Settlement of a Valuation Case Before the U.S. Tax Court This article discusses issues found in a case that is pending before the United States Tax Court (the “Tax Court”). The specific issues relate to issues regarding sales of closely held stock to grantor trusts in exchange for promissory notes. Specifically, the IRS took issue with two grantor sale trust transactions. The two cases were filed on December 26, 2013, as (1) Estate of Donald Woelbing v. Commissioner, Docket No. 30261-13, and (2) Estate of Marion Woelbing v. Commissioner, Docket No. 30260-13.
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Notable 4th Quarter 2015 Cases, Part II of II Part II of this article highlights the remaining notable 4th Quarter 2015 U.S. Tax Court Cases that will be of interest to valuation practitioners and business advisors. Estate of Purdue reminded us that taxpayers need to address 2036(a) concerns and establish a non-tax reason. In addition, the case reminds us that gifting an equity or LLC interest may not qualify as a present interest for gift tax purposes. Estate of Newberger involved the proper valuation of artwork, yet its holding is applicable to a business valuation opinion. Sumner Redstone v. Commissioner…
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Effective Interview Planning in a Fraud Investigation This article is a republication of Chapter 10 of The Corporate Fraud: The Executive’s Survival Guide, authored by Ray Dunkle of Red Flag Reporting. This article features the chapter written by James I. Marasco, CPA, CIA, CFE. In this chapter, Mr. Marasco addresses the proper approach for conducting interviews. This includes what type of questions to ask, what verbal cues and mannerisms may suggest, and the “do and do not’s” of proper interviewing. It is important to be aware of specific requirements governing the jurisdiction in which the interview takes place. States have…
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Notable 4th Quarter 2015 Cases, Part I of II Part I of this article highlights notable 4th Quarter 2015 U.S. Tax Court Cases that will be of interest to valuation practitioners and business advisors. Estate of Purdue reminds us that taxpayers need to address 2036(a) concerns and establish a non-tax reason. In addition, the case reminds us that gifting an equity or LLC interest may not qualify as a present interest for gift tax purposes. Estate of Newberger involves the proper valuation of artwork, yet its holding is applicable to a business valuation opinion. Sumner Redstone v. Commissioner involves a…
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About Valuing Pass-Through Entities
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The Compensation-Productivity Nexus Affiliate employer agreements that do not involve designated health services may not be subject to Stark Law. However, where there is an ownership nexus—shared parent or direct subsidiary—between the hospital and affiliate employer, regulators may be able to find Stark Law violations. As governmental agencies drill down well beyond simple compensation comparatives, into the productivity and collections information at issue, hospitals, health systems and the valuation consultants who advise these organizations need to be aware of the ever-increasing scrutiny not only of compensation but the fair market value opinions that may support such compensation. This article examines…
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Challenges and the Emergence of Peer Review Judges are often required to pick apart complicated expert analysis to assess the validity and reliability of an expert’s work when its admissibility is challenged. But in the professional domain, we would not expect a tax auditor to be able to analyze a report on macroeconomic theory. Why, then, do we ask courts to perform these analyses in fields from accounting to zoology? It stands to reason our courts need help. We propose that litigators and experts now have the chance to help courts, and in the process, serve their clients better. Litigators…
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Is Recognizing Cognitive and Motivational Biases Enough? The National Academy of Sciences reported that bias is a severe problem in forensic sciences. Cognitive biases were described as, “common features of decision making, and they cannot be willed away.” Is recognizing bias, alone, sufficient to address cognitive, motivational or other biases? What can a forensic expert do to avoid the bias trap? In this article, the author answers these questions.
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Hitchner, Pratt, and Fishman Answer the Call In the past month, business valuation professionals have read reviews from a number of practitioners serving as reviewers for the Q&A Guide. All of them are positive. In this book review, we go into a little more detail and discuss what these established and accomplished business valuation professionals and leaders answer in the Q&A Guide. So, what does this book cover? What is not covered? These questions are answered in this review.
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It is not Just About More “Clicks” How important is a website? In this article, Dr. Lee Frederiksen shares what his research reveals about high-performing websites; it is not about more clicks.
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Businesses Where Real Estate is Integral to Operations What is the best approach to use to value a business where real estate is indispensable to operations? In this article, Dr. Brous discusses the use of the option to abandon.
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Effective Trial Preparation and Presentations What is the role of a financial expert? How important is the financial expert? In this article, the author answers these questions and shares his experience serving as a damage expert.
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Correlating Patent Values with Prior Citations What is forward patent citation? Why is it relevant? In this article, the author answers the above questions and details how these may be relevant to a damages expert in a patent infringement matter. These experts may need to ascertain the value attributable to the patented technology at issue. While comparable license agreements may serve useful in providing a market-based approach to arriving at a value, the damages expert must also seek to apportion out the comparable patents related to the patented technology within the comparable license agreements from that of the intellectual property…
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T.C. Memo. 2015-249: A Checklist to Address 2036 Concerns The issue raised in Estate of Purdue v. Commissioner was whether the “decedent’s desire to have the marketable securities and the building interest held and managed as a family asset constituted a legitimate non-tax motive for the transfer of property to PFLLC.”
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An Era of Reform—The Four Pillars, Volumes I and II Since 1950, the U.S. population has doubled from just more than 152 million to an estimated 320 million. In this same period, the average life expectancy has increased from approximately 68 years to over 78 years. This increased life expectancy and accompanying rise in the incidence and prevalence of diseases, conditions, and injuries is driving demand for healthcare services. Cost concerns and a rapidly evolving regulatory and legal environment have created new opportunities in healthcare consultancy for large and small firms. This two-volume set is designed to serve as a…
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Qualified Business Appraiser and Appraisal Needed A November 2015 memorandum by the U.S. Tax Court in Fleming Cardiovascular, P.A. v. Commissioner found that the Internal Revenue Services (“IRS”) did not abuse its discretion in revoking the Fleming Cardiovascular, P.A. Employee Stock Ownership Plan’s (“ESOP”) qualified and tax exempt status for failure to operate in accordance with plan documents. Of note, the ESOP failed to obtain an independent annual valuation of the stock by a qualified appraiser in five out of seven plan years.
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Q&A Guide for Valuation Practitioners James Hitchner, Dr. Shannon Pratt, and Jay Fishman are co-authors of a publication that uses a Q&A approach to address important questions. The article includes excerpts from this book.
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Post-Grant Review, Inter Partes Review (IPR) and Ex Parte Re-Examination (EPR) alternatives to Litigation Litigation of Intellectual Property is costly. What alternatives do parties have to costly and protracted litigation? This article discusses various options to litigation.
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A Meaningful New Year’s Resolution Why is compliance so important to business? What are the reasons and consequences for failing to have a compliance program? In this article, Peter J. Comodeca, Esq. with the law firm of Calfee, Halter & Griswold, LLP discusses the legal reasons to comply and costs of failing to comply.
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Benchmarking Your Reports and Examining What Hypothetical Conditions and/or Extraordinary Assumptions You Have Made! However, thanks to WikiLeaks, “The Interview”, and Sony Pictures, a rather sizeable repository of sample reports exist free of charge. These reports, as you might expect, are from the transaction arms of Big Four firms as well as leading national shops. Anyone who has been doing this for a while has seen valuation reports from almost every large firm out there. But for those new to the profession, or people helping others along, these now public documents are of educational value, in my opinion.