Business Valuations

Estates and Gifts

Estate planning: providing a value for a closely held company, a prerequisite for estate planning

Estate tax return: a contemporaneous prepared business valuation of a closely held company for the estate tax return can head off IRS challenges as to the company’s fair market value at date of death

Topsy-turvy world of estate planning: due to the American Taxpayer Relief Act of 2012, increasing the federal tax exemption to $5.43M (individuals) and $10.86M (couples) the focus of estate planning is now income taxes. When a beneficiary receives an asset, i.e an ownership interest in a business entity, vacation home, collectibles, etc., his/her’s tax basis is generally fair market value at date of death. The beneficiary’s tax basis determines the gain (loss) upon the eventual sale of the asset. All gains are subject to income taxes, only business/investment losses are deductible.

The IRS is presently implementing estate tax basis reporting rules, whereby, the decedent’s estate is mandated to report the estate assets date of death values to both the IRS and the beneficiary.

 

Gifts: IRS regulations state that a gift tax return involving a business interest must be accompanied by a well-documented business valuation report in order for the statue of limitations to start

Buy-Sell Agreement

Besides the valuation of the business itself, it is imperative the parties to the agreement understand valuation concepts and definitions to avoid misunderstandings of their ownership value, such as:

  • valuation approaches and methods
  • the various standards of value
  • valuation discounts

Business Acquisitions

See business forecasts and projections