Business Valuation and Federal Taxes: Procedure, Law and Perspective, 2nd Edition

Table of contents

1. Cover
2. Title Page
3. Copyright
4. Dedication
5. Foreword to Second Edition
6. Foreword: Legal Practitioner's Perspective
7. Foreword: Law Professor's Perspective
8. Foreword: Business Appraiser's Perspective
9. Preface to the New Edition
   1. Origin of the Book
   2. Authors Provide Own Perspectives
   3. Topics Covered
10. Acknowledgments
11. About the Authors
12. Chapter 1: Standards of Business Valuation
    1. Summary
    2. Introduction
    3. Sources for Defining Value
    4. Definitions of Value
    5. Premise of Value
    6. Conclusion
13. Chapter 2: Subsequent Events
    1. Summary
    2. Key Question
    3. Valuation Date
    4. Subsequent Events—Exceptions
    5. Conclusion
14. Chapter 3: Business Valuation Experts
    1. Summary
    2. Introduction
    3. Proving Business Value
    4. The Expert Appraiser
    5. Types of Experts
    6. Various Roles of Experts
    7. Business Valuation Litigation Witnesses
    8. Admissibility of Evidence Underlying Expert Opinions
    9. Limitations to Admissibility
    10. Reliability of the Expert
    11. Minimum Thresholds for the Business Valuation Expert
    12. Sarbanes-Oxley Act of 2002
    13. Attorney Assistance to the Expert
    14. Qualified Appraiser
    15. Concerns about Expert Testimony
    16. Court-Appointed Expert
    17. Conclusion
    18. Appendix: Expert Credentials and Qualifications
15. Chapter 4: Sources of Law and Choice of Courts
    1. Summary
    2. Structure of the American Legal System
    3. Tax Law
    4. Tax Litigation
    5. Conclusion
16. Chapter 5: Burden of Proof in Valuation Controversies
    1. Summary
    2. Burden of Proof
    3. Who Bears the Burden of Proof?
    4. Burden of Proof: Exceptions to the General Rule
17. Chapter 6: Penalties and Sanctions
    1. Summary
    2. Introduction
    3. Valuation Penalties
    4. Preparer and Appraiser Penalties
    5. General Penalties
    6. Discretionary Sanctions
18. Chapter 7: How the Form of Entity Affects Valuation
    1. Summary
    2. Introduction
    3. Corporations
    4. General Partnerships
    5. Limited Partnerships
    6. Limited Liability Companies
    7. Sole Proprietorships
    8. Tax Classifications
    9. Valuation Considerations
    10. Entity-Level Discounts
    11. Choice of Jurisdiction
    12. Conclusion
19. Chapter 8: Valuation of S Corporations and Other Pass-Through Tax Entities: Minority and Controlling Interests
    1. Introduction
    2. Case Law Background
    3. S Corporation Minority Interest Appraisals
    4. Comparison of Minority Interest Theories—A Summary of the Issues
    5. S Corporation Controlling Interest Appraisals
    6. General S Corporation Appraisal Considerations
    7. Conclusion
20. Chapter 9: Transfer Pricing
    1. Summary
    2. Introduction
    3. Conclusion
21. Chapter 10: Customs Valuation
    1. Summary
    2. Introduction
    3. Customs Valuation Methods and Concepts
    4. Related-Party Transactions
    5. Conclusion
22. Chapter 11: Adjustments to Financial Statements
    1. Summary
    2. Separating Nonoperating Items from Operating Items
    3. Addressing Excess Assets and Asset Deficiencies
    4. Handling Contingent Assets and Liabilities
    5. Adjusting Cash-Basis Statements to Accrual-Basis Statements
    6. Normalizing Adjustments
    7. Controlling Adjustments
    8. Conclusion
23. Chapter 12: Comparative Financial Statement Analysis
    1. Summary
    2. Comparable Ratio Analysis
    3. Common Size Statements
    4. Tying the Financial Statement Analysis to the Value Conclusion
    5. Conclusion
24. Chapter 13: Economic and Industry Analysis
    1. Summary
    2. Objective of Economic and Industry Analysis
    3. International Economic Analysis
    4. National Economic Analysis
    5. Regional and Local Economic Analysis
    6. Industry Analysis
    7. Conclusion
    8. Partial Bibliography of Sources for Economic and Industry Analysis
25. Chapter 14: Site Visits and Interviews
    1. Summary
    2. Site Visits
    3. Management Interviews
    4. Interviews with Persons Outside the Company
    5. Conclusion
26. Chapter 15: The Income Approach
    1. Summary of Approaches, Methods, and Procedures
    2. Introduction to the Income Approach
    3. Net Cash Flow: The Preferred Measure of Economic Benefit in the Income Approach
    4. Discounting versus Capitalizing
    5. Relationship between Discount Rate and Capitalization Rate
    6. Projected Amounts of Expected Returns
    7. Developing Discount and Capitalization Rates for Equity Returns
    8. Weighted Average Cost of Capital (WACC)
    9. The Midyear Convention
    10. The Income Approach in the Courts
    11. Conclusion
    12. Appendix: An Illustration of the Income Approach to Valuation
27. Chapter 16: The Market Approach
    1. Summary
    2. The Market Approach
    3. Revenue Ruling 59-60 Emphasizes Market Approach
    4. The Guideline Public Company and the Guideline Transaction (Merger and Acquisition) Method
    5. How Many Guideline Companies?
    6. Selection of Guideline Companies
    7. Documenting the Search for Guideline Companies
    8. Choosing Multiples Based on Objective Empirical Evidence
    9. What Prices to Use in the Numerators of the Market Valuation Multiples
    10. Choosing the Level of the Valuation Multiple
    11. Selecting Which Valuation Multiples to Use
    12. Assigning Weights to Various Market Multiples
    13. Sample Market Valuation Approach Tables
    14. Other Methods Classified under the Market Approach
    15. Conclusion
    16. Appendix: An Illustration of the Market Approach to Valuation
28. Chapter 17: The Asset-Based Approach
    1. Summary
    2. Adjusted Net Asset Value Method
    3. Excess Earnings Method (The Formula Approach)
    4. Conclusion
29. Chapter 18: Entity-Level Discounts
    1. Summary
    2. Trapped-In Capital Gains Discount
    3. Key Person Discount
    4. Portfolio (Nonhomogeneous Assets) Discount
    5. Discount for Contingent Liabilities
    6. Conclusion
30. Chapter 19: Minority Discounts/Control Premiums
    1. Summary
    2. Minority Discounts/Control Premiums
    3. Conclusion
31. Chapter 20: Discounts for Lack of Marketability
    1. Summary: General Introduction to Shareholder-Level Discounts and Premiums
    2. Definition of Marketability
    3. Benchmark for Marketability Is Cash in Three Days
    4. Investors Cherish Liquidity, Abhor Illiquidity
    5. Degrees of Marketability or Lack Thereof
    6. Empirical Evidence to Quantify Discounts for Lack of Marketability: Restricted Stock Studies
    7. Empirical Evidence to Quantify Discounts for Lack of Marketability: Pre-IPO Studies
    8. Criticisms of the Pre-IPO Studies
    9. Factors Affecting the Magnitude of Discounts for Lack of Marketability
    10. Use of the Databases for Quantifying Discounts for Lack of Marketability
    11. Discounts for Lack of Marketability for Controlling Interests
    12. Option Pricing as Indicator of DLOM
    13. Discounts for Lack of Marketability in the Courts
    14. Conclusion
    15. Partial Bibliography of Sources for Discounts for Lack of Marketability
32. Chapter 21: Other Shareholder-Level Discounts
    1. Summary
    2. Voting versus Nonvoting Shares
    3. Blockage
    4. Discounts for Undivided Fractional Interests in Property
    5. Conclusion
33. Chapter 22: Personal versus Enterprise Goodwill
    1. Summary
    2. Definitions of Goodwill
    3. Tax Implications
    4. Indications of Personal versus Enterprise Goodwill
    5. Landmark Cases
    6. Excerpt from Personal Goodwill Appraisal Report
    7. Conclusion
34. Chapter 23: Weighting of Approaches
    1. Summary
    2. Theory and Practice
    3. Mathematical versus Subjective Weighting
    4. Examples of Weighting of Approaches
    5. Conclusion
35. Chapter 24: IRS Positions
    1. Summary
    2. Introduction
    3. Rev. Rul. 59-60
    4. Rev. Rul. 65-192
    5. Rev. Rul. 65-193
    6. Rev. Proc. 66-49
    7. Rev. Rul. 68-609
    8. Rev. Proc. 77-12
    9. Rev. Rul. 77-287
    10. Rev. Rul. 83-120
    11. Rev. Rul. 85-75
    12. Rev. Rul. 93-12
    13. Tax Advice Memorandum 9436005
    14. Rev. Proc. 2003-51
    15. Rev. Proc. 2007-41
    16. Rev. Rul. 2008-35
36. Chapter 25: Business Appraisal Reports
    1. Summary
    2. Business Valuation Report-Writing Standards
    3. Elements of the Business Valuation Report
    4. Organization of the Report
    5. Qualities of a Good Appraisal Report
    6. Conclusion
37. Chapter 26: Valuation of Options
    1. Summary
    2. Introduction and Background
    3. General Principles of Option Valuation
    4. Specific Rules for Valuing Options
    5. Conclusion
38. Chapter 27: Questions to Ask Business Valuation Experts
    1. Summary
    2. Qualifications
    3. Financial Statement Adjustments and Analysis
    4. Economic and Industry Data
    5. Site Visits and Interviews
    6. General Questions about Methodology
    7. Discount and Capitalization Rates in the Income Approach
    8. Projections Used in the Income Approach
    9. Asset-Based Approach
    10. Entity-Level Discounts
    11. Minority Interest Discounts/Control Premiums
    12. Discounts for Lack of Marketability
    13. Voting/Nonvoting Stock
    14. Questions about Contradictory Prior Testimony
39. Appendix A: International Glossary of Business Valuation Terms
40. Appendix B: Bibliography
    1. Books
    2. Articles and Papers
    3. Periodicals
    4. Mergers and Acquisitions Databases
    5. Discount for Lack of Marketability Databases
41. Table of Cases
42. Index