J&M Distrib., Inc. v. Hearth & Home Techs., Inc.
Expert’s use of Revenue Ruling 59-60 for valuation of closely held business and for damages calculation does not render opinion inadmissible under Daubert, court says, noting that scope of revenue ruling goes beyond valuation of estate and gift taxes.
Multimillion-Dollar Personal Goodwill Allocation Leaves Court Stunned
Court says defendants were unjustly enriched when they allocated 40% of the price a competitor paid for assets of and to settle lawsuit with their company to personal goodwill where they also received compensation for consulting services and noncompetes.
City of Baton Rouge v. Jay’s Donuts, Inc.
Court deems expert’s discretionary cash flow analysis an appropriate formula for determining loss to owner of expropriated business but says compensation calculation may be based on other methods, including rule of thumb guide for selling donut shop.
Expert’s Tax Appraisal Weathers Frontal Daubert Attack
Appeals court says tax tribunal did not abdicate its gatekeeper role under Rule 702 when admitting taxpayer expert’s appraisal, where the expert was qualified and used a reliable methodology; a searching inquiry into the underlying data was not necessary.
Estate Valuation Can’t Ignore Historical Data, Tax Court Says
Tax court disapproves of estate’s “conflicting expert reports” as to value of decedent’s 100% interest in a C corp. but ultimately adopts estate’s DCF valuation, finding its treatment of personal goodwill is more credible than the IRS’s approach.
High Valuations Complicate Division of Sizable Marital Estate
Appeals court affirms trial court’s above fair market value determinations regarding husband’s interests in various family businesses and the resulting equalization judgment but rejects trial court’s means with which to enforce payment of judgment.
Perez v. Bruister (I)
In ESOP case, court finds trustees unreasonably relied on appraiser’s valuations and overpaid for company stock; court credits parties’ three experts equally and arrives at fair market value by averaging results from experts’ multiple calculations.
Court Spotlights Lack of Control in Oil and Gas Interest Valuation
Appeals court affirms trial court’s discounting for lack of control and marketability in valuing oil and gas interests where trust’s ownership in interests was fractional and indirect and there was testimony regarding IRS’s estate tax discount rates.
A Time Limit on Use of Destruction of Business Method?
Court finds damages expert’s use of destruction of business method is not improper despite a four-year gap between the alleged offending conduct and the company’s demise, and it does not render his calculation inadmissible under Daubert.
Potok v. Rebh
Court says defendants were unjustly enriched when they allocated 40% of the price a competitor paid for assets of and to settle lawsuit with their company to personal goodwill where they also received compensation for consulting services and noncompetes.
Crider v. Crider
Appeals court affirms trial court’s above fair market value determinations regarding husband’s interests in various family businesses and the resulting equalization judgment but rejects trial court’s means with which to enforce payment of judgment.
B & L Development LLC v. City of Norton Shores
Appeals court says tax tribunal did not abdicate its gatekeeper role under Rule 702 when admitting taxpayer expert’s appraisal, where the expert was qualified and used a reliable methodology; a searching inquiry into the underlying data was not necessary.
RERI Holdings I, LLC v. Comm’r
Tax Court denies IRS’s summary judgment motion to disallow claimed charitable deduction arguing taxpayer’s appraiser improperly valued donated interest in LLC using present-value Section 7520 tables and failed to submit “qualified appraisal.”
Estate of Adell v. Commissioner
Tax court disapproves of estate’s “conflicting expert reports” as to value of decedent’s 100% interest in a C corp. but ultimately adopts estate’s DCF valuation, finding its treatment of personal goodwill is more credible than the IRS’s approach.
Buyout Agreement Short-Circuits Court’s Scrutiny of Appraisals
Court says determination of repurchase price of departing partner’s stake is subject to operating agreement giving defendants absolute control over valuation; absent bad faith conduct, court declines to scrutinize appraisals underlying buyout offer.
Marshall v. Marshall (I)
Appeals court says parties’ agreement is ambiguous as to whether distributions related to husband’s ownership in S corp. are includable in alimony and child support calculation; on remand, trial court must determine what income parties meant when specifying use of pretax income from employment.
Courts Agree Reasonable Compensation Is Sound Method for Calculating Spousal Support in S Corp Context
Appeals court says parties’ agreement is ambiguous as to whether distributions related to husband’s ownership in S corp. are includable in alimony and child support calculation; on remand, trial court must determine what income parties meant when specifying use of pretax income from employment.
Courts Decry Expert’s Failure to Explore Different Ways to Develop FMV
Appeals court affirms trial court’s valuation of medical practices based on buyout provisions where wife’s expert made no attempt to ascertain businesses’ FMV by any other valuation method.
Court Pans Valuation Based on Expert’s Fiction, Not Fact
High court rejects valuation of husband’s interest in closely held company where wife’s expert transformed it from one owned by four people into one managed by one person to increase its overall value.
Taubman v. U.S. Bank, N.A.
Appeals court affirms trial court’s discounting for lack of control and marketability in valuing oil and gas interests where trust’s ownership in interests was fractional and indirect and there was testimony regarding IRS’s estate tax discount rates.
MacDermid Printing Solutions, Inc. v Cortron Corp.
Court finds damages expert’s use of destruction of business method is not improper despite a four-year gap between the alleged offending conduct and the company’s demise, and it does not render his calculation inadmissible under Daubert.
DCF Model Proves Unreliable Tool for Ascertaining Cost Basis
Court finds numerous problematic assumptions make plaintiff expert’s DCF model unreliable indicator of FMV of thrift’s branching right; without this value, plaintiff is unable to establish the right’s cost basis and support its tax refund claim.