Tax Court to valuators: Explain yourself!
Abstract: Courts today no longer accept valuation experts’ opinions without careful scrutiny. This article discusses one case in which the court found that the estate expert’s valuation erroneously relied primarily on the discounted cash flow (DCF) method and “tax affected” the company’s earnings — that is, reduced the company’s projected earnings to reflect an assumed corporate tax burden. A sidebar discusses whether it’s advisable or not to tax affect earnings. Citations: Estate of Gallagher, T.C. Memo. 2011-148 (June 28, 2011). Gross v. Commissioner, T.C. Memo. 1999-254 (July 29, 1999)