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.
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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 withdrawing member’s share in an LLC was not applicable since future cash flow could not be assumed and the withdrawing member provided the majority of the company’s business.
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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.
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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 qualifies for tax preference at the shareholder level. Before making this tax adjustment, the valuation expert should consider several factors.
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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 the healthcare industry faces a changing paradigm, the increased need for healthcare consulting services has been met by professionals who have entered the consulting arena from a diverse array of professional backgrounds, e.g., accounting, finance and economics, insurance, etc.
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One Medical Practice Could—Depending on How Rules of Thumb are Applied—be Valued at Several Radically Different Prices. Find Out Why! Paul Hyde, in a recent Around the Valuation World™ in 90 Minutes webinar, explained why rules of thumb are dangerous to rely on for valuation. The focus of his argument relied on six simple graphics that illustrated how the value of one hypothetical medical practice could—depending on how a rule of thumb is applied—be assessed at either $800,000 or $200,000 . . . or any number of different variations in between!
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US Securities and Exchange Commission (SEC) is Aggressively Policing Fund Valuation Practices in the Hedge Fund Industry Kris Devasabai at Risk.net reports that hedge funds, under pressure from regulators and investors, are establishing robust pricing policies for hard-to-value assets. They are also hiring independent experts to price complex and illiquid assets as investors and regulators intensify their scrutiny of valuation practices. Here’s more:
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An Overly High Valuation Can Scare Away Investors or Spark a Down Round that Dilutes an Earlier Angel Investment Mark Boslet at PE Hub explains that with IPOs on track to have their biggest year since 2010 and some major technology disruptions sparking infectious excitement, it’s important to keep in mind key fundamentals including not accepting too high a valuation for your business or investment properties. Here’s why:
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Plus: Bishop v. Commissioner Rules on When and Whether a Bad Debt Loss Can Be a Claimed Deduction In Schwab v. Commissioner, a case turns on when a variable universal life insurance policy is a taxable event. In Boone Operations Co., LLC v. Commissioner, find out when contributing fill dirt to the city of Tucson is or isn’t a charitable or taxable event.
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Recent Cases Consider: Fair Market Value in Arkansas, Equalization Payments and Healthcare Credits in Iowa, and Valuations Based on Future Cash Flow in Louisiana Judge Wiggins in Iowa rules In re Marriage of McDermott on equalization payments and tax credits for health insurance payments. In Louisiana, Judge Williams finds a valuation in Fancher v. Prudhomme invalid since it was based on assumed cash flow—and a withdrawing member was the source of almost all the company’s business. Instead, current asset value is key. Find out more.
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A Petitioner Relies Reasonably on His CPA in Gaggero v. Commissioner, the Tax Court Finds. That Makes a Difference: Here’s Why. In Gaggero v. Commissioner, Judge Holmes at the U.S. Tax Court disagrees with the IRS’s contention that the plaintiff conducted an improper scheme to avoid capital gains. In First Street Holdings NV, LLC v. MS Mission Holdings, LLC, Judge Markell at the U.S. Bankruptcy Court finds a lower bankruptcy court’s errors to be likely prejudicial.
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Aswath Damodaran, NYU’s Legendary Valuation Expert, Recently Argues that there’s a 90% Chance Apple is Undervalued. Here’s Why. This comes in the wake of Apple shares’ breathtaking plunge from recent highs. (That’s be about $700 in September to $425 or so today.) In a new blog post, Sam Ro at Business Insider reports that Damodaran thinks that management can learn a few things from the recent market volatility, and he offers some advice. Here are his four tips verbatim (emphasis courtesy of Business Insider’s Sam Ro: Build up credibility with investors: The company has to regain credibility with investors. Apple…
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Annie Cushing is on a Mission to Rid the World of Ugly Data. Learn About Data Collection, Analytics, Technical SEO, Analysis, and Beautification. Annie Cushing, a Senior SEO at SEER Interactive, a Philadelphia-based online marketing agency, explains that “There comes a time in a marketer’s life when making pretty charts with a predefined dataset just doesn’t cut it. “And finding the sum and average of a column of data just doesn’t satisfy you anymore. Eventually — and it’s really inevitable — you will actually have to dive deep into the data and cull out a smaller dataset or manipulate it…
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“You’re The Boss” Author Josh Patrick Suggests Business Owners Use Credentialed Advisers Who Work Only for You, Employing Intermediaries, Developing a Personal Financial Plan, More. Josh Patrick is a founder and principal at Stage 2 Planning Partners, where he works with private business owners on creating personal and business value. Recently he offered some recommendations about selling a business at the New York Times “You’re the Boss” blog. Here are five of the “hard-earned” lessons he passes on.
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MidasFund Will Not Acquire Distressed Companies; However, it Will Buy Stable Divisions of Bankrupt Companies. Here’s Why. “Last week’s announcement that MidasFund had started acquiring zombie companies caused a flurry of emails,” writes Rob Slee on the MidasMoments blog of the MidasNation site. “Many of you asked about the differences between acquiring distressed, zombie and healthy companies. Let’s dig into this.” Here’s an excerpt:
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There Are Different Standards. They Have Different Places in Various Appraisals. Here’s Why. Jim Hitchner considers various responses to the query: “When valuing an operating company, is it necessary to mention USPAP in addition to SSVS 1 when talking about the standards adhered to?” Good question. There were lots of answers from various valuators in a recent discussion. Here’s Jim’s take on it all.
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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 in the Estate of Gallagher v. Commissioner, (TC Memo. 2011-148). The court’s valuation was closest to the value on the return as filed.
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Sweet Tax Deductions for Individuals That Often Get Forgotten With October 15 behind us and April 15 still comfortably far away, it’s a good time to start boning up on ways to save your clients money once things start getting serious. With that in mind, Bankrate.com identified 10 great deductions that individual taxpayers should use – but often forget. Accounting Today passes on the good news. Here’s the list:
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A Valuation Misstatement Results in Tax Underpayment; An Appraisal is “Not Qualified.” In Alpha I, L.P., v. United States, Judge O’Malley of the U.S. Court of Appeals for the Federal Circuit considers the legitimacy of certain partnership transfers to charitable remainder unitrusts (CRUTs). In Rothman v. Commissioner, Judge Laro at the U.S. Tax Court rules on the importance of a “qualified appraisal.”
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Investors Cool on Tech A survey of tech firms’ valuations shows many companies are challenged. Here’s detail from various reporters: