DLOM inconsistency in N.Y.

BVWireIssue #153-2
June 10, 2015

New York court decisions on DLOM are all over the map and sometimes very perplexing, a panel of speakers pointed out at the recent annual business valuation conference in New York City hosted by the New York State Society of CPAs (NYSSCPA).

A puzzlement: For example, there’s a “treacherous landscape” regarding DLOM and real estate companies. In the Chiu case, the business owned real estate that was easily marketable, so Chris Mercer (Mercer Capital), who testified in this case, argued that there should be no DLOM. The court agreed (recently affirmed on appeal). But, in Giaimo (another Mercer case), a company also owned marketable real estate, but the court ruled for a 16% DLOM. “There was credible evidence that people were lining up to buy the property,” Mercer recalls. “I don’t know where the court got the 16% DLOM.” Peter Mahler (Farrell Fritz P.C.) suggested that, because the real estate was held in a “corporate wrapper,” the situation was more complex. Mercer also stated that he testified that, because of transaction costs, a 5% DLOM-like discount should be applied. But the written opinion states that there was “no testimony” in this regard. Go figure.

The cases are: Chiu v. Chiu, 2015 NY Slip Op 01427 [2d Dept Feb. 18, 2015], and Giaimo v. Vitale (II), 2012 N.Y. App. Div. LEXIS 8706 [Dec. 20, 2012 (slip op.)]. For more on these cases, go to BVLaw.

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