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I began my business valuation career in the mid 1980’s, when the Greatest Generation was retiring and transferring family business ownership and assets to the Baby Boomers. That process is now repeating with the Baby Boomers and the Millennials.
Back then, estate / gift tax rates were high and exemption amounts were low. Consequently, planning emphasized tax minimization / compliance. The required standard of value was fair market value, as defined by tax law and Revenue Rulings.
Current tax rates are lower and exemptions are higher. Many more businesses and assets are being transferred tax-free. For tax-exempt transfers, the standard of value does not have to be fair market value. Families, not the IRS, have the power to decide what is fair.
Here are some of the issues that arise in these situations:
The central point is that in tax-free estates, the fair market value standard does not necessarily apply. It should be invoked with careful thought. It may not adequately address issues of fairness among heirs. Families are empowered to decide that. They must have discussions, with the advice of qualified professionals, in order to arrive at their asset valuation and allocation decisions.
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About Western Reserve Valuation Services LLC
Western Reserve Valuation Services LLC, based in Columbus, Ohio, is a leading provider of valuation services and financial opinions relating to corporate finance transactions, corporate tax planning and compliance, succession planning and wealth preservation, employee stock ownership plans (“ESOPs”), financial reporting and portfolio / fund valuations. For more information, visit www.wesresvaluation.com or call (614) 448-3700.
Western Reserve Valuation Services is an affiliate of Western Reserve Partners LLC, a FINRA-member investment banking firm offering financial advisory services relating to mergers and acquisitions, capital raising and financial restructuring. For more information on Western Reserve Partners, please www.wesrespartners.com or call (216) 589-0900.