Louisiana Court of Appeals Disallows a Discount for Trapped-In Capital Gains Taxes and a Reduction in Receivables for Collectability
In determining the fair value of a minority interest in stock sold back to the companies in a shareholder oppression assertion, the Louisiana Court of Appeals rejected a discount for trapped-in capital gains tax since the companies had no intention of selling the properties owned. The appeals court also disallowed a reduction in fair value related to the value of affiliated accounts receivable, noting that there was no evidence that the receivables were uncollectible.
Harvey v. Harvey (In re Michael S.)
In this divorce case, on appeal, the California appellate court rejected a discount for taxes not immediate and specific and allowed a DLOM regarding the value of the wife’s one-half interest in the jointly owned business. The court also determined that “the [trial] court impliedly made the factual findings necessary to support its ruling regarding Cynthia’s breach of fiduciary duty claim.” Finally, the appeals court determined that the trial court had the authority to set its own terms for payment of the equalization amount to the wife.
In a Divorce Case, the California Court of Appeal Rejects Discount for Taxes Not Immediate and Specific But Allows a DLOM
In this divorce case, on appeal, the California appellate court rejected a discount for taxes not immediate and specific and allowed a DLOM regarding the value of the wife’s one-half interest in the jointly owned business. The court also determined that “the [trial] court impliedly made the factual findings necessary to support its ruling regarding Cynthia’s breach of fiduciary duty claim.” Finally, the appeals court determined that the trial court had the authority to set its own terms for payment of the equalization amount to the wife.
The Nelson Tax Court case ‘has it all’
An appellate court recently affirmed the Nelson Tax Court case, which “has it all” in terms of valuation issues, said Barry Sziklay (Friedman LLP) in his session at the New Jersey CPA Society’s Business Valuation and Litigation Services Conference.
Walsh v. Vinoskey
This case covered the appellate decisions regarding the well-publicized Vinoskey ESOP case. The appellate court affirmed the district court in deciding that the company owner had extensive knowledge about the company and its prior valuations, and thus it was plausible to infer that “something was off.” There was no clear error in the district court finding that the owner violated ERISA. The appellate court also allowed an offset to damages for the debt the owner forgave.
Court Affirms Violation of ERISA but Allows Offset of Debt Forgiveness in Determining Damages
This case covered the appellate decisions regarding the well-publicized Vinoskey ESOP case. The appellate court affirmed the district court in deciding that the company owner had extensive knowledge about the company and its prior valuations, and thus it was plausible to infer that “something was off.” There was no clear error in the district court finding that the owner violated ERISA. The appellate court also allowed an offset to damages for the debt the owner forgave.
Guttman v. Guttman
The one-third partner of a real estate partnership, Bruce Guttman (Bruce), sued for dissolution. The two majority partners initiated a statutory procedure to buy out Bruce. All three appraisals were very close to $38 million. Feeling the valuations to be too low, Bruce sought to withdraw his complaint without prejudice. The trial court, on a motion from the majority partners, vacated Bruce’s dismissal. The appellate court affirmed the trial court.
One-Third Partner Sued to Have Partnership Dissolved, Asked to Vacate His Dissolution Assertion
The one-third partner of a real estate partnership, Bruce Guttman (Bruce), sued for dissolution. The two majority partners initiated a statutory procedure to buy out Bruce. All three appraisals were very close to $38 million. Feeling the valuations to be too low, Bruce sought to withdraw his complaint without prejudice. The trial court, on a motion from the majority partners, vacated Bruce’s dismissal. The appellate court affirmed the trial court.
The Myth of the Healthcare Multiple
For most, the concept of a valuation multiple is easy for market participants to understand. Unfortunately, this simplicity of concept leads to widespread misapplication of valuation multiples and often results in sellers having unreasonable expectations. In the myth of the multiple, healthcare valuation expert Jason Ruchaber, CFA, ASA, will separate fact from fiction and explore the real financial and compliance considerations that drive FMV and purchase price in healthcare transactions.
BV News and Trends November 2021
A monthly roundup of key developments of interest to business valuation experts.
Key ESOP case underlines importance of the management interview
In the published opinion in the groundbreaking recent Walsh v Bowers ESOP case, the court noted that the DOL’s valuation expert’s “failure to follow Uniform Standards of Professional Appraisal Practice (USPAP) introduced substantial errors into [his] analysis.”
Will the landmark ESOP valuation case open the door?
During an amazing webinar with the testifying experts in the recent Walsh v Bowers ESOP case, a question came in from the audience: “Do you think this case will open the door for the Department of Labor and the valuation profession to work together to develop guidance around ESOP valuations?”
IRS sending agents to NACVA’s BV training
The IRS is sending 79 agents to business valuation training provided by the National Association of Certified Valuators and Analysts (NACVA), according to former IRS manager Michael Gregory (Michael Gregory Consulting LLC).
Nelson v Commr.
Taxpayer appealed a Tax Court ruling that she gifted a percentage of partnership interests and not a fixed amount of value. As a result, when the IRS determined the FMV of those interests, the Taxpayer was left with a gift tax deficiency.
Court of Appeals Upholds Tax Court—Taxpayer Gifted a Percentage of Partnership Interests, Not a Fixed Amount
Taxpayer appealed a Tax Court ruling that she gifted a percentage of partnership interests and not a fixed amount of value. As a result, when the IRS determined the FMV of those interests, the Taxpayer was left with a gift tax deficiency.
Experts in landmark ESOP valuation case give the inside story
For over a decade, the Department of Labor has not lost a major ESOP case on a valuation issue, but its winning streak ended with Walsh v. Bowers.
Insurer not required to defend valuation firm in ESOP lawsuit
A valuation firm can no longer force its professional liability insurer to defend a lawsuit challenging the firm’s ESOP valuation because the case’s surviving claim falls under a policy exclusion, a federal court has ruled.
BV News and Trends September 2021
A monthly roundup of key developments of interest to business valuation experts.
Insiders Examine Michael Jackson Estate Valuation Dispute
Testifying experts for the estate give their main takeaways from this fierce dispute with the IRS.
Major win in ESOP valuation case vs. DOL
A district court has ruled “decisively” against the Department of Labor (DOL) in an ESOP valuation case, stressing that the DOL failed to follow standard valuation practices.
Expelled partner should get FMV—but of what?
An Oregon appellate case deals with compensation for a partner’s 25% interest in a business after he is expelled from the firm.
Walsh v. Bowers
A district court has ruled “decisively” against the Department of Labor (DOL) in an ESOP valuation case, stressing that the DOL failed to follow standard valuation practices.
District Court Rules ‘Decisively’ Against the DOL in an ESOP Overvaluation Case
The Department of Labor sued the defendants, which included two individual owners, Bowers & Kubota Consulting Inc. and the Bowers & Kubota ESOP, alleging that the defendants had violated ERISA laws by manipulating data to induce the ESOP to pay $40 million for the shares of the individual shareholders that the DOL claimed was in excess of the fair market value of the shares. After extensive testimony of valuation experts and analysis of the facts of the case, the court determined that no ERISA violations have been established.
Cheng v. Coastal Lb Assocs.
This case concerned the purchase of minority interests in a California limited liability company under the Corporate Code concerning the purchase of these interests in lieu of a liquidation of the company. The appellate court affirmed the trial court’s order confirming the purchase of these interests at a discounted fair market value.
California Court of Appeal Allows a Discount for Lack of Control in the Buyout of 25% Interests in an LLC
This case concerned the purchase of minority interests in a California limited liability company under the Corporate Code concerning the purchase of these interests in lieu of a liquidation of the company. The appellate court affirmed the trial court’s order confirming the purchase of these interests at a discounted fair market value.