When should an appraisal of a non-cash charitable contribution be performed?

Taxpayers who make charitable contributions of non-cash property could be putting themselves in IRS penalty danger if the contribution is more than $5,000 and the property has not been appraised by a qualified appraiser who has issued a qualified appraisal report. A recent Tax Court case emphasizes the need for an appraisal report to be …

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Valuation Services as a Management Tool

Most clients come to us for business valuation services because of outside requirements. They need an independent appraisal for tax compliance, financial reporting, marital dissolution or estate and gift planning, among other reasons. But even if you don’t have any of these needs, you might want to obtain an appraisal. Why would you want an …

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Could New Section 2704 Regulations Eliminate Discounts Applicable to Transferred Interests in Family Owned Entities?

Section 2704(b) Internal Revenue Code Section 2704(b) provides that certain “applicable restrictions” that would typically justify the application of lack of control and/or lack of marketability discounts to transferred interests in closely-held family entities such as limited partnerships or limited liability companies are to be ignored for the purpose of valuation, if those interests are …

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Shareholder debt or equity, does it affect value?

Shareholders of a small business sometimes will infuse cash into their Companies when needed. This cash is often recorded as a loan to the business. The shareholder and the Company may or may not have documented the “loan” setting forth the terms including interest rate, payback period, etc. When developing an equity value of a …

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Can You Apply a Discount to a Promissory Note?

Hoffman v. Commissioner: Tax Court Accepts 12.5% Discount Rate Treasury Regulation 20.2031-4 states that the fair market value of promissory notes, secured or unsecured, is presumed to be the amount of unpaid principal, plus accrued interest at the date of valuation, unless the taxpayer provides sufficient evidence to the Internal Revenue Service which supports a …

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A Time to Reflect

We just rang in the New Year, 2015, and it is now a time for reflection on 2014. First and foremost, I wish to thank all the clients we served during the past year. Henry & Horne ’s Business Valuation and Litigation Support Services Group (H&H BV/LS Group) provided forensic, valuation and litigation services to …

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Start Up Companies – Why You Need a Valuation for Stock Options

It seems everyone remembers the Enron accounting scandal. Prior to the company going bankrupt, Enron executives were accelerating payments under their deferred compensation plans in order to cash in before the bankruptcy. Other publicly-traded companies were seemingly abusing the timing of stock option awards by back-dating the option grants. Section 409A was added to the …

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In Federal Tax Court Your Report Is Your Testimony

The level of detail and the manner of explanation in a valuation report for tax compliance purposes is extremely important as the report serves as the expert’s direct testimony in Federal Tax Court. It’s interesting to observe the important steps that families take to protect their assets – hiring top wealth management teams, tax consultants, …

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Quantifying the Lack of Control Discount

Should business appraisers rely more on implied rates of return when quantifying minority discounts? A thought provoking webinar was sponsored by the American Society of Appraisers (ASA) on March 25, 2014. Presenters Eric W. Nath and Bruce A. Johnson encouraged appraisers to place much more emphasis on factors that would be considered by “real world” …

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Getting Clarity in Buy-Sell Agreements

Any business with multiple owners should have a buy-sell agreement in place.  Buy-sell agreements are entered into between the co-owners of a business to direct what should happen when an owner leaves the company.  A typical agreement covers such issues as who can buy the ownership interest, what triggers a buyout, what price will be …

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