Among the most anticipated speakers at the DLOM Summit was Howard Lewis, who just retired as National Program Manager for the IRS’s Engineering and Valuation programs to lead the Institute of Business Appraisers as its new Executive Director (see BVWire #70-5).  Lewis began his remarks in a light-hearted manner by recalling a professional conference on the discount rate, where the speaker stood up and said, “Good morning, the discount rate is 18%,” and then sat down.

As for what the IRS’s “official position” on marketability discounts may be—“I don’t have a clue," Lewis quipped.  “There is no such thing as an official position.  There are hundreds of valuators, managers, appraisers, and service agents—all of whom are trying to solve this problem, and all are frustrated by the process and its problems.”  Lewis likened the situation to a taxi trip from New York’s LaGuardia Airport to nearby Forest Hills, which should take ten minutes but ends up, after multiple detours and distractions, taking two hours.  “That’s what’s happening in valuation analysis today,” Lewis said.  “We’re trying to get to the right answer but we’ve created a process that’s fraught with risk and waste.” 

Analysis must be market-based.  Regardless of which model or methodology you use, Lewis told Summit attendees, “make sure your analysis begins and ends with the market.”  After all, the root of the calculation is the marketability discount within the overarching determination of fair market value.  “We need to shorten the trip and simplify the process and focus on the market,” Lewis said, “because that’s where the answer lies.”  For a complete summary of his remarks, plus exclusive interviews with Summit moderators and organizers, see the November Business Valuation Update™.