I recently wrote an article about several cases being brought by the Department of Labor (DOL) against Employee Stock Ownership Plan (ESOP) trustees. The cases all related to the DOL’s claim that the ESOP trustees had breached their fiduciary duties by relying on appraisals prepared for the valuation of the ESOP owned stock. One such …
We saw large increases in the value of public companies during 2017 in anticipation of the new administration’s proposals to reduce federal regulations, promote growth policies and push for tax reduction. The Dow Jones Industrial Average and the NASDAQ both increased just over 20% during 2017 and the S&P 500 index increased by almost 16% …
The valuation of a business is prepared as of a certain date in time. This could be any date, often determined by the purpose of the valuation. A valuation prepared for estate tax purposes is as of the date of death. A valuation for divorce purposes is often the date of service. The valuation date …
When it comes to the valuation of non-controlling interests in pass-through entities (PTEs) such as a Subchapter S corporation, there have been ongoing disagreements between business valuators and the IRS. The issue is whether and to what extent to offset PTE earnings for income taxes (often termed “tax-affecting”). Doing so reduces the value under the …
Recently, this seems to be the number one question I receive from aging business owners that have begun to contemplate what to do next with their business. Business owners are beginning to realize they cannot work forever and are looking for options to liquidate their investment. So, what’s their business worth? What are a business …
Recent discussions by the new administration regarding changing corporate and individual tax rates got me thinking about how different income tax rates can affect the value of a company. For example, I ran some numbers with the following assumptions. The current effective tax rate on a pass-through company’s earnings at the individual level is 38 …
Giustina (*) case dealt with the value of an approximate 41% limited partnership interest in a partnership that held timberland. Giustina Land & Timber Co. Limited Partnership (GLTC) owned more than 47,000 acres of timberland at the time of death of Natale Giustina. GLTC had operated continuously since its formation in 1990. Profits were generated …
On August 2 Mark Mazur, the U.S. Treasury’s assistant secretary, announced that the IRS will implement new regulations that will effectively eliminate valuation discounts. Background In an effort to diminish perceived abuses related to valuation discounts associated with transfers of interests in family entities, the IRS enacted Section 2704 of the Internal Revenue Code (the …
When valuing a controlling or non-controlling interest in a C corporation that owns only marketable securities, a common method to apply is the net asset value method under the asset approach. Under this method, the fair market value of liabilities is subtracted from the fair market value of assets. Included in the liabilities is a …