In Jackson case, Tax Court dismisses IRS expert’s revenue projections as ‘simply not reasonable’
When Michael Jackson died, his image and likeness was besmirched and yet, once competent executors took charge, they were able to make a lot of money for the estate in the immediate post-death years. The issue was to what extent this subsequent development could factor into the image-and-likeness valuation. In explaining his high valuation, the IRS’ expert offered a theory of “foreseeable opportunities” that the U.S. Tax Court found unpersuasive.
Tax Court resists tax affecting in Michael Jackson case
Although the U.S. Tax Court recently handed the Michael Jackson estate a decisive victory regarding the estate’s tax liability, the court did not side with the estate on tax affecting, an issue that has preoccupied valuators, many of whom are proponents of the practice, for a long time.
Tax Court issues highly anticipated ruling in Michael Jackson case
In the long-running litigation between the estate of the late megastar Michael Jackson and the Internal Revenue Service, the U.S. Tax Court recently issued its opinion on the value of Jackson’s image and likeness, as well as the value of his interest in two music publishing assets. Overall, this much-anticipated decision is a major win for the Jackson estate. The court’s momentous decision includes an expansive analysis of the rivaling valuation testimony.
2020 Top Business Valuation and Damages Cases
Complicated as the year 2020 was, it was not boring. The past year offered a wealth of lawsuits dealing with business valuation and economic damages issues. The list below shows our Top 10.
ESOPs: good for employees but facing an uncertain future
A recent article in the New York Times extols the virtues of employee ownership through employee stock ownership plans (ESOPs). And trade groups for employee-owned businesses have noted bipartisan Congressional support for ESOPs. But ESOP experts (trustees and appraisers) worry that the Department of Labor’s antagonistic attitude toward ESOP transactions, validated by key victories in court, has stymied ESOP formation.
How to value a business and settle a divorce during COVID-19; divorce professionals share tips
How do you resolve a divorce case during COVID-19, when many businesses in all kinds of industries are coping with significant losses and continuing uncertainty over future performance? This was the topic of an excellent panel discussion that was part of the recent virtual AAML/BVR divorce conference.
Courts are weighing in on COVID-19 business interruption claims
COVID-19-related business interruption cases are winding their way through the court system, and one state court, in a matter of first impression, recently issued a decision against the business owner.
Indiana and South Carolina courts issue key discount rulings
The Indiana Court of Appeals and the South Carolina Supreme Court recently issued noteworthy rulings on the appropriateness of discounts in valuing minority interests. The contexts in which the issue arose were different, but both situations amounted to a compelled buyback of shares.
Business interruption cases and the role financial experts can play
Filing a business interruption claim has become one of the go-to moves for businesses as they try to mitigate the impact of COVID-19. A discussion of two cases that were adjudicated just before the COVID-19 crisis came into relief explains the trajectory many claims, including claims arising out of the COVID-19 crisis, may take and points to opportunities for damages experts.
Business interruption and other legal claims arising out of COVID-19 crisis
Just as the novel coronavirus causing COVID-19 brought businesses and economic activity to a sudden halt, an ABA panel discussed the grave effects on businesses and the legal doctrines available to business owners to mitigate the economic injury stemming from business interruption and unforeseeable circumstances.
Delaware Court of Chancery says no to expert’s novel approach to beta calculation
In an appraisal proceeding in which the Delaware Court of Chancery favored the discounted cash flow analysis as the means with which to determine fair value, the court had sharp words for the company expert’s decision to introduce a new way for calculating equity beta.
Connecticut court affirms lower court's decision not to tax affect
In a buyout dispute involving a Connecticut family business, an appellate court recently upheld the trial court’s earlier decision not to tax affect the earnings of the company in valuing the departing shareholder’s interest, even though experts for both sides tax affected.
Tax Court adopts tax-affected valuation of PTE without overturning Gross
For years, the appraisal community has wondered when the U.S. Tax Court will recognize the need for tax affecting when valuing pass-through entities (PTE) and how the court will square its decision with precedent, i.e., the Gross case in which the Tax Court rejected the taxpayer’s tax-affected valuation.
Trial court favors DOL in Vinoskey ESOP trial
In the closely watched Vinoskey ESOP litigation, the trial court recently issued a long decision that found all the defendants liable.
In about face, Florida Supreme Court abandons Frye for Daubert
Florida has a history of wavering when it comes to the standard for admissibility of expert testimony. Not too long ago, the state Supreme Court frustrated legislative efforts to move the state from the Frye standard to the Daubert standard only to reverse itself recently by announcing the adoption of Daubert.
Kress gift tax case signifies approval of tax affecting—at least in federal district court
One aspect that has valuators excited about the Kress v. United States gift tax case is that the federal court that ruled on the taxpayers’ challenge to the IRS’s gift tax assessment accepted valuations from both parties’ experts that applied a C corporation tax rate to value minority shares in an S corporation.
Appeals court upholds Lund buyout ruling and fair value determination
A protracted Minnesota buyout dispute involving the heirs to a local grocery store empire, Lunds & Byerlys, may have reached the end following a recent ruling from the state appeals court. The reviewing court upheld the trial court’s decision to grant the minority shareholder’s request for a buyout as well as the court's fair value determination.
Post-trial briefs in Vinoskey ESOP trial point to fierce valuation fight
The DOL’s aggressive oversight strategy concerning ESOPs has led to a number of controversial lawsuits, including, most recently, the Acosta v. Vinoskey case, which, in the past few months, went to trial over the DOL's overpayment claim.
Court upholds Section 1031 tax ruling, affirming appraisals were unreliable
In 2016, the U.S. Tax Court found for the Internal Revenue Service in a dispute over a series of exchanges that Exelon, the tax payer, designated as section 1031 transactions. The court found these were not like-kind exchanges and expressed dismay over the appraisals the tax payer offered to support its claim for significant deductions.
Split high court rules on classification of earnout payment in divorce dispute
The parties’ dispute over how to classify earnout payments related to the sale of a valuable marital asset recently prompted a split ruling from the Minnesota Supreme Court. The issue was whether those payments were part of the sales consideration, as the wife argued, or represented future compensation to the husband, as the district court found.
Failure to explain inputs gets expert excluded under Daubert
If more proof is necessary to show that courts across all legal fields dive deep into the details of valuation testimony, a recent damages case that arose in the context of a condemnation proceeding should do the trick.
New Jersey closer to Daubert but still not a Daubert jurisdiction
A decision from the Supreme Court recently led New Jersey to adopt key Daubert factors for determining the admissibility of expert testimony, but the high court’s ruling also expresses a reluctance to fully embrace the Daubert standard.
In Memory of Tax Court Judge David Laro
BVR is very sad to note that the eminent David Laro, a senior judge of the United States Tax Court, passed away on September 21. Valuators in particular looked up to Judge Laro for his unique understanding of the field of valuation and the role it plays in many tax cases.
Alabama divorce court adopts result of calculation engagement
There is a split in the valuation community as to the merit of calculation engagements. As we recently reported, some valuators are adamantly opposed to doing them, whereas other appraisers believe that calculation engagements have a rightful place in their tool kit.
Tennessee no longer mandates Delaware block method to determine fair value
For the longest time, Tennessee case law required trial courts presiding over dissenting shareholder actions to determine fair value by using the Delaware block method. In a recent ruling, the Tennessee Supreme Court struck down the requirement and Tennessee has joined the jurisdictions that allow "more modern" valuation approaches.