IRS came ‘this close’ to consensus on tax affecting

BVWireIssue #126-2
March 13, 2013

Not too long ago, a team of IRS engineering managers, BV specialists, and attorneys came together and developed a single approach for valuing S corporations. The team—headed Michael Gregory, a former IRS territory manager—submitted its approach for broader management review, with an eye toward taking it public.

The four territory managers and employees in the IRS’s engineering program “reached a consensus on how we might approach subchapter S issues,” Gregory revealed in his recent webinar on how to prepare a DLOM for the IRS. “However, over on the estate and gift tax side,” he said, there were five territory managers who couldn’t agree on a single approach. Some believed the six court decisions on tax affecting have resolved the issue as a matter of law and would compel the agency to appeal any case in which the valuator has tax affected. Other managers believed that it still is a factual issue, and some cases will call for tax affecting, but others won’t.

Still other territory managers wanted to submit each tax-affecting valuation to an individual review. Given the disagreement among IRS managers and executives, “there was no consensus” and no collective “desire to spend the political capital internally,” said Gregory, now a private consultant (Michael Gregory Consulting). The IRS continues to work on the issue—as will the BV community.

Please let us know if you have any comments about this article or enhancements you would like to see.