Successful succession planning starts today
U.S. companies currently face an economic crisis unparalleled
since the Great Depression: rising energy and commodity prices, increasingly
stringent lending requirements, volatile stock market values and a general
sense of uncertainty. This article points out that, while many businesses are
worth less today than under more favorable market conditions, private business
owners now can gift a higher percentage of the business to heirs without
incurring federal gift taxes or, possibly, estate taxes. The article notes that
this is a good time to start, or revisit, succession plans and lists several
ways valuators can help.
Make no mistakes — the
IRS means business
As part of the Pension Protection Act of 2006 (PPA), stiffer
penalties await preparers, appraisers and taxpayers who misstate value or
sidestep the appraisal process for tax purposes. This article discusses a
recent court case that illustrates how overvaluation can prove costly in
charitable contribution cases. The article also explains several new rules PPA
introduced that revised the thresholds for substantial and gross valuation
misstatements, discussing the potential implications for taxpayers. Case
Citation: Bergquist et al v.
Commissioner, 131 T.C. No. 2, July 22, 2008.
Valuing options: Are you
up for the challenge?
Employee stock options (ESOs) can be an effective way for
companies to attract and retain key employees and are popular among startups
and technology firms, which tend to be cash-poor but offer significant growth
potential. But accounting for ESOs became more complicated when the Financial
Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards No. 123(R), which eliminated the intrinsic method of reporting ESOs.
This article explains that now companies must use the fair value method,
requiring ESO issuers to enlist valuation expertise.
How to evaluate a
distressed business
The tumultuous economy has taken its toll on many private
businesses. Weaker companies may be liquidating assets to generate cash flow or
even filing for bankruptcy, offering opportunities to stronger players. This
brief article notes that even in these cases acquisition due diligence is
extremely important to help potential buyers realistically assess the
distressed business’s value.