Thoughts and Insights by Michael Gregory

Business Valuation and the IRS in 2023

The IRS has many challenges and some real opportunities in FY 2023 (October 1, 2022 to September 30, 2023) with the Inflation Reduction Act signed into law August 18, 2022. That law includes as part of the Act $80 billion and potentially 87,000 additional employees to the IRS over the next 10 years. A question arises as to what that means for the Engineering Program where IRS business valuers are located.  This article takes a look at this question and provides some insights and recommendations for those working in this area. This includes business valuers, accountants, attorneys, and others that may have issues related to fair market value with the Internal Revenue Code

IRS and conflict resolution – Part 6 Thoughts on Rev. Rul. 59-60

One of the fundamentals of business valuation training is Revenue Ruling 59-60. Although published in 1959 with the express purpose to “outline and review in general the approach, methods and factors to be considered in valuing shares of the capital stock of closely held corporations for estate tax and gift tax purposes” it has been accepted by the federal courts in applications of fair market value across the board. This commentary introduces the main points of the revenue ruling, provides some insights from a historical perspective and comments on a recent publication regarding Revenue Ruling 59-60 and its application to Subchapter S corporations, limited liability corporations, and partnerships.

Business valuers, the IRS, and conflict resolution – Part 5 Negotiating with the IRS

The last two weeks I offered ideas on the Top Strategies for Negotiation Part One and Part Two. This article is one of a series of five articles over the past five months. The focus of this article is entirely with the IRS on a technical issue. Having worked for the IRS for 28 years at all levels from specialist to executive, having brought mediation and mediation training to the IRS Large Business and International Division and trained some 2,500 employees in the techniques, having been involved with over 2,500 mediations from boards of directors with fortune 100 companies on billion dollar issues, to the IRS on valuation issues or issues on research credit from thousands of dollars to a billion dollars, I wanted to offer you some insights on how to negotiate with the IRS on examination on these types of issues. Similar techniques can be used at Appeals and with IRS Counsel, but the emphasis there is on hazards of litigation. There is a different emphasis on examination that focuses on factual development. This commentary will introduce you to factual issues and negotiations on examination where issues are discussed and may be resolved factually.

Business valuers, the IRS, and conflict resolution – Part 2 - Top issues of disagreement

This is part 2 of a 6 part series. Conflicts and disputes in the area of business valuation with the IRS may be expected given the subjective nature of this topic. Part 1 set the stage introducing the concepts of mediation, business valuer bias, steps to overcome bias, federal court rules, the likelihood of litigation, how most appraisers never know their appraisal is being audited by the IRS, and potential penalties on appraisers. This Part 2 commentary focuses on the most commonly adjusted areas by IRS valuers and what valuers can do to reduce the probability of an audit technically.

Is the IRS Job Aid on Reasonable Compensation still relevant?

The IRS valuers identified reasonable compensation as one of the top issues for audit. Differences of opinion by valuers in the private sector and IRS valuers could lead to conflict and disputes on examination, leading to Appeals, and potentially to litigation. This commentary defines reasonable compensation, introduces the IRS Job Aid and Appendix, provides links to some recent IRS papers related to reasonable compensation, introduces how various levels at the IRS look at the issue, provides links to relevant court cases and key factors for consideration from those court cases, and provides a source for contemporary commentary on this topic.

This is how to interact with an IRS Estate and Gift Tax Attorney on a valuation issue

It was my pleasure to be interviewed by Melissa Gragg, the Managing Partner at Bridge Valuation Partners, LLC, via her pod cast on this topic. For those not interested in listening to a nearly 90 minute podcast with lots of details, here is a much shorter seven minute version sound bites on LinkedIn. However, for those looking for a quick read on some of the key points this may help. We discussed over a dozen questions and additional follow up questions, but here are some of the key points.

Begin an Audit with the IRS with Collaboration

When you think of collaboration quite likely the IRS does not come to mind. Rather when you hear the term IRS you are not thinking of working together. Instead the thought of an IRS audit likely brings forth thoughts of anxiety, I don’t have time for this, why me and now what? With that in mind I thought explaining some basic tips after receiving an audit letter from the IRS may help. Especially as these tips relate to The Collaboration Effect. After all the IRS are people too.

IRS, Business Valuers, Adjustments and Preventative Approaches

On July 1, 2020 it was my pleasure to be interviewed by Melissa Gragg, CVA, MAFF, CDFA and Managing Partner at Bridge Valuation Partners, LLC. This 84 minute podcast is packed many ideas of how to avoid and what to do if audited by the IRS on an estate or gift tax return. For business valuers this commentary focuses on the most common adjustments by IRS Business Valuers and what you might want to consider to both avoid an audit and what to do if audited. What does this have to do with The Collaboration Effect® you may ask. Read on. Clearly not everything in that podcast can be presented here, but some of the key highlights can be. The purpose of this commentary is to focus on one of the questions from that podcast. That is: What are the most common adjustments by IRS Business Valuers.

Token Concessions and Counteroffers in Negotiations with the IRS on Business Valuations

When you think of negotiations, do you think about the IRS? With all of the negatives on TV about the big bad IRS it is important to realize they are people with a job to do, and they are indeed people. As with any organization there can be zealots that are over the top. Depending on your experiences you may have met one, and that person may have set your bias on the IRS. However, the vast majority of IRS examiners are reasonable people. if you are open to resolving issues with the IRS, here are two key elements to consider. Before proceeding, reflect and remember your ethical principles and values to be true to yourself. If what you want to do is do the right thing, do what it takes and have closure these ideas can help you with the IRS. Let’s look at token concessions first.

What questions should you ask when preparing for a valuation discussion with the IRS?

This article addresses how to prepare and what questions to ask when involved in a facilitation, negotiation or mediation with another party. The focus here is on a business valuation issue with the IRS.  Preparation is key. Conducting a mock interaction ahead of time can be extremely valuable.