Major advance in thinking about S corp taxes and value

BVWireIssue #150-2
March 11, 2015

A soon-to-be-published book is being hailed as a major advance in the area of valuations of pass-through entities. It challenges traditional notions about the differences in value between a pass-through entity and the public market C corporation. The new book reveals an abundance of research that shows that shareholder-level taxes do indeed affect a firm’s value. Up to now, this position has been refuted by the IRS and the Tax Court, largely because data has never been presented to support it. This work should provide valuation professions with the evidence they need to support their valuation conclusions. It also provides a suggestion for a new, more direct approach to pass-through entity valuation.

In the works for seven years, the book presents over 60 academic studies and papers that demonstrate that shareholder-level taxes have a definite effect on firm value. The new book, Taxes and Value: The Ongoing Research and Analysis Relating to the S Corporation Valuation Puzzle by Nancy J. Fannon (Meyers, Harrison and Pia LLC) and Keith Sellers (University of Denver), to be published by Business Valuation Resources, will be available in April. It is available for pre-order if you click here.

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