Major Court Decisions and Tax Sunset Provisions: New and Noteworthy Developments in the Valuation of S Corporations
The vast majority of U.S businesses are pass-through entities (S corporations, LLCs, and partnerships). The debate over how to value them has raged in the courts and academia for decades, and understanding how to do so is important to all valuation professionals. Recent cases such as the Estate of Cecil have demonstrated that the IRS and the Tax Court will accept tax affecting only when correctly applied and supported.
Advanced Topics and Case Studies When Valuing Family Limited Partnerships and LLCs
As professional methodology has advanced and tax court cases have confirmed, employing analytical techniques to value family limited partnerships/LLCs using the income and market approaches allow appraisers to determine an accurate value objectively. Certain types of partnerships may be considered complicated. This webinar will focus on valuing more complex FLPs using case studies. Mr. Johnson will present empirical data that support the use of these objective appraisal methods and share his opinion on current issues ...
Court’s value of law firm interest KO’d on appeal
No operating agreement and no buy-sell agreement can trigger dragged-out fighting when a member or owner leaves the firm.
Furrer v. Siegel & Rouhana, LLC
A name attorney in a Maryland law firm withdrew after having his license suspended. He sued the firm for compensation for his 26.5% interest in the firm. The firm countersued for damages related to his mistreatment of client accounts. The trial court determined a value of his interest and also determined damages that the attorney owed the firm for his mistreatment of client accounts. The appellate court affirmed the damages but remanded the valuation of the 26.5% interest.
Maryland Appellate Court Remands for Valuation of Withdrawing Member’s Interest in Law Firm and Affirms Damages Award
A name attorney in a Maryland law firm withdrew after having his license suspended. He sued the firm for compensation for his 26.5% interest in the firm. The firm countersued for damages related to his mistreatment of client accounts. The trial court determined a value of his interest and also determined damages that the attorney owed the firm for his mistreatment of client accounts. The appellate court affirmed the damages but remanded the valuation of the 26.5% interest.
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.
Discounts inappropriate under controlling agreement, appeals court finds
In a buyout dispute involving a limited liability company, the Oregon Court of Appeals recently overturned a trial court’s decision to apply discounts when valuing the departing member’s minority interest.
Tax Court allows for ‘slight’ discount for lack of control for majority interests in real estate holding companies
In a gift and estate tax dispute, the estate and Internal Revenue Service agreed to apply discounts for lack of control and marketability to the majority interests in a number of real estate holding companies.
LLC buyout at fair value poses ‘conundrum’ for the court
In allowing LLC members to buy out a departing member to avoid the dissolution of the company, a court had to determine the fair value of the departing member’s interest in a holding company.
Finkel v. Palm Park, Inc.
In LLC member dispute, court faces “conundrum” where fair value buyout seeks to avoid LLC’s dissolution and court leans on expert’s FMV valuation using net asset value approach premised on “orderly liquidation”; court notes FMV is based on hypothetical actors and transaction, not specific parties.
Court’s Fair Value Determination Leans Heavily on Expert’s Fair Market Valuation Premised on Liquidation
In LLC member dispute, court faces “conundrum” where fair value buyout seeks to avoid LLC’s dissolution and court leans on expert’s FMV valuation using net asset value approach premised on “orderly liquidation”; court notes FMV is based on hypothetical actors and transaction, not specific parties.
Structure, Valuation & Tax Insights for Logistics & Trucking Companies
Join Jaclyn Burket Frank and Ricky Castillo for an engaging trip into the world of logistics and trucking businesses. Discover the different types of entity structure along with the advantages and disadvantages of each structure. Learn how the 2018 tax law impacted each entity structure and common deductible/nondeductible expenses for the logistics and trucking industry. The industry-specific adjustments to consider along with specific questions to ask business owners to determine whether economic, governmental, and location ...
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).
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.
Washington appeals court issues key ruling on entity goodwill
In a “complicated” (court’s word) dissolution case, the Washington Court of Appeals recently made an important ruling on whether a professional limited liability company (PLLC) can have goodwill separate from the goodwill of the professionals.
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.
Court Says Expulsion Price Determination in Louisiana Buyout Dispute Is Triable Issue
In buyout dispute resulting from expulsion of LLC member, court finds state law does not preclude use of discounts in valuing withdrawing LLC member’s interest; company’s operating agreement is ambiguous on how to value expelled member’s interest, court says, leaving issue for jury to decide.
Complete Logistical Services, LLC v. Rulh
In buyout dispute resulting from expulsion of LLC member, court finds state law does not preclude use of discounts in valuing withdrawing LLC member’s interest; company’s operating agreement is ambiguous on how to value expelled member’s interest, court says, leaving issue for jury to decide.
Saltzer v. Rolka
In buyout dispute, appellate court upholds trial court’s valuation of company, which applies company-specific risk discount related to uncertain extension of company’s key contract but does not deduct value of personal goodwill attributable to remaining members.
Appellate Court Upholds Use of Risk Discount in Fair Value Determination
In buyout dispute, appellate court upholds trial court’s valuation of company, which applies company-specific risk discount related to uncertain extension of company’s key contract but does not deduct value of personal goodwill attributable to remaining members.
Calculation engagement value holds up in Alabama divorce litigation
Many valuators are adamantly opposed to doing calculation engagements, as we recently reported.
Appeals Court Validates Trial Court’s Reliance on Calculation of Value
Appeals court rejects claim that expert’s value determination pursuant to a calculation engagement rather than a valuation engagement was unreliable; trial court properly considered limitations inherent in a calculation engagement when crediting expert’s value estimate, appeals court says.