QBI guidance due out end of July
U.S. Treasury Department rules outlining which pass-through entities can claim the new 20% qualified business income (QBI) tax deduction are expected by the end of July, according to a report in AccountingToday.
New study predicts ‘mass’ conversion from PTE to C corp
A new study by Penn Wharton predicts a “mass conversion” of pass-through businesses to C corporation under the Tax Cuts and Jobs Act.
How New QBI Deduction Impacts the Hypothetical Buyer and Seller, Part 2
Part 2 of a two-part article on the impact of the new tax law’s Qualified Business Income (QBI) deduction for pass-through entities in determining estimated after-tax cash flow at the investor level, as well as the related change in the fair market value of the entity.
BVU News and Trends July 2018
A monthly roundup of key developments of interest to business valuation experts.
Checklist for Initial Information Request to Analyze Replacement Compensation
The Tax Cuts and Jobs Act (TCJA) will trigger much greater scrutiny on what constitutes reasonable compensation for owner-employees of pass-through entities (PTEs).
Flowchart seeks to sort out QBI
Arguably the most puzzling provision of the Tax Cuts and Jobs Act is the New IRC Code Section 199a, which allows a 20% write-off of “qualified business income” (QBI) for sole proprietors, owners of S corporations, and members of partnerships/LLCs.
Valuing an S-corporation? Ten books and articles you absolutely should read
View a list of essential reading for business appraisers preparing to value an S corporation, from valuation expert and former IRS territory manager, Michael Gregory.
Internal IRS memo unearthed re: S corp valuations
During a webinar, Michael Gregory (Michael Gregory Consulting LLC) discussed an internal IRS memo he recently obtained via a Freedom of Information Act (FOIA) request that has implications for valuing noncontrolling interests in S corps.
How to Conduct an S Corp Valuation for the IRS Given IRS Internal Memorandums
Join Michael Gregory for a discussion on two recently obtained internal IRS memorandums so that you can work more effectively with the IRS on estate and gift tax valuations. These memorandums shed light on how the IRS approaches valuing S corporation valuations and what you need to consider when preparing an S corporation valuation for federal tax purposes. The memorandums recommend consideration of both Revenue Ruling 59-60 and the IRS Job Aid on Non-Controlling Interests.
Q&As on the Impact of the 2017 Tax Act on Business Valuation
Chris Mellen (Valuation Research Corp.) adds to the evolving discussion about the impacts of the new tax law on business valuation. Part of a series.
Tax Reform Puts Broader Spotlight on Reasonable Comp
Ron Seigneur and Kevin Yeanoplos, the co-authors of a guide on reasonable compensation, explain how tax reform has put more focus on the matter.
How the New QBI Deduction Impacts the Hypothetical Buyer and Seller
Part 1 of a two-part article on the impact of the new tax law’s Qualified Business Income (QBI) deduction for pass-through entities in determining estimated after-tax cash flow at the investor level, as well as the related change in the fair market value of the entity.
Re: Comments Concerning S Corp Tax-Affecting Article
Comments on the response from James Alerding to an article on tax affecting S corps, which appeared in the December 2017 edition of Business Valuation Update titled “Tax Affecting S Corporations: It’s Not a Matter of Whether. It’s a Matter of When.”
Michigan court explains treatment of S corp’s retained earnings in divorce
The overarching issue in a recent Michigan divorce case was appreciation. Did the nonowner spouse (wife) have a right to a portion of the increase in value of her husband’s separate property, an S corporation? A related issue, and one that posed a question of first impression in Michigan, was how to treat the company’s retained earnings.
Valuing C Corps and Pass-Through Entities Under the New Tax Law
On December 22, 2017, President Donald J. Trump signed into law the Tax Cuts and Jobs Act of 2017 (the “Act”). The Act is the most comprehensive tax reform package since the Tax Reform Act of 1986. The Act contains sweeping changes to corporate and individual tax rates, deduction limitations, foreign income taxation, and the tax treatment of pass-through entities (PTEs) such as S corporations and limited liability companies. In this article, we will discuss ...
Valuation Experts Give Initial Thoughts on Tax Reform
Valuation experts were asked for their initial impressions on what to consider when doing valuations under the Tax Cuts and Jobs Act. This will be an evolving discussion.
A Response to an Article on S Corp Tax Affecting
This is a response to “Tax Affecting S Corporations: It’s Not a Matter of Whether. It’s a Matter of When,” written by Alan S. Zipp, that appeared in the December 2017 issue of Business Valuation Update.
2018 Tax Cuts and Jobs Act: Impact on Valuations of C Corps and Pass-Through Entities
The Tax Cuts and Jobs Act impacts the federal tax treatment of C corps, pass-through entities, and their respective ownership interests, and these changes will affect both the conduct of business valuation and the values of businesses and equity ownership interests. The Tax Cuts and Jobs Act contains temporary changes in the individual income tax rate structure, “bonus depreciation,” limitations on state and local tax (SALT) deductions, and “qualified business income” deductions for certain PTEs.
Inside Pratt’s Stats: Impact of Entity Form on Selling Price (Part 2)
Based on the results of various statistical analyses of Pratt’s Stats transactional data, this article explains how transaction size and the entity form support the existence (and the magnitude) of the “pass-through entity premium.”
Wright v. Phillips
In fair value determination analogous to statutory appraisal valuation, Chancery says companies’ S corp status “has discrete value applicable here,” as captured in expert’s use of 14.5% tax rate (as opposed to 31%); court approves marketability discount.
S Corp Status Adds ‘Discrete’ Value to Business, Chancery Says
In fair value determination analogous to statutory appraisal valuation, Chancery says companies’ S corp status “has discrete value applicable here,” as captured in expert’s use of 14.5% tax rate (as opposed to 31%); court approves marketability discount.
Vedros v. Vedros
Court says discounting for lack of marketability of minority interest in home healthcare agency, operating as an S corporation, is appropriate where LLC agreement included transfer restrictions and partners were not planning to buy out owner spouse.
Facts Support Discounts in Valuation of Small Healthcare Agency
Court says discounting for lack of marketability of minority interest in home healthcare agency, operating as an S corporation, is appropriate where LLC agreement included transfer restrictions and partners were not planning to buy out owner spouse.
Improper Use of Active/Passive Framework Skewers Valuation
Court says appreciation analysis suffers from improper use of active/passive framework; valuation of company must include all assets, including real estate whose value dropped, where marital labor contributed to overall appreciation of separate property.
Bair v. Bair
Court says appreciation analysis suffers from improper use of active/passive framework; valuation of company must include all assets, including real estate whose value dropped, where marital labor contributed to overall appreciation of separate property.