Courts Reject Tax Affecting and Use of Discounts in Connecticut Buyout Dispute
Trial court’s fair value determination in buyout dispute involving family business withstands appeal, including decision not to tax affect or apply majority and minority discounts; appellate court finds there is no controlling state law on the issues and upholds trial court’s findings on facts.
A Masterclass in the Valuation of Family Limited Partnerships and LLCs (A BVR Web Workshop)
As professional appraisal methodology has advanced, so has the valuation of family limited partnerships (FLPs) and limited liability companies (LLCs). Adopting an analytical method for valuing FLPs and LLCs using the income and market approaches allows appraisers to more accurately and objectively determine a value that can withstand the scrutiny of IRS challenges. Experts Bruce Johnson, Jim Park, and Spencer Jefferies conduct case studies to teach the best practices for valuing noncontrolling, nonmarketable FLP and ...
Spend more time on the numerator, expert panel advises
Attendees at a recent online workshop were urged to spend more time on the numerator (forecasts) of the valuation equation rather than the denominator (cost of capital).
McLelland v. Paxton
In dissolution dispute, appeals court affirms trial court’s finding, based on plaintiff expert testimony, that dissolved professional LLC had entity goodwill at trial based, in large part, on ownership of three leases and operation of offices that doctors could use upon termination of partnership.
Washington State Appeals Court Adopts Rule on Entity Goodwill in Professional LLC
In dissolution dispute, appeals court affirms trial court’s finding, based on plaintiff expert testimony, that dissolved professional LLC had entity goodwill at trial based, in large part, on ownership of three leases and operation of offices that doctors could use upon termination of partnership.
A simple look at betas—and other inputs to the income approach
When estimating a company’s cost of equity, we all know investors adjust for varying levels of risk.
Don’t Make Me Call Security!: How to Consider Data Security in a Business Appraisal
Cyber liability is of increasing concern for business owners and executives. With the average total cost of a single data breach of $8.19 million in the U.S., shareholder value can be wiped out with the click of a mouse. Cyber risk is a relatively new risk yet is a particularly lethal one. According to Inc. Magazine, 60% of successful cyberattacks force the target business to close. Appraisals that fail to explicitly address this risk are ...
Details of the CUT method used in the Amazon case
Last week’s BVWire covered the 9th Circuit decision in the Amazon case that affirmed the U.S. Tax Court’s 2017 decision in favor of the company in a transfer pricing case.
Tax Court adopts tax-affected valuation of PTE without overturning Gross
For years, the appraisal community has wondered when the U.S. Tax Court will recognize the need for tax affecting when valuing pass-through entities (PTE) and how the court will square its decision with precedent, i.e., the Gross case in which the Tax Court rejected the taxpayer’s tax-affected valuation.
Linde v. Linde
Appellate court upholds trial court’s finding that majority shareholder breached fiduciary duty to minority shareholder and buyout order; trial court performed careful valuation analysis finding defense expert’s asset-based approach was “simply an improper method of valuation in the present case.”
Court Says Asset Approach ‘Is Simply an Improper Method’ in Present Appraisal Proceeding
Appellate court upholds trial court’s finding that majority shareholder breached fiduciary duty to minority shareholder and buyout order; trial court performed careful valuation analysis finding defense expert’s asset-based approach was “simply an improper method of valuation in the present case.”
Tax Court’s Amazon valuation ruling stands up to 9th Circuit scrutiny
The 9th Circuit recently affirmed the U.S. Tax Court’s 2017 decision in favor of Amazon in this key transfer pricing case, finding the governing regulations limited the definition of “intangible” to independently transferrable assets.
Distinguishing Gross, Tax Court adopts tax-affected valuation of PTE
In an ingenious move, the U.S. Tax Court, ruling on an Oregon gift tax dispute, accepted the taxpayers’ tax-affected valuations of pass-through entities (PTE) without overturning Gross.
Estate of Aaron Jones v. Commissioner
In gift tax dispute, Tax Court adopts estate expert’s valuation of two related PTEs, including expert’s tax affecting; court distinguishes Gross and later cases; issue is not whether to tax affect but how; estate expert’s tax affecting was “more accurate than [IRS’] blunt zero-rate approach.”
Keeping Gross Alive, Nimble Tax Court Accepts PTE Tax Affecting
In gift tax dispute, Tax Court adopts estate expert’s valuation of two related PTEs, including expert’s tax affecting; court distinguishes Gross and later cases; issue is not whether to tax affect but how; estate expert’s tax affecting was “more accurate than [IRS’] blunt zero-rate approach.”
9th Circuit Upholds Tax Court’s Valuation of Intangibles in Big Transfer Pricing Case
Appeals court affirms Tax Court ruling favoring taxpayer’s CUT method over IRS’ DCF to value various intangible assets transferred to European subsidiary; governing regulations limit definition of “intangible” to independently transferrable assets, excluding residual business assets, court says.
Amazon.com, Inc. v. Commissioner (II)
Appeals court affirms Tax Court ruling favoring taxpayer’s CUT method over IRS’ DCF to value various intangible assets transferred to European subsidiary; governing regulations limit definition of “intangible” to independently transferrable assets, excluding residual business assets, court says.
Reasonable Compensation for Closely Held Businesses + RCReports Demo
Determining reasonable compensation for closely held small and medium-sized businesses is not a magical or mysterious process. In fact, it is a straight forward process that relies on a basic understanding of the three different methods for determining reasonable compensation and when and where they apply. Join Stephen Kirkland and Paul Hamann for this rewarding and rich session. Practitioners armed with this knowledge and the proper tools can easily determine reasonable compensation for any company.
Oudheusden v. Oudheusden (I)
Appellate court remands because of trial court’s impermissible double dipping, where trial court awarded wife half of the fair market value of husband’s two solely owned businesses, which represented husband’s sole income stream, and based spousal support on annual income generated by businesses.
Connecticut Appellate Court Remands Because of Impermissible Double Dipping
Appellate court remands because of trial court’s impermissible double dipping, where trial court awarded wife half of the fair market value of husband’s two solely owned businesses, which represented husband’s sole income stream, and based spousal support on annual income generated by businesses.
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.
Pratt’s Stats/Deal Stats analysis holds up in divorce litigation
A Maryland divorce case illustrates the difficulties an appraiser charged with valuing a small company in the divorce context may face and how he or she may prevail in court.
Alkayali v. Boukhari
Appeals court upholds valuation of plaintiff’s interest in dissolved company and jury award; plaintiff expert’s analysis of sales transactions of comparable companies was admissible; Pratt’s Stats/DealStats database provided a reliable basis for expert to identify relevant sales, court says.
Court Validates Expert’s Reliance on Pratt’s Stats/DealStats for Sales Transaction Analysis
Appeals court upholds valuation of plaintiff’s interest in dissolved company and jury award; plaintiff expert’s analysis of sales transactions of comparable companies was admissible; Pratt’s Stats/DealStats database provided a reliable basis for expert to identify relevant sales, court says.
The Legend of Weighted Average Return on Assets and Benchmarking Purchase Price Allocation Data
The author's research shows that only current assets, non-competes, and customer relationships have any predictability to WACC in limited industries. In general, when intangibles have significance, their coefficients are negative, which reduces WACC and implied risk. This finding supports the claim by Lev and Gu (2008) that intangibles are important assets, which reduce, not increase risk. The concept that intangible always should have a premium above WACC is unfounded, and the premise of ARM 34 that intangibles are ancillary assets is outdated. The author suggests and alternative method to use purchase price allocation data to support the selection of premiums above WACC.