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How COVID-19 Is Impacting the IRS and Valuation Audits

Still reeling from the effects of the government shutdown and budget cutbacks, the pandemic has dealt another blow to the IRS that has affected how the agency selects and reviews tax returns that include valuations. A former IRS manager who dealt with valuations at the agency gives some interesting insights.

Mission Critical in Divorce: 10 Key Insights in 50 Minutes-a Free AAML/BVR Virtual Divorce Conference Preview

Brought to you by the American Academy of Matrimonial Lawyers (AAML) and Business Valuation Resources (BVR), this free preview for the Virtual Divorce Conference brings together attorneys, valuation professionals, and industry experts in a one action-packed, 60-minute session. Get short compelling lessons that you need to know now. This year’s conference focuses on the topics most impacted by divorce, and anyone serving business owners involved in matrimonial dissolution can get access to this premium preview ...

IRS deals with triple whammy as it reviews valuations

The government shutdown, budget cutbacks—and now the pandemic—have impacted the IRS and how it selects and reviews tax returns that include valuations.

Valuation of Small Promissory Notes

Privately held promissory notes (typically $0 to $10 million) need to be valued for gift/estate, tax, and related party transactions. However, bonds from publicly traded companies are not comparable because publicly traded companies are large, diversified, and represent much less risk. Note buyers typically discount the outstanding balance of privately held notes to yield a return of 12% to 20% depending on the collateral and other risk factors. Since corporate bonds yield around 4% to ...

Nelson v. Commissioner

In gift tax case, Tax Court finds donor transferred percentages in limited liability company rather than fixed dollar amounts based on language in transfer instruments; further, where transferred minority interests include elements of control, minority discount should be reduced, not eliminated.

Court Says Reduced Minority Discount Appropriate Where Minority Interest Has Elements of Control

In gift tax case, Tax Court finds donor transferred percentages in limited liability company rather than fixed dollar amounts based on language in transfer instruments; further, where transferred minority interests include elements of control, minority discount should be reduced, not eliminated.

Perfect Storm: COVID-19 and 2020 Election—Unexpected Windfall for E&G Tax Planning

Insights into the impacts on the estate and gift tax area and the opportunities it presents for business valuers.

BVU News and Trends April 2020

A monthly roundup of key developments of interest to business valuation experts.

BVU News and Trends March 2020

A monthly roundup of key developments of interest to business valuation experts.

Tax Court spurns IRS’ gift tax valuation theory and methodology

In a gift tax dispute, the U.S. Tax Court recently found for the taxpayer when it rejected the unusual reasoning and methodology the Internal Revenue Service’s trial expert proposed to keep low the discounts applicable to the nonvoting membership units in two limited liability companies (LLCs).

IRS ruling on subsequent events and valuation

In a private letter ruling, the IRS says that a pending merger is to be considered in valuing a company’s stock for gift tax purposes.

Grieve v. Commissioner

In gift tax dispute, Tax Court rejects IRS expert’s valuation of noncontrolling, nonmarketable interests in two LLCs; expert proposed valuation theory and method were intended to lower opposing experts’ minority and marketability discounts but lacked support in facts, case law, or among peers.

Tax Court Rejects IRS’ Value Analysis, Finding It Assumes Additional Actions Not ‘Reasonably Probable’

In gift tax dispute, Tax Court rejects IRS expert’s valuation of noncontrolling, nonmarketable interests in two LLCs; expert proposed valuation theory and method were intended to lower opposing experts’ minority and marketability discounts but lacked support in facts, case law, or among peers.

Advisers urge family biz owners to sell now

Amid a booming economy and political uncertainty, wealth advisers are encouraging family-owned businesses to sell before the “party ends,” according to an article in Bloomberg.

Office of Chief Counsel Internal Revenue Service Memorandum

IRS private letter ruling says that, under facts, gift tax valuation must consider merger that was being negotiated at the time the donor transferred company stock into a trust where the merger was only announced after the stock transfer and the announcement prompted an increase in stock value.

IRS Private Letter Ruling on Whether to Consider Pending Merger in Gift Tax Valuation

IRS private letter ruling says that, under facts, gift tax valuation must consider merger that was being negotiated at the time the donor transferred company stock into a trust where the merger was only announced after the stock transfer and the announcement prompted an increase in stock value.

Willamette gives insights into estate and gift valuations

The Summer 2019 Insights from Willamette Management Associates focuses on valuations for estate and gift tax purposes and is edited by Weston C. Kirk.

BVU News and Trends May 2019

A monthly roundup of key developments of interest to business valuation experts.

Blau v. Commissioner (RERI II)

In charitable contribution case involving remainder interest, D.C. Circuit upholds Tax Court’s value-related findings, including that petitioner did not provide qualified appraisal and did not meet substantiation requirements; valuation here is to be based on FMV, not actuarial tables.

D.C. Circuit Upholds Remainder-Interest Valuation in Weird Charitable Contribution Case

In charitable contribution case involving remainder interest, D.C. Circuit upholds Tax Court’s value-related findings, including that petitioner did not provide qualified appraisal and did not meet substantiation requirements; valuation here is to be based on FMV, not actuarial tables.

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.

Kress v. United States signifies approval of S corp tax affecting

In a gift tax case teeming with valuation issues, one notable aspect was that, in valuing the minority shares of an S corporation, both parties’ experts applied a C corporation tax rate to the company’s earnings and the court, without ado, accepted the practice.

Gift Tax Case Suggests Overall Acceptance of S Corp Tax Affecting

In gift tax case requiring valuation of minority shares in S corporation, district court accepts application, by all experts, of C corp-level tax rate to company’s earnings; court, with minor DLOM adjustment, credits valuations by taxpayers’ expert, noting his market approach is “the most sound.”

Kress v. United States

In gift tax case requiring valuation of minority shares in S corporation, district court accepts application, by all experts, of C corp-level tax rate to company’s earnings; court, with minor DLOM adjustment, credits valuations by taxpayers’ expert, noting his market approach is “the most sound.”

How IRS turmoil from the shutdown affects BV

The IRS is doing its best to recover from the government shutdown, but business valuation experts need to be aware of certain issues, according to Michael Gregory (Michael Gregory Consulting LLC), who gave an IRS update during a recent BVR webinar.

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