A summary of recent federal court cases involving gross misstatement of valuation. This month’s federal court case summaries feature seven cases that highlight the recent U.S. Supreme Court decision involving gross misstatement of valuation. In addition, the summary features cases that delineate the consequences to valuation professionals who fail to comply with Tax Court pre-trial orders under Tax Ct. R. 9 ...

Business valuation in divorce In this article, Brian Murray examines the risks taken by clients when valuators are hired to “get the numbers” needed to support a desired outcome in divorce proceedings. In most cases, such a preplanned agenda backfires and creates more problems in the end. ...

New private company cost of capital model delivers consistent and observable results The Implied Private Company Pricing Line (IPCPL) Cost of Capital Model seeks to eliminate pitfalls for unsystematic risk, liquidity, small stock premium, PTE taxes, and cash/leverage by utilizing real transaction, market-clearing prices between buyers and sellers of comparable small private businesses. ...

Historical perspective and current recommendations The Internal Revenue Service published Discount for Lack of Marketability: Job Aid for IRS Professionals (Job Aid) in August of 2013.  Now, two new books provide  advice on how to prepare a DLOM and which methods valuators  should consider and why.  These will help any business valuation practice, whether working on a DLOM for the IRS or any other purpose. ...

A summary of recent federal and state court cases involving final partner administrative adjustments, mergers, and matrimonial law This month we highlight four cases.  The first is Rovakat, a federal appellate court decision where a claimed redemption was deemed a sale of stock. The In re MFW Shareholder Litigation case involves a motion for summary judgment where a majority of the minority shareholders app ...

More on the neutral business valuator and the mediation process This article, by one of the top national leaders in the mediation profession, discusses the importance of having reliable facts to expedite the settlement of conflicts where the value of a business is a key factor. ...

Reality TV offers more than entertainment Reality turnaround TV shows provide valuators lessons that go a long way toward improving their consulting and valuation skills, and client deliverable. Those lessons could result in more opportunities and greater credibility. ...

The standard 10 stages to use in an intangible asset engagement In this second installment, Robert F. Reilly completes his review of the 10 typical stages of any intangible asset analysis engagement. For purposes of this article, an intangible asset analysis may include a valuation, damages analysis, transfer price study, or other economic analysis. The business appraiser will typically consider these stage ...

The standard 10 stages In this first half of his two-part series, Robert F. Reilly summarizes six of the ten typical stages of any intangible asset analysis assignment. For purposes of this article, an intangible asset analysis may include a valuation, damages analysis, transfer price study, or other economic analysis. The business appraiser will typically consider these stages, or elements, before, during, ...

Equity creditor appointment standards and lessons for hiring business valuation professionals from Kodak’s bankruptcy This article provides an overview of the Eastman Kodak bankruptcy case and focuses on the standard a bankruptcy court will use deciding whether to appoint an official equity creditors' committee. It also explains why the bankruptcy court granted Kodak’s motion in limine to exclude‒under Daub ...

A closer look at real estate appraisal and government contracts A wife sells her portion of interest in a law firm in an arm’s length transaction and the timing and circumstances are questioned with regard to marital property. Adhering to cost accounting standards within government contracts and real estate valuation issues are reviewed in the latest Case Law Update. ...

Appraising marina properties is a challenging niche with as many variables as there are bodies of water Just like appraisals on dry land, location plays a major role in developing an opinion of value for a marina property, but the criteria for an appraisal can be a little different from those of landlocked commercial enterprises. Here are a few of the questions that must be considered when valuing marina pr ...

Healthcare revenue planning challenges Beware of valuing a healthcare practice based on 2012 revenue. Reimbursement rates are lower in 2013, and penalties are being assigned by Medicare. This could further reduce a healthcare practice's value. ...

A proactive approach pays off for selling shareholders A business valuation analyst has the training, valuation skills, and experience to provide meaningful feedback to owners seeking to exit their businesses. When and how to conduct the pre-sale valuation is crucial to maximizing profit potential. This article will provide insight into using your valuation skills to help prepare a business for sale. ...

Suggested benchmark analysis to assess the reasonableness of the cost of equity In the February/March 2013 issue of the Financial Valuation & Litigation Expert (FVLE), Issue 41, Jim Hitchner authored “How to ‘Rig’ a Valuation: The Discount Rate.” This is the first of a two-part FVLE series. The article provides suggested guidance to unmask the intentional “rig.” ...

How much is that receivable really worth? Valuing receivables in a medical practice is never simply a matter of analyzing an aged receivables report. A number of factors must be considered to accurately value what could easily be the largest asset of the practice. ...

Fractional interest discounts allowed In Estate of Elkins v. Commissioner, the U.S. Tax Court sides with petitioners holding they were entitled to a ten percent discount from pro rata fair market value with respect to a decedent’s interest in various works of art.  In Fancher v. Prudhome, the Louisiana Court of Appeals upholds a trial court’s determination that using the Income Approach to value a withdrawi ...

How to apply the landmark cases Delaware MRI (2007) and Bernier (2012) Eric J. Barr, CPA/ABV/CFF, CVA, CFE, analyzes two landmark court decisions—Delaware MRI and Bernier—and offers more clarity on the proper way to value an ownership interest in a pass-through entity under the fair market standard of value.  ...

Important factors to consider in making tax adjustments to pass-through income Damodaran recently wrote about the potential devaluation of dividend-paying stocks if the preferred dividend tax rate were to climb back up to the ordinary rate.  This could inspire valuation experts to make a tax adjustment reducing untaxed Pass-Through Entity (PTE) income to equate it with corporately taxed income that qualifie ...

Changes in the capital markets utilized in financing healthcare transactions have transformed the way that the healthcare providers and enterprises operate within the current transactional marketplace, explains Robert James Cimasi.  These changes, particularly in recent years following the “Great Recession,”  relate to both the availability of capital sources and the types of financial instruments used.  As ...