Many in the estate/gift valuation community cite the landmark Mandelbaum v. Commissioner (1995) primarily for the Tax Court’s ten-factor holding on the determination of marketability discounts. (A full-text copy of Mandelbaum is available to subscribers of BVLaw.)
Equally important was the dicta conveying the Court’s disenchantment with the proffered valuation reports. “Having found limited refuge in the opinions of either expert,” Judge David Laro wrote, “we proceed to determine the value of the marketability discount.”
At this past weekend’s LEI National CLE Conference in Snowmass, Colorado—which offered a business valuation track for the first time—presenter Ron Seigneur (Seigneur Gustafson & Knight, LLP), distributed a copy of Ackerman v. Ackerman (Dec. 27, 2006), which he predicted will become the “Mandelbaum” of reasonable compensation cases.
In this California divorce, the parties litigated the value of the husband’s plastic surgery practice. To support a determination of goodwill, the wife’s expert looked to regional breakdowns from the MGMA (Medical Group Management Association) survey, while the husband’s expert relied on broad national data from the AMA (American Medical Association).The trial court found problems with both experts’ data; neither was sufficiently “fine-tuned” to the Newport Beach area where the husband practiced, and the judge was forced to apply his own “quality control” in its valuation determination. The appeals court affirmed, citing a list of business/professional attributes to include in goodwill determinations.
For a copy of the case, click here. For more on the LEI National CLE Conference, now in its third decade sponsoring first-class confabs in world-class ski resorts, click here.
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