Valuing Pass Through Entities 1st Edition by Eric Barr 1118848667 9781118848661

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ISBN 10: 1118848667 

ISBN 13: 9781118848661

Author: Eric J. Barr

The clarity and guidance valuation analysts have been thirsting for The business appraisal community regularly names the valuation of pass-through entities as a major issue of concern. Courts, appraisers, and the IRS have long been at odds on the topic, and the contention within the appraisal community itself over methods and inputs further complicates the issue. Valuing Pass-Through Entities provides clarity for the analyst tasked with valuation, offering clear explanations of the different perspectives and approaches to the process. Valuing Pass-Through Entities cuts through the chatter to: Explain the advantages and limitations of different types of pass-through entities Analyze the different viewpoints currently dividing the appraisal community Gain a fresh perspective on landmark cases Explain how to properly utilize a court-tested model Examine detailed sensitivity analyses of different inputs under the income and market approaches The book includes illustrative examples, templates, and a useful technical supplement, plus case studies that demonstrate the real-world effects of various pass-through entity valuation methods and inputs. Detailed analyses and an easy-to-apply model simplify the process while positively affecting outcomes.  The companion website provides the text of landmark court decisions, a blog featuring industry trends and tidbits, additional articles, and the insight of the author and other industry leaders. Valuation requires the successful juggling of multiple variables, many of which can have a major impact on value. Analysts need to know how to balance each factor and apply the appropriate rates and discounts, but a lack of standard practice often leaves the issue too subjective. Valuing Pass-Through Entities clears the air, providing real-world guidelines and tools.

Table of contents:

Chapter 1: Introduction
Definition of Value
Beauty and Value
Premise of Value
Approaches to Value
The PTE Conundrum

Chapter 2: The History of Federal Statutory Tax Rates in Maximum Income Brackets and the Evolution of Different Forms of Business Entities
Origins of the United States Internal Revenue Code
Years 1913 Through 1938
Years 1939 Through 1953
Years 1954 Through 1985
S Corporations
Tax on Unreasonable Compensation
General Utilities Doctrine
Years 1986 Through 2013
Limited Liability Companies
Summary

Chapter 3: Effective Federal Individual and Corporation Income Tax Rates
Effective Federal Income Taxes on $10,000 of 2012 CPI Adjusted Taxable Income, 1913–2013
Effective Federal Income Taxes on $100,000 of 2012 CPI Adjusted Taxable Income, 1913–2013
Effective Federal Income Taxes on $1 Million of 2012 CPI Adjusted Taxable Income, 1913–2013
Summary

Chapter 4: Comparison of Different Entity Forms
Business Life Cycle
Benefits and Limitations of PTEs
Financial Statements of C Corporations and PTEs
PTE Status and Bank Financing
Prevalence of PTEs
Change in Form of Entity

Chapter 5: Income Approach and Value to the Holder
Value to the Holder versus Value to the Buyer
Jurisdictional Issues
Delaware Open MRI Radiology Associates, P.A. v. Howard B. Kessler
Bernier v. Bernier
Limitations OF Delaware Open MRI and Bernier
The Modified Delaware MRI Model
Flexibility of the MDMM

Chapter 6: Inputs to Modified Delaware MRI Model
Normalized Pretax Income
Entity-Level Income Taxes on Pass-Through Earnings
Income Retained in the Business
Effective Federal and State Income Tax Rates on Pass-Through Income
Dividend Tax Rates
Summary

Chapter 7: Income Approach and Investment Value
Measuring Investment Value
Deal Structure

Chapter 8: Income Approach and Fair Market Value
Characteristics of FMV
Determining FMV
Example of Failing to Consider Floor and Ceiling Values

Chapter 9: Fair Market Value Court Decisions
Number of Federal Estate and Gift Tax Returns
Gross V. Commissioner
Estate of Heck V. Commissioner
Wall V. Commissioner
Estate of Adams V. Commissioner
Robert Dallas V. Commissioner
Gallagher V. Commissioner
Analysis of Cases

Chapter 10: The Market Approach
Revenue Ruling 59–60
Appraisal Standards Board Standards
AICPA Statement on Standards for Valuation Services
Guideline Public Company Method
Guideline Public Company Method and PTE Value to the Holder
Guideline Public Company Method and PTE Investment Value
Guideline Public Company Method and PTE Fair Market Value
Guideline Transactions Method

Chapter 11: Individual State Income Taxes
Statutory Individual State Income Tax Rates
Effective Individual State Income Tax Rates

Chapter 12: Discounts, Premiums, Bylaws, and State Laws
PTE Agreements
State Law
Nevada Senate Bill 350

Chapter 13: Valuing Complex PTE Ownership Interests
Reasons for Complex Capital Structures
Option-Pricing Method
Example 1: Preferred-Member Units
Example 2: Joint Venture
Example 3: S Corporation with Unreasonable Officer/Stockholder Compensation

Appendix A: Checklist
Appendix B: Case Study: Bob’s Cruises
Part I: Introduction
Part II: Sam’s Cruises
Part III: Valuing Sam’s Cruises
Part IV: Valuing Betty’s Cruises
Part V: Closing the Deal
Part VI: Looking Back

About the Website
Index
End User License Agreement

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Tags: Eric Barr, Valuing, Through, Entities