This appeal in a California court involved a dispute over an appraisal of the plaintiffs’ 15% interest in a grocery store the defendant operated. The plaintiffs alleged that the award of the superior court was obtained by fraud and that the arbitrator prejudiced their rights.
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Appeals Court Remands for New Damages Determination Based on Improper Monopolization Verdict
At issue in this case are price discrimination damages, anti-trust damages, and tort damages.
Tax Court Hands Jackson Estate Major Win but Finds Reasoning for Tax Affecting Unpersuasive
Tax Court mostly sides with estate of late superstar in valuing three contested assets; assets had to be valued separately, based on parties’ stipulations, and at death; court says Jackson’s “tattered” image and likeness meant he earned little money apart from his music; court rejects tax affecting.
Expert’s Failure to Explain Basis for Compensation Analysis Renders Testimony Inadmissible
In condemnation case requiring fair market value analysis to determine compensation due to landowners, court excludes defense expert testimony, citing failure to follow mandated methodology and standard of value; court calls aspects of loss calculation based on income approach “disturbing.”
North Carolina Court Says Deal Price Represents Upper Limit of Tobacco Company’s Fair Value
In appraisal action involving merger of public (tobacco) company, court, guided by key Delaware court decisions, says deal price best reflects fair value and represents upper limit; contemporaneous valuations based on comparable companies, precedent transactions, and DCF support use of deal price.
Appeals Court Decides Trial Court Abused Its Discretion in Choosing the Method of Determining Damages
In this case alleging damages to a soybean crop, a Louisiana court of appeals determined that the trial court abused its discretion when it chose an expert's methodology for calculating damages, as another methodology was supported by the record and was not overly speculative; a reduced damage award was appropriate. The trial court affirmed two other issues regarding evidence of cause of damages and the issue of standing as to who owned the land and thus the crops.
Minority Shareholder Receives Award of $12 Million for Breach of Contract, $58 Million Buyout Award for Minority Interest
This shareholder dispute case involved two businesses three brothers in Minnesota owned. One of the brothers, Jim Koch, had a falling out with the other two, Randy and Dave Koch. A temporary agreement was made among them in 2006, but subsequently the relationship and actions of the parties deteriorated. In particular, an IRS audit of the two businesses triggered a disagreement as to whether required payments under the agreement had to be tax deductible. Certain actions by the defendants breached the 2006 agreement as determined by a jury resulting in a damages award of $12 million. The court then held a bench trial to determine the value of the two businesses for determining the buyout amount for Jim’s interest in both businesses. Experts for each side testified as to value. The opinion provided a good analysis of the various issues in the methodologies each of the experts used.
Court Denies a Motion to Dismiss Plaintiffs’ Claims That Defendants “Hid” Losses and Impaired Goodwill
In this case regarding alleged fraud in the purchase or sale of securities, the defendants pled a motion to dismiss the plaintiffs’ claims. The parties categorized the defendants’ alleged misstatements into two groups: (1) the Nutrisystem claim, where the defendants allegedly misled investors as to the success of the Nutrisystem acquisition; and (2) the goodwill claim, where the defendants allegedly impaired goodwill by carrying goodwill at a value that exceeded its implied fair value. The court denied the motion to dismiss.
Petitioners Not Allowed a Charitable Contribution—Did Not Use a Qualified Appraiser
The taxpayers made a valid gift of stock, but they realized and recognized gain because their right to the proceeds from the sale occurred before the gift was made. They also were not entitled to a charitable contribution deduction because they did not procure a qualified appraisal. The taxpayers were not liable for an underpayment penalty.
U.S. District Court Decides Some Issues for Government and Some for Defendants But Very Little in Damages in an ERISA ESOP Case
In this ESOP ERISA case, the government (plaintiffs) (Secretary of Labor) alleged claims against the defendants, Robert N. Preston and TPP Holdings Inc. (and nominally against its ESOP) for: (1) breach of fiduciary duties; (2) engaging in prohibited transactions; and (3) co-liability of defendants. In a lengthy opinion, the court determined that the defendants did breach fiduciary duties and did engage in prohibited transactions. It further decided that there was no co-liability among the defendants, but it did not allow an offset of payments on debt of TPP Preston personally made. In determining FMV, the court did not allow a minority interest discount. In so doing, the resulting damages determined were minimal.
Delaware Chancery Court Rejects Partnership Valuation in a Freeze-Out as Unfair to Minority Partners
In this coordinated action involving 13 partnerships that were involved in freeze-out transactions by AT&T of minority shareholders, AT&T breached its fiduciary duties and effectuated the freeze-out through an unfair process and by paying an unfair price. The freeze-out was subject to the entire fairness standard of review. AT&T bore the burden of proving that the freeze-out was entirely fair to the minority partners. AT&T failed in that proof and thereby sought to capture future value for itself. AT&T did not employ any procedures that insured fairness to the minority partners. The lead partner of the valuation firm had a long-standing relationship with AT&T, and internal AT&T personnel influenced the outcome of the valuation. The court determined the fair value of the interest as a remedy to the situation.
Personal Service Corporation Valued Using Holder’s Interest
The Michigan Court of Appeals affirmed the lower court’s valuation of a personal service corporation engaged in software consulting.
A Gross Result in the Gross Case Calls Into Question Circumstances in Which Tax Affecting Is Valid
Appraisers may soon have to defend their tax affecting in prior S corporation valuations as a result of Gross.
Case Remanded to Trial Court for Failure to Value the Business
The issue in this marital dissolution was whether the trial court erred in failing to value the company and instead splitting the husband’s stock between the parties.
Tax Court Rejects Tax Affecting, CSRP, Poor Comps, and More
Tax Court dismisses guideline company comparable method in this case for lack of true comparables and rejects experts’ DCF for tax affecting and other adjustments without sufficient justification or support.
S Corporation Valued Using Two-Year-Old Transaction
The Indiana Court of Appeals affirmed the valuation of a minority interest in an S corporation based on the two-year old acquisition price paid by the controlling shareholder.
Not Necessary to Tax Affect Pepsi Bottler S Corp Earnings
Petitioners in this case were gifted a total of 373.5 shares of common stock out of 19,680 outstanding shares in G&J Pepsi-Cola Bottlers Inc. (an S corporation) from their parents, and each filed a Form 709 (United States Gift and Generation Skipping Transfer Tax Return) in a timely manner.
S corporation retained earnings not marital property; 28% marketability discount upheld
Among the issues for the court to decide were whether wife's interest in an accumulated adjustment account (AAA) of an S corporation was marital property, and whether the trial court erred in applying a marketability discount to wife's interest in a limited partnership.
Court Rejects Adjusting Cap Rate Earnings to Apply to S Corporation
The issue in this estate tax matter is the fair market value of decedent William G. Adams Jr.'s 178 shares of voting common stock (a 61.59% interest) of Waddell Sluder Adams & Co., Inc. (WSA), an insurance agency that operated as an S corporation.
S Corporation’s Cash at Year-End Is Not the Same as Cash Available for Distribution to Shareholders for Support Calculation Purposes
The Florida Court of Appeal, Fifth District reversed the lower court’s award of spousal support because the trial court improperly concluded that the amount of cash in the subchapter S corporation at year end as reflected on its balance sheet was availabl ...
Matter of Digeser v. Flach
Income approach, capitalization rate, expert testimony, valuation methods, fair value, minority oppression, statutory appraisal, S corporation, C corporation, normalization, market-based approach, comparable transactions ...
Bernier v. Bernier (I)
Massachusetts Supreme Court applies tax affecting analysis to valuation of subchapter S corporations in divorce.
Bernier v. Bernier (II)
Massachusetts Court of Appeals remands the case—for the second time—to the trial court for an appropriate valuation of the parties’ S corporations, including a tax affecting according to the “Kessler metric” (adopted from the Delaware Chancery Court).
Olson v. Olson
The issue in this case is the court's award of stock to the spouse rather than valuing the stock and awarding half the value.
Gentile v. Gentile
Appellate court affirms lower court’s Fair Market Value (FMV) determination of husband’s S corp. medical practice, which incorporates goodwill value the wife’s expert calculated based on the Goodwill Registry.
Gallagher v. Commissioner (I)
Tax Court dismisses guideline company comparable method in this case for lack of true comparables, and rejects experts’ DCF for tax affecting and other adjustments without sufficient justification or support.