EFTA00592519.pdf

Z! 1 3' ;Cy DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE 290 Broadway New York, N.Y. 10007-1867 S:'/IALL BUSINESS/SELF-EMPLOYED DIVISION Date: March 31, 2016 Estate & Gift Tax Attorney - Lawrence Falk Badge # - 13; Teleph Fax # e-mail -I Leon D. Black 760 Park Avenue New York, N.Y. 10021 Gift Tax Return — 2013 Tax Period Donor - Leon D. Black Dear Mr. Black, The 2013 gift tax return has been selected for examination. If you would prefer to be represented by an attorney or accountant, please have the enclosed power of attorney form completed and forwarded to the address listed above. Please provide the following items and information: 1) Schedule A, Part 3, #7 — The gift amount related to the economic benefit of split dollar life insurance of the Leon D. Black 1999 Life Insurance Trust #1, was listed at $91,380. Please provide a detailed account as to how this amount was arrived at; and 2) Schedule A, Part 3, #8— The gift amount related to the economic benefit of split dollar life insurance of the Leon D. Black 1999 Life Insurance Trust #2, was listed at $19,879 . Please provide a detailed account as to how this amount was arrived at; and 3) Schedule A, Part 3, #9 — The Empire Valuation Consultants, LLC, appraisal, on page 64, analyzed the lack of control discount regarding the transfer of the donor's 37.75% Limited Partnership Interest in Black Family Partners, L.P. The appraisal cited iviergerstat Review 2013 and stated that the control premiums in Mergerstat corresponded to a discount for lack of control of 27%. The appraisal then cited Mergerstat's Third Quarter 2013 Control Premium Study and stated that the control premiums corresponded to lack of control discounts of between 25% and 32.4%. The appraisal also cited Closed End Investment Funds and stated the average discounts to be 11.3%. Based on the above, it appears that the minority/lack of control discount would be between 11.3% and 32.4%. Regarding an appropriate marketability discount, the appraisal, on page 70 EFTA00592519 stated that as a result of its analysis of restricted stock studies, a reasonable restricted stock equivalent discount for Black Family Partners, LP, would be 13.9%. The appraisal then applied a range of private equity discount increments to the selected restricted stock equivalent discount of 13.9% and concluded that a reasonable discount for lack of marketability would range from 21% to 27% with a mid-point of 24%. However, the appraisal, on page 70, concluded that the combined minority/marketability discount should be a total of 15%. Please have Empire provide a detailed explanation as to how a total 15% discount was arrived at as their appraisal leads to the conclusion that a much higher total discount was warranted; and 4) Schedule A, Part 3, #10 — The Empire Valuation Consultants, LLC, appraisal, on page 64, analyzed the lack of control discount regarding the transfer of the donors 34.53% Limited Partnership Interest in Black Family Partners, L.P. The appraisal cited Mergerstat Review 2013 and stated that the control premiums in Mergerstat corresponded to a discount for lack of control of 27%. The appraisal then cited Mergerstat's Third Quarter 2013 Control Premium Study and stated that the control premiums corresponded to lack of control discounts of between 25% and 32.4%. The appraisal also cited Closed End Investment Funds and stated that the average discounts to be 11.5%. Based on the above, it appears that the minority/lack of control discount would be between 11.5% and 32.4%. Regarding an appropriate marketability discount, the appraisal, on page 70 stated that as a result of its analysis of restricted stock studies a reasonable restricted stock equivalent discount for Black Family Partners, LP, would be 13.9%. The appraisal then applied a range of private equity discounts increments to the selected restricted stock equivalent discount of 13.9% and concluded that a reasonable discount for lack of marketability would range from 21% to 27% with a mid-point of 24%. However, the appraisal, on page 70, concluded that the combined minority/marketability discount should be a total of 15%. Please have Empire provide a detailed explanation as to how a total 15% discount was arrived at as their appraisal leads to the conclusion that a much higher total discount was warranted; and 5) Please provide documentation for the above GRATS that payment was made for each of the two years. If payment was made in closely held stock, please provide a copy of the appraisal(s) at the distribution date(s). Please forward the items and information requested above by May 12, 2016. Please do not hesitate to contact me if you have any questions regarding this matter. Enclosures: Publication 1 and Notice 609 Form 2848 — Power of Attorney Form Lawrence Falk Estate & GM Tax Attorney EFTA00592520 Fort 2048 Acv 2015) Power of Attorney and Detlwation of Representative? OMB No. 1545-0150 For IRS Un On Lnaparnscul the Treasury mine Severn Senn > Information about Form 2848 and its Instructions Is at trenviagov/form2848. Name Part I Pow of Attorney Isephaw Caution: A separate Form 2848 must be completed for each taxpayer. Form 2848 will not be honored Function for any purpose other than representation before the IRS. Data / / 1 Taxpayer Information. Taxpayer must sign arid date this form on page 2, line 7. Taxpayer name and address Taxpayer Identification number(s) BLac%, Leon D 056-38-1069 Daytime telephone number —1 Plan nurrber for applicable) hereby appoints the following representative(s) as attorney(s)4n-fact 2 Represeritetne(s) must sign and date this form on page 2. Part II. Nainf and address Chem': if to be sent copies of notices and communications CAF No. rnti Telephone No. Fax No. Check If new: Address O W Telephone NO 0 Fax No. O Narni and address CAF No. PTIN Fax No. Cheei if to be seat copies of notices and communications r Check if newt Addren Telephone No. ■ Fax No. ■ Nank and address CAF No. Pull Telephone No. Fax No. Note: IRS sends notices and corrrnu mations to only twoapresentatives Check if new: Address O T No. Fax No. ■ Name and address CAF No. P71N Telephone No. Fax No. (Note: IRS sands notices and communications to • two esentatives Check new: Address O 7 NO. ff Fax No. ■ to rep resent the taxpayer before the Internal Revenue Service and perform the following acts: 3 Acts authorized you we required to comp** this hie 3). WM the exception of the acts described in Ina 5b. I authorize my representertive(s) to receive and inspect my confidential tax ir4ormation and to perfcrm acts that I can perbrm with respect lo the tax matters described belay. Fa example. my representave(s) shall have the authority to sir sew agnomen* cosents, a Ann documents Nee Inebustkins tor Ss 5a for authorizing a representative to sign a iron. Desc bat of Mater acome. Employment, Par* Excise. Estate. Celt. Whisesbbvila Pr otiose Dscupline. RA, FCUL Ovi Peron Sec. 5000A Sawed Respnbily Parer,. Sec 498G1 Shared ReePoraibily Parent, ax.) (see nstructionel Tax Form Number (1040, 941, 720, etc.) (If npreirabie) Yearis) or Period* (if applicable) (see instructions) 4 Specific use not recorded on Centralized Authorization (CAF). If the power of attorney is for a specific use not recorded on CAF, check this box. See the instructions for Unit 4. Specific Use Not Recorded on CM •• O irmi Additional sets authottted ii addition to the acts lend or tine 3 above, l authorize my rephessntative(S) to perform the following acts (see Inettuctons for line Sa for more information): O Authaica cesciosure to thrd panes; O Substitute or ada representative(s): O Sign a return; O Other acts authorized: For Privacy Act and Paperwork Reduction Act Notice, see the instructions. Oat. No. 1195W Form 2848 (tiov 12.2015) EFTA00592521 Form NUS (Rev. 12-2015) Page 2 b Specific acts not authorized. My representative(s) is (are) not authorized to endorse a otherwise negotiate any check (including directing or accepting payment by arty means. electronic or othenvise. Into an account owned or controlled by the representatives) or any film or caner entity with whom the representative(s) is (are) associated) issued by the government in respect of a federal tax liability. list any other specific deletions to the acts otherwise authorized n this power of attorney (see instructions for Ire 5b): 6 FtetentlorthrovocatIon of prior power(s) of attorney. The fling of this power of attorney automatically revokes all earlier power(s) of attorney on file with the Internal Revenue Service for the same matters and years or periods covered by this document. If you do not want to revoke a prior power of attorney, check here > K YOU MUST ATTACH A COPY OF ANY POWER OF ATTORNEY YOU WANT TO REMAIN IN EFFECT. 7 Signature of taxpayer. Mates motto concern a year In Mich a pint ream was fled, each spouse must file a separate power of attorney even it they are apporMIng the some representallve(s). lf signed by a corporate officer. partner, guardian, tax matters partner, executor. recover, admi inflator, or trustee on behalf of the taxpayer. I artily that I have the legal authority to execute this foal on behalf of the taxpayer. C> IF NOT COMPLETED, SIGNED, AND DATED, THE IRS WILL RETURN THIS POWER OF ATTORNEY TO THE TAXPAYCR. •••••••••• Signature Dote Title (if applicable) PrInt Hume Pent nand tax Byer from Ino 1 M other then lixividual ma Declaration of Representative Order penalties of perjury, by my signature below I declare that: • I am not currentfy suspended or disbarred from practice, a ineigible for practice. before the Internal Revenue Service: craft subject to regulations contained in Circular 230 (31 CFR Subtitle A. Part 10), as amended. governing practice before the Internal Revenue Service: • I an authorized to represent the taxpayer identified in Part I for the matters) specified there: and elan, one of the following: a Attorney—a member in good standing of the bar of the highest court of the jurisdiction shown below. b Certified Public Accountant —ecensed to practice as a certified pubic accountant is active in the jurisdiction shown below. c Enrolled Agent —enrolled as an agent by the Internal Revenue Service per the requirements of Circular 230. d Officer —a bona fide officer of the taxpayer organization. e tut-Time Employee—a tuff-time employee of the taxpayer. f Family Member—a member of the taxpayers immediate family (spouse. parent. child, grandparent. grandched, stepparent, step-child, brother, or sister). g Emoted Actuary—enrolled as an actuary by the Joint Board for the Enrollment of Actuaries under 29 U.S.C. 1242 (the authority to practice before tin Interns Revenue Service is tinned by section 10.3(of) of Circular 230). h Unenroaed Return Preparer —Authority to practice before the IRS Is limited. An unenrolled return preparer may represent, provided the preparer (1) prepared and signed the return or claim for refund (or prepared if there is no signature space on the form}; (2) was eligible to sign the return or (kern to refund; (3) has a valid PTIfil: and (4) possesses the required Annual Filing Season Program Record of Cornplefion(s). See Special Rules Lrid Requirements for Unweaned Return Preparers in the instructions for additional information. It Student Attorney a CPA—receives permission to represent taxpayers before the IRS by virtue of his/her status as a law. business. or accounting student working in an UTC or STCP. See instructions for Part II for additional Information and reckirements,  Enrolled Retirement Flan Agent—enrolled as a retirement plan agent under the requirements of Circular 230 (the authority to practice before the Internal Revenue Service is limited by section 10.3(e)). tir ta -A.AnAnom OF REPAESENTATIVE iS NOT COMPLETED, SIGNED, AND DATED, THE IRS WILL RETURE POWER OF ATTORNEY. REPRESENTATIVES MUST SIGN IN THE ORDER LISTED IN PART I, LINE 2. :hats. For designations d-f, enter your title, position, or relationship to the taxpayer in the *Licensing jurisdiction' column. Dort ignation— km ern above %Ter (a4). Licensing MiredictIon (Stat" othir kcensing sulhonly (if applicable). Bar, scene. cereal:aeon, registration, a enrollment number p implcable). Signature Date EFTA00592522