(Part II of III) Part one of this three-part series summarized the facts regarding Clary Hood, Inc. (“CHI”) and the basis for the litigation. This second article focuses on the Tax Court’s analysis of the reasonableness of compensation issue in the Hood decision. Introduction The U.S. Tax Court decision in Clary Hood, Inc. v. Commissioner[1] provides important practical guidance to private companies and to ...

How many clients will you gain or lose this year? A rough gauge of those figures might come from identifying whom among your client or referral bases is passively or actively loyal to you or your firm. Author Rohit Bhargava has written about this concept and understanding it presents two massive opportunities for your practice. The author of this article shares the insight gained from Rohit Bhargava. How ma ...

(Part I of III) This article about excess compensation is comprised of three-parts. Part one summarizes the facts regarding Clary Hood, Inc. v. Commissioner and the U.S. Tax Court’s holding. Part two of this series describes the Tax Court’s analysis and conclusions regarding the reasonableness of compensation issues. Part three describes the Tax Court’s analysis and conclusions regarding Section 6662 penalt ...

FTC Proposes Rule to Ban Non-Competes On January 5, 2023, the Federal Trade Commission (FTC) issued a Notice of Proposed Rulemaking (NPRM) that, if adopted, would functionally serve as a complete ban on non-compete clauses and contractual provisions or employment policies that have a similar effect with limited exception. The 60-day comment period runs through March 7, 2023. On January 5, 2023, the Federal ...

Their Changing Roles and Responsibilities The Frye and Daubert decisions shook the legal world and the standards enunciated also shook the valuation world. In this article, the author shares some recent Maryland developments and surmises that there may be more changes coming that will affect the role of lawyers, judges and experts. In my 30 years as a Judge on three different Maryland Trial Courts and the l ...

An Additional Consideration for Business Valuation and Forensic Accountants When Valuing a Company The Biometric Information Privacy Act (BIPA), 740 Ill. Comp. Stat. 14/1 et seq., is not just for Google and Facebook. While the technology giants have been sued for allegedly violating BIPA, so too have countless other companies. In the last few years, plaintiffs have sued hundreds, if not thousands, of compan ...

It is all Based on Your Perspective The purchase price of a transaction can look vastly different. Therefore, when considering the prices of various transactions, it is important to know how those prices have been calculated so that one has a consistent perspective and is not comparing apples to oranges This article illustrates the various perspectives that may emerge in connection with a purchase price. Wi ...

VPS StraightTalk Webinar, October 20, 2022 This summer and fall 2022, within the business valuation profession, one of the most contentious issues has been “which cost of capital should business valuation professionals use when valuing a small business?” First, Dr. Damodaran advocated the implied equity risk premium with the capital asset pricing model without adding a size premium or company specific risk. ...

Where to Start? In forensic accounting, whether litigation is contemplated or not, the key to the most reliable conclusion is starting with accurate and complete information. Under the best of circumstances, the primary source of this information is your client. On the other hand, when the person or entity you are requesting from is an adversary, there is little incentive for cooperation. Regardless of the ...

Answer These Five Questions How do you know if social networking will work for you? If you are using social media and not getting results, are you wasting precious time? If you are not using social media, are you missing out on a gaping opportunity? The author of this article has invested about 16 years on LinkedIn and about five years on YouTube. Based on what he has done and the results he has achieved in ...

Is Bankruptcy the Next Stop and is a “Fresh Start” Available for Amber Heard? The well-publicized defamation case of Johnny Depp and Amber Heard resulted in a substantial judgment against Heard. Setting off the amount awarded to Depp, Heard will be liable for approximately $8 million in compensatory and punitive damages. If Heard files for relief under bankruptcy law, is that judgment dischargeable? What ca ...

Using Weights and Factors to Quantify Risk This is a condensation of the author’s article, originally published in The Value Examiner, July/August 2022. The author proposes an alternative way of calculating the company specific risk premium. This is a condensation of my article originally published in The Value Examiner, July/August 2022. Most of us who value businesses are not valuing businesses in the mid ...

A Five-Step Process to Secure Debt Refinancing For anyone dealing with a company that has a troubled balance sheet, maintaining cash flow is critical to determining an optimal go-forward approach. In many cases, the go-forward involves a transaction such as a merger or sale. But, to get to that point, a stressed or distressed company must maintain the liquidity it needs to continue running the business whil ...

How the PTE Tax Can Impact the Valuation of Pass-Through Entities This paper explains how the PTE tax in Massachusetts and several other states affects the valuation of a business and how business owners can account for this tax to avoid double taxation. Introduction Taxes can have a significant impact on the value of a business. Pass-through entities such as S-Corporations and partnerships generally do not ...

November 2022 The importance of consumer protection laws can seem unfathomable when you see a label on a sweater reminding you to remove the child before laundering, but laws prohibiting deceptive trade practices and false advertising exist because the incentives to run roughshod over consumers are significant. Since the individual harm resulting from consumer fraud is often small, those laws often provide ...

On Business Valuation The effects of inflation on consumers’ spending and psyche are well-known. The difficulties each causes in day-to-day life are often discussed. Inflation has affected everything from the cost of transportation to the cost of food and housing. What is less discussed, however, is how the current inflationary period is affecting small business owners and their companies. In this article t ...

Alleged Best Practices to Whom? Peter J. Butler, CFA, ASA, MBA, founder of Valtrend, LLC and inventor of the Total Cost of Equity Calculator (TCOE), responds to comments made by Robert Reilly and Connor Thurman regarding best practices used to arrive at the company specific risk; the latter article did not discuss the TCOE and here he “key[s] in on Part III—the section which addresses empirical evidence in ...

It is that time of the year when we take stock of what we accomplished, what we did not, and plan for next year. But chances are, you may be too focused on tasks you can check off when they are done and not the big picture goals or where they are leading you towards—or not. This article discusses the importance of taking-in the big picture—the goals, strategies, and tactics—as one develops and/or reviews th ...

A Review of the Basics for Lost Profits (Part III) This is the third installment of this series. The first part provided an overall introduction to this review of the basics for lost profits. The second part reviewed the similarities and differences between estimating lost profits and litigious based business valuations. This installment takes a deeper look into the methods for calculating lost profits. Fou ...

The Consistency of Data and Trends The real estate sector encompasses a variety of activities, limited only by the imagination, including: selling, leasing, management, development, appraisal, title services, and investment. When valuing businesses linked to the real estate market, whether directly or indirectly, it is essential to examine both the risk and the cash flow generating ability of each company. ...