Standards of Value: Which Is Used When?

Standards of Value: Which Is Used When?

Business valuations are conducted with a specific purpose in mind. This purpose suggests — and sometimes dictates — the standard of value to be used in the valuation. For example, the standard used for a business liquidation is different from the one used for a gift...
How to Avoid Estate Litigation — Stick to the 3 Ds

How to Avoid Estate Litigation — Stick to the 3 Ds

You might think that the enormous transfer of wealth from baby boomers to their heirs — $68 trillion over the next few decades — is causing great joy among beneficiaries. Unfortunately, this is not the case. Along with increasing wealth transfer, there’s also been an...
What’s Reasonable in Reasonable Compensation?

What’s Reasonable in Reasonable Compensation?

Owner compensation is always of interest to valuation advisors. When assessing a company’s value, advisors look at labor costs as a factor in operating earnings. If the owner is paid an unreasonable salary — too high or too low — the advisor “normalizes” it to reflect...
Dealing with Contingent Liabilities

Dealing with Contingent Liabilities

Some valuations include contingent liabilities, which can have a significant impact on value. Defining Contingency Contingent liabilities are potential liabilities that may or may not be realized. They include possible claims against the target company, such as: •...
Tax Court Accepts Tax-Affected Valuation

Tax Court Accepts Tax-Affected Valuation

On the heels of the Kress v. United States gift tax case, in which a federal district court affirmed the practice of tax affecting pass-through entities (PTEs) for valuation purposes, the U.S. Tax Court recently accepted a taxpayer’s tax-affected valuation in the case...
Lost Profits: How to Calculate the Damage

Lost Profits: How to Calculate the Damage

Business valuation analysts are often called upon to calculate economic damages incurred when something goes wrong for a company or a shareholder. It might be a disruption in normal operations caused by a fire or flood, lost revenues caused by theft or breach of...