If the drubbing in the IRS DLOM Job Aid weren’t enough, the FMV Restricted Stock Study just received a four-point critique in a recent posting by a Palm Beach CPA firm. “From a theoretical perspective,” the authors write, the FMV analysis may be vulnerable in these areas:

• The underlying companies in the database do not represent “American business.”
• The underlying companies are primarily unprofitable, non-dividend paying, and risky.
• The two-year holding period restriction data is limited and aged.
• The majority of transactions are subject to registration rights.

Whether these questions are new, BV appraisers should at least be aware of this new angle of attack on an established methodology for deriving the marketability discount. Lance Hall (FMV Opinions Inc.) promises a response to each point in the next issue of BVWire.