1.5M company value that incorporated a 20% marketability discount on a 51/49-owned roofing business. Neither case is transfer-tax authority. Both reinforce the same point: outside the tax-court setting, judges still expect expert reasoning that connects to the record, and they still reward fact-based discount work over plug-number selections.

What separates a discount that survives from one that doesn’t

The pattern across the tax cases, the shareholder disputes, and the divorce work is consistent. Defensible discounts start with asset composition, move through entity purpose and governance, and end with the timing and documentation of how the structure came together. OBBBA does not change the recurring red flags, only the population of estates that gets tested.

Recurring red flags
  • Deathbed funding or formation timed to a known health crisis.
  • No meaningful nontax purpose or genuine pooling of assets.
  • Insufficient liquidity outside the entity to cover the decedent’s expected needs.
  • Documents that leave effective control with the decedent or a related party.
  • Discounts imported from unrelated cases without record-specific support.
  • Boilerplate report language that doesn’t tie to the actual rights and restrictions.

The takeaway

OBBBA raised the threshold without repealing the doctrine. The estates that still trigger federal tax, the families with state-tax exposure, the closely held entities with buy-sell or insurance structures, the partnerships facing Tax Court scrutiny, and the businesses inside shareholder or divorce disputes all still need discount work that survives review. The number of engagements may shrink, but the standard for the ones that remain just got higher, because those are the ones with the most at stake.