The Tax Court Says Certified A recent Tax Court opinion brought to light the importance of having an appraiser designation from a professional appraiser organization. While the decision is limited to Tax Court cases, it provides a cautionary tale for all who provide business appraisals in litigious situations. A recent Tax Court opinion brought to light the importance of having an appraiser designation from ...

In Your Expert Report This article includes tips for preparing an expert report but is not intended to be all inclusive. In addition to these points, remember to carefully consider professional standards, including those that are non-binding, and any code of ethics. Also prepare your report with the expectation of a Daubert motion or similar challenge to your qualifications and/or methodology. The Federal R ...

The Tax Court also denies capital gain treatment but allows business deductions for a taxpayer's subsequent shooting activity. Recently, the Tax Court ruled that an individual who received income as a nominee of a C corporation was not subject to the hobby loss rules of Sec. 183. To read the full article in the Journal of Accountancy, click: Salesman’s Termination Payment Held Not For Goodwill. ...

Many nonresidents who come to the United States as scholars, appeal to the Tax Court claiming benefits under a tax treaty. Three recent cases provide tips to decide if it is worth the time and effort to appeal to the Tax Court. Three different U.S. tax treaties are covered: those with Russia, Poland, and China. To read the full article in The Tax Adviser, click: Researchers and Scholars Claim Tax Treaty Ben ...

A taxpayer cannot blame tax preparation software for inaccuracies that lead to penalties.  A recent Tax Court case provides a cautionary tale for taxpayers who rely on do-it-yourself tax preparation software to prepare their tax returns.  Craig Smalley provides some insight into this. To read the full article in The Tax Adviser, click: Reliance on Tax Software Does Not Let Taxpayer Off the Hook. ...

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, ...

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 ...

Calculating appropriate goodwill can create significant savings to a taxpayer.  Lucas M. Parris, senior member of Mercer Capital’s Financial Reporting Valuation Group, describes the existence of personal goodwill apart from corporate goodwill. To read more about the results of this report in the Mercer Capital's Financial Reporting Blog, click: An Overview of Personal Goodwill. This article is republished f ...

In Economic Substance Analyses Valuation analysts and other financial advisers are often called on to perform economic substance analyses in federal income tax challenges. In these cases, the Internal Revenue Service challenges a tax deduction or loss related to a taxpayer transaction by applying the so-called economic substance doctrine. This doctrine allows the Service to disallow a taxpayer transaction i ...

According to Tax Court decisions Part 2 of this article examines the remaining eight most common mistakes made in valuation, based on U.S. Tax Court decisions. Court rulings may be right or wrong, but without taking sides, this article confirms the truism that experience is the best teacher. . ...

According to Tax Court decisions Part 1 of this article examines eight of the 16 most common mistakes made in business valuation reports according to U.S. Tax Court decisions. Business valuation textbooks, training manuals, and conference presentations may do a good job of teaching the right ways to conduct valuations. But in some respects, the most authoritative teacher of what is right and, just as import ...

Estate of Elkins Included Works by Picasso, Jackson Pollock, Henry Moore, Paul Cezanne, and Jasper Johns Roger Russell at Accounting Today reports that in the case, Estate of Elkins, 140 TC No. 5, the court applied Section 2703(a)(2) of the Tax Code in valuing the art, which included works by Picasso, Jackson Pollock, Henry Moore, Paul Cezanne, and Jasper Johns.  Section 2703(a)(2) of the Tax Code provides ...

Case Involved $6M in Gift Tax and $5M in Estate Tax; Interest in General Partnership Sold for Private Annuity; Much Planning at the End of 2012 Bruce Givner at Financial Planning reports that U.S. Tax Court Judge Elizabeth Paris handed the taxpayers a victory last Thursday [2/14/2013]  involving a powerful estate tax planning tool: private annuities.   The case, Estate of Kite v. Commissioner, is important, ...

Tax Court Judges Structured Trust Advantaged Repackaged Securities” ("STARS") as Illegitimate.  Costs to BNY/Mellon May Exceed $800M. The Internal Revenue Service won a high-profile tax shelter case involving Bank of New York Mellon Corp. on Monday, in a ruling that could cost the company more than $800 million.  John D. McKinnon at the WSJ Washington Wire reports the news: ...

The Tax Court Speaks Loudly and Firmly on the Responsibilities of Business Appraisers Hempstead & Co. has published "Estate of Gallagher is a Valuation Tutorial."  The article emphasizes the importance of providing the court with a clear and convincing explanation of the assumptions and arguments you have employed in carrying out a business appraisal. It discusses the recent Tax Court Memorandum opinion ...

All kinds of news, findings, and rulings come out that might affect the work of financial consultants and appraisers every day. When can you know when a precedent is important or something you can ignore? Or, put another way: what information is most important to pay attention to? Rand Curtiss explains. ...

Roger Russell recaps the decision at Accounting Today. The Tax Court, in a recent summary opinion, ruled that an individual did not have cancellation of debt income in the year that a collection agency issued him a Form 1099-C and stopped its automated collection efforts. The IRS determined a deficiency in David Stewart’s 2008 income tax of $2,138, based on a Form 1099-C issued by the collection agency. The ...

Payments an accounting firm characterized as consulting fees were really disguised dividends and should have been taxed as corporate income, the Seventh Circuit held on Thursday. The payments reduced the firm's income to zero, and the court applied the "independent investor" test to recharacterize them as dividends paid to the firm's owners.   Alistair M. Nevius at the Journal of Accountancy, in the article ...