Tax Implications in Business Valuation

Educational overview of tax considerations that influence business valuations including estate and gift tax compliance, tax-affecting, and transaction structuring implications.

Key Tax Consideration Areas

Tax factors that influence valuation methodology and compliance requirements

Estate & Gift Tax Valuations

Tax compliance valuations for estate planning and transfer tax purposes

IRS Revenue Ruling 59-60 compliance
Discount and premium applications
Date of valuation considerations
Fractional interest valuations
Tax-Affecting Considerations

Application of corporate tax rates in pass-through entity valuations

S-Corporation tax affecting debate
Partnership and LLC tax considerations
Built-in gains tax implications
Tax rate selection and timing
Transaction Tax Implications

Tax structure impacts on business value and transaction design

Asset vs stock sale tax consequences
Installment sale treatment
Section 1202 qualified small business stock
Depreciation recapture considerations

Tax-Related Discounts

Common valuation discounts applied in tax compliance contexts

Marketability Discount

Reduction for lack of ready market

Typical Range:

20-40%

Application:

Private company interests

Minority Interest Discount

Reduction for lack of control

Typical Range:

15-30%

Application:

Non-controlling interests

Key Person Discount

Risk of key person dependency

Typical Range:

5-25%

Application:

Owner-dependent businesses

Built-in Gains Tax

Corporate-level tax liability

Typical Range:

Variable

Application:

C-Corp conversions

Tax Compliance Standards

IRS guidelines and regulatory requirements for tax-related valuations

Revenue Ruling 59-60

IRS guidelines for valuing closely held businesses for estate and gift tax purposes, emphasizing fair market value determination.

Chapter 14 Regulations

Special valuation rules for estate planning transactions including GRATs, sales to defective trusts, and family limited partnerships.

Documentation Requirements

Comprehensive valuation reports with detailed support for assumptions, methods, and conclusions to withstand IRS examination.

Educational content only. We are not currently accepting litigation or IRS case engagements. This educational content helps business owners understand tax implications in valuation contexts for general knowledge purposes.