At the recent 2013 IRS Valuation Summit, a mock trial was presided over by Judge Mark Holmes, of the real U.S. Tax Court, reports David M. Rosenthal (Curtis-Rosenthal Inc.), who co-chaired the conference. The idea was to present in a dramatic and entertaining way the wrong way and the right way to conduct oneself as an appraiser expert witness.

Bob Dietrich (Navigant Capital Advisors), co-chair of the conference, prepared the mock trial presentation. In an initial presentation of the valuation experts in the hot seat at the trial, Stephen Roach (Jones, Roach & Caringella Inc.) did everything wrong as the inept appraisal expert witness presented by the taxpayer’s attorney, David Holtz (Holtz, Slavett & Drabkin). After a brutal cross-examination, the IRS’s attorney, Gary Slavett (Holtz, Slavett & Drabkin), made a motion for the “court” to strike the appraisal report from evidence based on a Daubert challenge. Judge Holmes deliberated and ruled in favor of the IRS, granting the Daubert challenge and striking the faulty appraisal report.

In a second presentation of the same trial, a much better prepared (and better dressed) Roach showed how a professional appraiser prepares an appraisal and testifies before U.S. Tax Court. This time around, the taxpayer’s attorney was able to find fault with the appraisal prepared by the IRS’s appraisal expert, Frank Molinari (Internal Revenue Service), while the taxpayer’s expert held up very well under cross-examination. After thorough consideration of the evidence and testimony, this time Judge Holmes ruled in favor of the taxpayer, demonstrating the importance of having a professional and well-prepared expert appraiser.

The December issue of Business Valuation Update has additional coverage of the 2013 IRS Valuation Summit, which was presented by the Southern California Chapter of the Appraisal Institute and the CFA Society.