Thoughts and Insights by Michael Gregory

S-Corps

The word Compliance in cursive with a photo of others in the background
January 16th, 2023

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.

Cover for the book Valuing Interests in S-Corps
November 7th, 2022

Business valuers, the IRS, and conflict resolution – Part 4 S-Corp issues

This is the fourth in a series of six monthly technical blogs on issues related to business valuation. Many business valuers believe that all entities whether a C-corp that is taxed or an S-corp that pays no federal income taxes should both be valued as if they pay tax (Grabowski, Mercer, Van Vleet)[i]. These business valuers believe there is no difference in the determination of fair market value. Others believe there is an S-corp adjustment to be made, but it should not be fully taxed (Fannon, Treharne)[ii]. These approaches suggest a premium for an S-corp. In general, the IRS believes that an S-corp should not be tax affected since it does not pay federal income taxes. This article looks at this issue in general. For a more complete analysis of this topic see original commentary dated Valuing Interests in S Corps (2013) or an updated and more comprehensive commentary within Business Valuations and the IRS (2018).   [i] https://www.amazon.com/Business-Valuations-IRS-Michael-Gregory/dp/1945148020 (423-433 and 436-441)   [ii] https://www.amazon.com/Business-Valuations-IRS-Michael-Gregory/dp/1945148020 (419-423 and 433-435)  

three hands pointing fingers at three other hands
September 6th, 2022

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.

IRS symbol with IRS - blue background and white symbol and lettering
August 3rd, 2020

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.

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