USPAP/IVS Front and Center in Proposed Regs for Tax Valuations
The IRS has issued proposed regulations that would make changes to Circular 230 that would strengthen the agency’s ability to penalize or disqualify appraisers who do tax-related valuations. Two sets of valuation standards, USPAP and IVS, figure prominently in the proposed regs as benchmarks by which the IRS will scrutinize valuations. Public comments are due February 24, and a public hearing will be held March 6.
BV News and Trends February 2025
A monthly roundup of key developments of interest to business valuation experts.
Reminder: Comments due February 24 on proposed IRS Circular 230 regs
The IRS is continuing to accept public comments on proposing changes to its Circular 230 that will strengthen its ability to disqualify appraisers who do tax-related valuations.
Divorcing business owner kept PPP loan a secret
In an Ohio case, the couple began negotiating terms of their divorce in October 2020 and decided to use Dec. 31, 2020, as the valuation date for marital assets.
BVLaw Review: The Top Valuation Cases of 2024
The BVLaw platform added over 60 cases during 2023, bringing the total to almost 4,400 cases in the database—plus accompanying case analyses that hit the valuation highlights. This article is a rundown of some of the more important cases for 2024.
Comments started on proposed IRS regs regarding appraisers
Last week, we alerted you to proposed changes to its Circular 230 related to appraisers who do tax-related valuations.
Skyrocketed but forgotten crypto figures in divorce case
In an Indiana divorce case, the couple operated a cryptocurrency business, and, after they split up, they entered into a mediated property settlement that awarded “all assets” of the business to the husband.
Comments wanted on proposed IRS regs regarding appraiser disqualification
The IRS is proposing changes to its Circular 230 that will strengthen its ability to disqualify appraisers who do tax-related valuations.
A Dozen Tips From the VSCPA Forensic and Valuation Services Conference
Business Valuation Update attends a great many conferences and webinars, but we never fail to learn something new. Yes, the topics can be the same, but, no matter how many times you hear about something, a different presenter will offer some new information or give a different perspective on it, which is very valuable. Such was the case at the recent two-day Forensic and Valuation Conference held by the Virginia Society of CPAs (VSCPA), which had an excellent mix of topics and speakers.
Beach v. Beach
A vestige of the COVID-19 era, a PPP loan, was the central issue in the Ohio appeals court’s reversal of the trial court’s judgment. The trial court vacated the parties’ Oct. 21, 2021, decree of dissolution of marriage. The husband had applied for a PPP loan of $9.4 million and did not notify the wife or either of the parties’ experts. The reversal by the appeals court was based on the date of valuation, agreed to by both parties, predating the PPP loan. As shown in a number of cases in different jurisdictions, the date of valuation became a critical issue in determining the value of a marital estate.
Ohio Court of Appeals Reverses and Does Not Allow Consideration of PPP Loan After Valuation Date
A vestige of the COVID-19 era, a PPP loan, was the central issue in the Ohio appeals court’s reversal of the trial court’s judgment. The trial court vacated the parties’ Oct. 21, 2021, decree of dissolution of marriage. The husband had applied for a PPP loan of $9.4 million and did not notify the wife or either of the parties’ experts. The reversal by the appeals court was based on the date of valuation, agreed to by both parties, predating the PPP loan. As shown in a number of cases in different jurisdictions, the date of valuation became a critical issue in determining the value of a marital estate.
Should you change your models now for potential tax law changes?
No, it is not advisable to change your valuation and financial models at this time based solely on the potential for tax law changes.
Court KO’s AI-assisted damages analysis
The featured case in the January issue of Business Valuation Update is a New York matter in which a damages expert used an artificial intelligence tool to help with his analysis.
AVW webcast features the Connelly case
Charles Persing (Bedersen LLP) appeared on the November edition of NACVA’s Around the Valuation World (AVW) webcast to discuss the Connelly case that came out this past June.
Donahue v. Donahue
This case is important because it held that the covenant not to compete value was not determinative of the value of personal goodwill. Florida had a law go into effect on July 1, 2024, regarding personal goodwill in divorce. It codified that personal goodwill was not a marital asset. Also, previously, when a business sale required a noncompete or restrictive covenant, its value was generally treated as personal goodwill and, therefore, not part of the marital equitable distribution. Today, however, courts may consider a portion of the restrictive covenant as enterprise goodwill, thereby increasing the value of the marital estate. It was up to the courts to make that distinction and determine whether such instruments should be considered martial assets.
Business’s Goodwill Determined to Be Enterprise Only; Covenant Not to Compete Does Not Change the Nature of the Goodwill
This case is important because it held that the covenant not to compete value was not determinative of the value of personal goodwill. Florida had a law go into effect on July 1, 2024, regarding personal goodwill in divorce. It codified that personal goodwill was not a marital asset. Also, previously, when a business sale required a noncompete or restrictive covenant, its value was generally treated as personal goodwill and, therefore, not part of the marital equitable distribution. Today, however, courts may consider a portion of the restrictive covenant as enterprise goodwill, thereby increasing the value of the marital estate. It was up to the courts to make that distinction and determine whether such instruments should be considered martial assets.
Discount on assets transferred shortly before death raises red flag
Family limited partnerships (FLPs) are popular tax-saving vehicles in estate planning because of the valuation discounts that are allowed.
Connelly Lesson: A Good Buy-Sell Is Not Enough to Fix Value
Some insights on the Connelly U.S. Supreme Court case from exit planner Paul Hood and attorney Ed Morrow. In the case, the estate of a deceased owner got hit with tax penalties due to trouble over the buy-sell agreement and mandatory redemption on death that was funded with life insurance.
Lunt v. Lunt
This divorce case provided a good analysis of personal versus enterprise goodwill and the elements that were included in each. It also discussed the history of personal and enterprise goodwill in Utah that progressively allowed the exclusion of personal goodwill from the marital estate in a divorce in Utah. The general principles of personal versus enterprise goodwill are applicable most everywhere.
Utah Appeals Court Affirms Trial Court Allocation of 5% of Value of Husband’s Website Business to Personal Goodwill
This divorce case provided a good analysis of personal versus enterprise goodwill and the elements that were included in each. It also discussed the history of personal and enterprise goodwill in Utah that progressively allowed the exclusion of personal goodwill from the marital estate in a divorce in Utah. The general principles of personal versus enterprise goodwill are applicable most everywhere.
Valuation Considerations for Gift & Estate Tax
The transfer of estate assets from one generation to another can be complex depending on the business and personal holdings of the estate. The valuation of such is essential to the determination of the taxable portion of the estate and calculating the applicable estate tax exemption. Our valuation team will demystify the valuation process by discussing the aspects that go into the appraisal of the material assets of an estate, including any/all intangible assets, machinery ...
Court devises own ROT for valuing a plumbing business
In a Nebraska divorce case, neither side offered expert testimony as to the proper methodology for valuing the husband’s plumbing business.
Blount v. Blount
The appellant wife in this case argued that the trial court failed to divide the marital estate equitably because it did not make an explicit finding of fact as to the valuation of the business that it awarded solely to her but instead only made a finding as to the “excess cash” found in the business. The appellate court affirmed the trial court, explaining that a specific finding of value was not required. (Editor’s note: According to a well-known family law attorney, this likely would be reversible error if specific findings were requested and should be even if not ...
Matter of Weber
The Surrogate Court of New York (i.e., essentially a probate court), in a case of first impression, determined the testimony of an expert witness to be unreliable and set standards for admission of testimony and reports based in part on the use of AI, including disclosure of the use of AI and the conduct of a Frye (similar to Daubert) hearing.
Georgia Appellate Court Affirms Order Allocating Excess Cash From Business to Husband but Fails to Assign Value to the Business
The appellant wife in this case argued that the trial court failed to divide the marital estate equitably because it did not make an explicit finding of fact as to the valuation of the business that it awarded solely to her but instead only made a finding as to the “excess cash” found in the business. The appellate court affirmed the trial court, explaining that a specific finding of value was not required. (Editor’s note: According to a well-known family law attorney, this likely would be reversible error if specific findings were requested and should be even if not ...