Iowa Supreme Court Allows Reduction in Value for Transaction Costs but Refuses to Allow a Reduction for Built-In Capital Gains Tax

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Court Case Digests
June 18, 2021

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0291 General Farms, Primarily Livestock and Animal Specialties
112990 All Other Animal Production
judicial dissolution
fair value, net asset value, breach of fiduciary duty, built-in capital gains tax (BICG tax), discount, stock, dissolution, assets, shareholders
Guge v. Kassel Enters.
2021 Iowa Sup. LEXIS 81, 962 N.W.2d 764
US
State Court
Iowa
Supreme Court
McDermott

Summary

This case was decided, on appeal, under the Iowa “election-to-purchase-in-lieu-of-dissolution statute.” The Iowa Supreme Court decided that, because the parties’ experts had “both included transaction costs in their valuations under a net asset approach, the district court’s failure to reduce the asset values to account for the costs to liquidate the corporation’s assets warranted reversal.” Additionally, since there was no evidence of an intention to liquidate the company or its assets, the court declined to adjust for the built-in gains tax consequences urged by the majority shareholder.

See Also

Guge v. Kassel Enters.

Full Text of Court Cases
June 18, 2021

This case was decided, on appeal, under the Iowa “election-to-purchase-in-lieu-of-dissolution statute.” The court decided that, because the parties’ experts had “both included transaction costs in their valuations under a net asset approach, the district court’s failure to reduce the asset values to account for the costs to liquidate the corporation’s assets warranted reversal.” Additionally, since there was no evidence of an intention to liquidate the company or its assets, the court declined to adjust for the built-in gains tax consequences urged by the majority shareholder.