Category Archives: Valuations

Tax Court Rejects Claimed Deduction for Management Fees

June 28, 2021 | Court Rulings, Valuations

Aspro, Inc. v Commissioner The U.S. Tax Court recently agreed with the Internal Revenue Service that management fees a corporation paid to its three shareholders over a three-year period were not deductible since none of the fees were paid “purely for services” and the petitioner failed to show the fees were “ordinary, necessary, and reasonable.”  Continue Reading »

Proper Damages Measure Is Lost Profits Calculation, Not DCF-Based Loss Analysis

June 23, 2021 | Court Rulings, Valuations

Precision Kidd Acquisition, LLC v. Pass This Pennsylvania appellate court decision (unpublished) includes an informative discussion of how to measure damages arising out of a merger in which the seller allegedly failed to inform the buyer during negotiations that one of its bigger customers had terminated a supply contract. The buyer (appellant) argued the proper  Continue Reading »

Key Ruling From Tennessee Appeals Court Finds Tax Affecting ‘Relevant’ to Fair Value Determination

June 1, 2021 | Court Rulings, Uncategorized, Valuations

Raley v. Brinkman In a Tennessee buyout dispute involving a limited liability corporation organized as an S-corporation, the parties disagreed over whether it was appropriate to tax affect in calculating the fair value of the terminated member’s interest. The trial court declined to tax effect. In contrast, after explaining the concept of fair value, the  Continue Reading »

Plaintiff’s Proposed Class Action Alleging Overpayment Survives Motion to Dismiss

May 17, 2021 | Court Rulings, Valuations

Lysengen v. Argent Trust Co. This proposed ESOP class action featured familiar claims against the trustee and several individual defendants. In her complaint, the plaintiff alleged the trustee violated ERISA by allowing the plan to overpay for company stock and by breaching its fiduciary duties. The complaint also claimed the individual defendants, i.e., selling shareholders,  Continue Reading »

Expert Identifies Only Viable Method to Value Stock in ‘Severely Distressed’ Private Company

May 3, 2021 | Court Rulings, Valuations

Lucero v. United States The taxpayer sued the federal government for a refund, arguing she had overpaid income taxes on stock she had received as part of settling a lawsuit against her former employer. She initially relied on the value in the settlement agreement but later claimed this value was inflated. The court agreed, relying  Continue Reading »

Indiana Supreme Court Issues Key Ruling on Discounts in Compelled Buybacks

April 19, 2021 | Court Rulings, Valuations

Hartman v. BigInch Fabricators & Construction Holding Co., Inc. Last year, in a compelled buyout, the Court of Appeals sided with the departing minority shareholder when it found discounts did not apply in a closed-market sale. In a freshly minted decision, the Indiana Supreme Court reversed the Court of Appeals, finding there was no blanket  Continue Reading »

Parties’ Agreement Complicates Spousal Support Calculation in S Corp Context

April 5, 2021 | Court Rulings, Divorce Litigation, Valuations

Marshall v. Marshall Instead of facilitating a resolution, a separation agreement between the divorcing spouses led to a protracted lawsuit. The issue was how to determine alimony where the owner spouse had an interest in a pass-through entity and the agreement was not entirely clear as to what income to consider. On second review, the  Continue Reading »

LLC Buyout at Fair Value Poses ‘Conundrum’ for the Court

March 22, 2021 | Valuations

Finkel v. Palm Park, Inc. In allowing LLC members to buy out a departing member to avoid the dissolution of the company, a court had to determine the fair value of the departing member’s interest in a holding company. The court, in large part, relied on the fair market valuation the remaining members’ BV expert  Continue Reading »

What makes a small business owner’s compensation ‘reasonable’?

March 15, 2021 | Accounting Standards, IRS Regulation, Tax Planning, Valuations

As a small business owner, you need to ensure that your compensation reflects what others would receive for performing similar duties in a similar setting. Not only is this important for tax purposes, but it’s needed to determine the value of your business. Total Compensation Package As the business owner, you’re likely to have related  Continue Reading »

Overstated’ Projections Sink Plaintiff’s Fair Value Determination

February 8, 2021 | Court Rulings, Valuations

Magarik v Kraus Earlier this year, a New York trial court presiding over a buyout dispute featuring an online wholesaler of faucets, sinks, and fixtures rebuffed the departing shareholder’s valuation. His expert’s discounted cash flow analysis collapsed on account of unreasonable projections that the company had used to secure a loan from a bank. Dubious  Continue Reading »