According to Lance Hall and Kyle Vataha (FMV Opinions, Inc.), the criticisms of The FMV Restricted Stock Study in the IRS DLOM Job Aid (available on BVR’s free download page) can be boiled down into three issues:

1. IRS criticism:  You can’t reliably use a regression model to determine an accurate discount.
   
   FMV answer:  Correct.  You don’t use a regression model to determine your P/E ratio and you shouldn’t do it for your DLOM.
   
   
2. IRS criticism:  The IRS cannot find any statistical relevance regarding the key comparative characteristics recommended by FMV
   
   FMV answer:  The IRS mixed registration rights data, step-premium transactions, with 6-month, 1-year and 2-year holding periods. No wonder they didn’t find a correlation.  However, at least 7 non-FMV academic and valuation professional statistical analyses did find statistical correlations with the recommended characteristics.
   
   
3. IRS criticism: There is no statistical proof that large percentage blocks of stock have higher discounts than small percentage blocks.  
   
   FMV answer:  Wrong!  At least three academic studies and two valuation studies have found the percentage block to be statistically meaningful.  This is important because the large block discounts set a floor for the private company DLOM

On Wednesday October 12th, join Lance Hall for a special 100-minute webinar, FMV Responds to the IRS DLOM Job Aid, in which Hall will address the IRS Job Aid, what it means for business appraisers, and how to approach your DLOM determinations in light of this document.