The most notable thing about the valuation of pass-through entities (PTEs) may be … that there’s nothing new to note, says Nancy Fannon (Meyers, Harrison & Pia). Has the IRS backed off its historic resistance to tax affecting the income stream of S corporations and similar PTEs to account for the difference between the public market data, from which they derive the cost of capital, and the subject PTE, to which they will apply it?

“I've been told yes, but the cases I've been called on indicate otherwise,” says Fannon. “Next to discounts for lack of marketability, there may be no issue more material to the valuation of a closely held company than tax affecting, yet I find there is an utter lack of consensus among professional business appraisers on what to do, leaving potentially widely disparate results from one practitioner to the next.” As a result, courts appeared more confused than ever: Consider the recent Bernier opinion from the Massachusetts Supreme Court, which just remanded a protracted divorce case back to the trial court for a third try at correctly applying the Kessler metric on tax affecting.

Get current on research, court cases, and credible solutions. Join Fannon and Keith Sellers (University of Denver) on October 18 for The Latest on S-Corps: Practical Lessons from Research and the Trenches to arm your appraisals of closely held companies with the latest academic conclusions and practical applications.