Given recent changes to IRS form 1065 (partnership income) and revised Schedules B, C, and K-1, taxpaying firms will have to file substantial ownership information and documentation for 2009, including their positions in affiliated firms and a clearer, more complete breakdown of ownership by individual and corporate partners. These new changes “may give appraisers a better sense of control issues,” says the current issue (Feb. 2010) of Business Valuation Notes by the Minnesota BV Group.

In particular, although reporting requirements for sole proprietorship distributions haven’t changed, “limited liability companies, partnership, and other tax pass-through business forms…must now display a chain of ownership, showing who owns directly or beneficially an interest,” Steve Blakely (Olsen Theilen & Co., Ltd., St. Paul, MN) tells BV Notes. For example, if Party A owns 15% of Partnership X directly but also owns 90% of Company B which owns 40% of Partnership X, then Party A must report owning a 51% “direct and indirect” interest of Partnership X, Blakely explains. “While the chain of ownership reporting seems to give a trail to control issue,” he adds, “it’s not as clear as ownership charts suggest.” The new rules also incorporate family relationships not required by prior estate planning regimens, including ownership by spouses and children.