Control Considerations in the Valuation of a 50 Percent Ownership Interest
In valuations developed for gift tax, estate tax, and generation-skipping tax purposes or income tax purposes, valuation analysts may be asked to determine the fair market value of a 50 percent interest in a private company. The issues to consider and analyze in selecting appropriate valuation adjustments to apply in the valuation of a 50 percent interest often are unique compared with the issues in the valuation of a less than 50 percent interest (e.g., a 48 percent interest) or a more than 50 percent interest (e.g., a 52 percent interest or a 100 percent interest).
The Expatriation Tax: How to Present Assets to the IRS When You Say Goodbye to the United States
Longtime U.S. residents who wish to leave the country as a permanent resident might be subject to the expatriation tax. There are important considerations regarding the valuation of assets that are reported to the Internal Revenue Service (“IRS”). The value of those assets affects the level of tax that is paid. In addition to retaining appropriate legal and tax counsel, for certain types of assets—stock or limited partnership interests, real property, and fine art and gems—enlisting the services of a credentialed appraiser, otherwise known as a valuation analyst, may be advisable for reporting the assets’ estimated value on IRS Form 8854.
The Valuation of Controlling Ownership Interests in the Context of Gift Tax Planning
The increase in the federal lifetime gift and estate tax exemption amount that resulted from the Tax Cuts and Jobs Act of 2017 provides for unique wealth planning opportunities. Many of these opportunities involve the transfer of noncontrolling and controlling ownership interests in privately held operating business entities. The valuation of a controlling ownership interest in a business entity for transfer tax purposes may involve the application of a control premium. The selection and application of a control premium can have a significant effect on the concluded value of the transferred business interest. This article discusses the application of a control premium in the valuation process and the guidance that is available to assist the valuation analyst in properly quantifying the control premium.
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