BV News and Trends May 2024
A monthly roundup of key developments of interest to business valuation experts.
Key Points From Hitchner’s Annual BV Update
A recap of Jim Hitchner’s look at the major issues in BV over the past year, including long-term growth rates, the three-stage DCF, normalizing the risk-free rate, cost of capital, plagiarism, lack of liquidity on a 100% interest, and more.
April 2024 issue of Willamette’s Perspectives is released
The April 2024 issue of the quarterly digital publication Perspectives, from Willamette Management Associates, has been released, and you can access it if you click here.
SCOTUS struggles with COLI valuation case
Last week, the U.S. Supreme Court heard oral arguments in the Connelly case, which involves the question of how corporate-owned life insurance (COLI) designed to fund the redemption of a deceased shareholder’s stock impacts the fair market value of the subject company and the value of the decedent’s gross estate.
Tax Valuations Are the Main Profit Driver for BV Firms, Per BVR Survey
Valuations for income, estate, and gift tax purposes are the most profitable for business valuation firms, according to a BVR survey. These valuations leap-frogged over litigation services and valuations for transactions/M&A purposes, which topped the list in 2018.
BV News and Trends March 2024
A monthly roundup of key developments of interest to business valuation experts.
Live today! SCOTUS arguments in the COLI valuation case
A live audio feed of oral arguments to the U.S. Supreme Court in the Connelly case will be broadcast today, March 27.
COLI valuation case now on SCOTUS’ calendar
March 27 is the date the U.S. Supreme Court will hear arguments in the Connelly case, according to the court’s calendar.
What Valuers Should Do While SCOTUS Mulls Connelly
Regardless of how the U.S. Supreme Court rules in the Connelly case, there are some steps valuers can take to better help their client business owners, many of whom could be sitting on ticking time bombs. The issue before SCOTUS is how does corporate-owned life insurance designed to fund the redemption of a deceased shareholder’s stock impact the fair market value of the subject company and the value of the decedent’s gross estate.
Hitchner’s annual review of need-to-know BV topics
Over 500 attendees listened to Jim Hitchner (Valuation Products and Services) do his annual review of recent need-to-know concepts, data, models, and methods in business valuation. Here are a few key points from the two-hour webinar.
Demenno v. Demenno
The Alaska Supreme Court affirmed the judgment of the trial court in determining the value of active appreciation and affirmed that the property in question remained the husband’s separate property and did not transmute to the marital estate.
Supreme Court (Alaska) Affirms Trial Court Calculation of Active Appreciation
The Alaska Supreme Court affirmed the judgment of the trial court in determining the value of active appreciation and affirmed that the property in question remained the husband’s separate property and did not transmute to the marital estate.
Today! Hitchner’s annual BV update webinar
BVWire looks forward to Jim Hitchner’s annual webinar where he reviews new concepts, data, models, and methods that have emerged in business valuation over the past year.
Neutral valuer does what he can with limited info
In a California divorce case, a court-appointed valuation expert was caught in the middle of a squabbling couple who didn’t provide enough information to value all the marital assets, including business interests.
Valuation Impact of Corporate-Owned Life Insurance on SCOTUS’ Agenda
The goal of this paper is to inform readers about a valuation issue that is the subject of a petition put before the United States Supreme Court to resolve a circuit split. The issue is how does corporate-owned life insurance designed to fund the redemption of a deceased shareholder’s stock impact the fair market value of the subject company and the value of the decedent’s gross estate. The author examines the applicable U.S. Tax Court, district court, and two appellate decisions so the reader can understand the arguments made and the basis for the legal conclusions.
BVLaw Review: The Top Valuation Cases of 2023
The BVLaw platform added approximately 70 cases during 2023, bringing the total to about 4,300 cases in the database. The cases are all related in some way to valuation, economic damages and lost profits, and other litigation. This article is a rundown of some of the more important cases for 2023.
Connelly case kicks off Heckerling conference
At the Heckerling Institute on Estate Planning in Orlando, Fla., earlier this month, the first session was a panel on key court cases of 2023, and “valuation was top of mind for many federal courts,” according to coverage in WealthManagement.com.
In re Hembree
In this appeal of a denied motion by the wife to set aside a marital settlement order, the appellate court affirmed the trial court. The wife claimed that the husband did not disclose a number of marital assets and misrepresented the values of certain marital assets. The trial court appointed its own expert for valuation of assets. The expert was unable to value a number of the assets for lack of information including a lack of proof of existence of some alleged assets.
Appellate Court (California) Affirms Denial of Wife’s Motion Claiming Missing Assets and Undervalued Assets
In this appeal of a denied motion by the wife to set aside a marital settlement order, the appellate court affirmed the trial court. The wife claimed that the husband did not disclose a number of marital assets and misrepresented the values of certain marital assets. The trial court appointed its own expert for valuation of assets. The expert was unable to value a number of the assets for lack of information including a lack of proof of existence of some alleged assets.
Grabowski analyzes COLI valuation issue SCOTUS will decide
The U.S. Supreme Court has agreed to hear a case involving a valuation issue in order to resolve a circuit split.
The No. 1 valuation issue that triggers an IRS audit
Discounts continue to be the No. 1 red flag that triggers an IRS audit, according to former IRS manager Michael Gregory (Michael Gregory Consulting LLC), speaking at the recent American Society of Appraisers (ASA) International Appraisers Conference in New Orleans.
Hoensheid v. Comm’r (In re Estate of Hoensheid)
The taxpayers made a valid gift of stock, but they realized and recognized gain because their right to the proceeds from the sale occurred before the gift was made. They also were not entitled to a charitable contribution deduction because they did not procure a qualified appraisal. The taxpayers were not liable for an underpayment penalty.
Petitioners Not Allowed a Charitable Contribution—Did Not Use a Qualified Appraiser
The taxpayers made a valid gift of stock, but they realized and recognized gain because their right to the proceeds from the sale occurred before the gift was made. They also were not entitled to a charitable contribution deduction because they did not procure a qualified appraisal. The taxpayers were not liable for an underpayment penalty.
Determining the FMV of Privately Held Promissory Notes
Privately held promissory notes need to be valued for gift/estate, tax, and related-party transactions. These appraisals must objectively consider the same risk and reward relationship that we use when valuing an operating company. However, the data sources that have historically been used are problematic. For example, corporate bonds from publicly traded companies are not typically comparable because publicly traded companies are large, diversified, and represent lower risk. This webinar will present a better source of ...
Tax Court (Grudgingly) Allows Tax Affecting Under the SEAM Method
This was a gift tax valuation case the U.S. Tax Court decided. Gifts of minority interests in The Biltmore Co. were made from the its shareholders, the Cecils, to their children and grandchildren. The IRS audited the gift tax returns and assessed deficiencies for reporting too low fair market values of the gifts of The Biltmore Co. stock. Both sides presented experts to value the gifted interests. The experts agreed that the cash flows should be tax affected. The court accepted the tax affecting while allowing that it was not an admission by the Tax Court that tax affecting should apply in all cases. The Tax Court made changes to the values presented and cobbled together a final value that resulted in refunds to the taxpayers/petitioners.