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 Dece ...

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, ...

About Valuing Pass-Through Entities ...

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 ...

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. ...

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 ...

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 Best Source of Referrals is One Not Readily Considered How can one maximize referral opportunities? What separates the most successful professional services firms from the rest? One key difference is surprisingly simple, and often overlooked: successful firms understand the process of referrals. Most firms work under long-held referral assumptions that are not effective. Most believe that winning new bu ...

IP Valuation—Beyond the Income and Cost Approach Valuation analysts (“analysts”) are often asked to value debtor company intellectual property (IP) within a business bankruptcy context. Some of the bankruptcy reasons to value IP include the assessment of the following: the debtor’s solvency, a secured creditor’s collateral and protection, the fairness of a Section 363 IP asset sale or license, the debtor’s ...

In Appraising Outpatient Enterprises Healthcare related outpatient enterprises are those that provide services that do not require hospital admission and may be performed outside the premises of a hospital. Valuation of healthcare related outpatient enterprises, similar to the valuation of any business, should include consideration of the three general approaches to valuation, i.e., the income approach, the ...

The Emergence of the Transitional Support Advisor Following a divorce, how does a financially naïve former spouse transition to become a financially independent former spouse? In this article, the author discusses what is a Transitional Support Expert and that professional’s role in a dissolution proceeding and following entry of the decree. ...

Prepare, Verify, and Excel at Trial In order to recover lost profits in a commercial damage case, three standards must be met. First, plaintiff must show proximate cause; second, the foreseeability; and third, reasonable certainty. This article will focus on the third standard, reasonable certainty. Experts seeking to provide realistic lost profit estimates must be aware of this standard. The following disc ...

Why the Choice Between Prime and Treasury Rate Matters Many bankruptcy practitioners have focused on the recent decisions in Momentive[1] that forced secured creditors to refinance prepetition loans at below market interest rates.  Most of these practitioners’ publications focus on the courts’ findings and the potential implication on future matters.  However, three interesting questions are not addressed i ...

Secured Creditors Lost Almost $200 Million in Economic Value Due to the Imposition of Below Market Interest Rates Many bankruptcy practitioners have focused on the recent decisions in Momentive[1] that forced secured creditors to refinance prepetition loans at below market interest rates.  Most of these practitioners’ publications focus on the courts’ findings and the potential implication on future matters ...

The Present Value of Future Lost Profits, and the Time Value of Money Experts estimating the present value of a business’ future lost profits have much less direction from the courts than their counterparts estimating the present value of a person’s lost earning capacity. Professional literature has attempted to fill this gap providing many articles discussing the differing methods for analyzing lost profit ...

SPARC the Analysis and Shine Have you ever asked your clients what drives the value of their businesses? If they feel comfortable that they know what drives their business’ value, have you ever asked them why it does? In this article, first of a two part series, Sarah von Helfenstein shares her thoughts on the kinds of things that we, as business analysts and appraisers, should consider when assessing busin ...

Guidance from Bross Trucking v. Commissioner (2014) Valuation analysts often have to separate company-owned entity goodwill from shareholder-owned personal goodwill in the valuation of closely held companies. These valuations may be performed for family law, shareholder dispute, breach of contract, or other litigation purposes; for transaction structuring and sale consideration allocation purposes; and for ...

Meet Your Advisory Team Selling a business is a one-time process for most owners. It is also a harrowing process involving professionals in many disciplines. Here is a description of the primary people assisting in the process. ...

How to Apply Survey Data to Your Company, using K-means Clustering We are in an age when fraud statistics and the individual profiles of those committing the fraud are at an all-time high. How does a firm identify factors that will enable the firm to understand the risk? The Association of Certified Fraud Examiners (ACFE) annual fraud survey—readily available for free—provides valuable insight to prevent fr ...

Use of Synthetic Credit Ratings to Determine the Appropriate Market Yield for the Preferred Equity Interest Among the estate tax planning methods that include grants of “carried” or profit interests, grantor retained annuity trusts, outright gifts, etc., entity freeze is a less known, or perhaps, less utilized tool. Yet, in certain circumstances, a freeze entity can be a compelling wealth transfer mechanism ...