Based on our review of the case and Dr. Kursh’s report, it appears that Dr. Kursh used information that was factually based and within the range of reasonable comparisons with market data in his application of the QMDM. It is unfortunate, but the Court was apparently not convinced of the reasonableness of Dr. Kursh’s assumptions and their consistency with “hard data” that was in his report and otherwise readily available.
This article comments on the embedded capital gains tax liability issue as discussed in the case, Davis v. Commissioner.
The Welch case reinforces a point we have made many times, that business appraisers need to be exceedingly careful in citing Tax Court decisions as support for positions taken in tax-related valuations.
A 1997 case illustrates the complexities that can evolve in the valuation of debt securities and the weight the Tax Court applies to an appraiser’s effort to obtain and verify information on a particular interest to be valued.
There has been a substantial controversy regarding the appropriate treatment of embedded capital gains in determining the fair market value of interests of C corporations since the repeal of the so-called General Utilities doctrine by the Tax Reform Act of 1986 (“TRA”).
We have previously discussed the concepts of normalizing adjustments and control adjustments to the income statement. Developing an understanding of these important adjustments that are made to the income stream is crucial in the process of conducting an appraisal – … Continued