Moderator Jay Fishman (Financial Research Associates) took on the “puzzling, controversial” topic of tax-affecting with the panel of Tax Court judges in Part III of BVR’s Tax Summit last Friday, hosted by Georgetown Univ. Law Center. Although none of the judges has presided over a case in which the issue came up—“I’m looking forward to it,” said Judge David Laro. “We are aware of the writings, the articles, the speeches, and the intensity of the debate” on the topic within the BV profession, Laro said, and they know that most BV analysts believe that what the Tax Court did in the Gross case was wrong.
But remember, added Judge Mary Ann Cohen, the Tax Court could adopt an expert’s findings on tax-affecting without necessarily conflicting with Gross because the facts of the case will be different and likely distinguishable. Judge Julian Jacobs also suggested that in the next case, the Tax Court might agree to render its decision as a T.C. Opinion (rather than a T.C Memo) if the court decides that the tax-affecting issue involves a sufficiently important legal issue or principle. “So if I heard correctly,” Fishman said, “since the tax-affecting cases so far are T.C. Memos, we shouldn’t feel bound by their facts, but [in the next case], we should do our homework and make sure our analysis backs up our conclusions.”
“You have to find the right facts and be prepared,” Judge Cohen agreed. “The courtroom door is open,” Judge Laro added. Read more of the judges’ insights, experience, and recommendations—on everything from the “red flags” of expert advocacy to what makes the DCF/income approach a more “real world” method than the market approach—in the January Business Valuation Update.