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George W. Vanderbilt, the grandson of Cornelius Vanderbilt, acquired thousands of acres of land in North Carolina, where he built a mansion from 1889 to 1895. Named Biltmore, the 178,926 square foot building is the largest privately owned residence in the United States.
George had one child, a daughter, Cornelia, who married John Cecil. The Cecils opened the Biltmore to the public in 1930 at the request of the City of Ashville, in hopes of promoting tourism during the Great Depression. It closed during World War II. In 1932 the TBC corporation was formed to own and manage the estate.
The Cecils had two sons, George and William. They worked to make the estate profitable as a tourist attraction. After Cornelia died in 1976, the brothers disagreed on the future of TBC. George surrendered all of his shares in TBC in exchange for 3,000 acres of the estate and the dairy operation, which was more profitable at that time.
In 1995, on the 100th anniversary of the opening of the mansion, William turned management responsibilities over to his son, William Jr. According to Wikepedia, the house is assessed at $157.2 million for property taxes, but that is reduced to $79.1 million thanks to agricultural deferments. TBC has shown a profit every year since 1995, with the exception of 2008 during the Great Recession. Money is earned by selling tickets to tour the house, and from a variety of supporting operations owned by TBC.
William Jr. and his wife Mimi had two children, Bill and Dini. Bill became TBC’s president and CEO, and Dini became the Vice Chairman of the Board of Directors. In 2003 Dini started a Family Preservation Program for TBC, which involved meetings of all her and Bill’s descendants. The objective was to keep the Biltmore Estate in the family, and to keep it running profitably.
TBC had two classes of stock. In 2010, William Jr. and Mimi made taxable gifts of all their ownership in TBC. They gave the voting shares to Bill and Dini, and the nonvoting shares to the grandchildren. The couple each reported taxable gifts of over $10 million.
IRS selected the gift tax returns for audit, and disputed the valuation. William Jr. and Mimi each died before the matter was resolved, so the controversy was continued by their estates.
The estates provided two experts for valuing the Biltmore Estate with a discounted cash flow analysis, a guideline public company analysis, and a similar transactions analysis. Discounts were permitted for the lack of liquidity restrictions on stock transfers. The IRS valuation expert’s opinions were given “zero weight” by the Tax Court, which sustained the taxpayer’s position.
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Any developments occurring after March 1, 2023, are not reflected in this article.
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