Contents

• Top Five Must-Haves for Tax Valuation Reports
• Survey Results for DLOM
• Credibility in Court—the View from the Bench
• The Discounting Decisions

Quick Links to SC&H Group, LLC

Litigation Support Services

Past Articles

SC&H Business Valuation & Support Leaders

Michael J. Young,
CPA/ABV, CVA
Director
(410) 403-1513
Over 27 years of experience; serves as expert witness in litigation issues including economic damages, patent infringement, valuation, and fraud matters in Federal and state courts.

Nathan E. DiNatale,
CPA/ABV, CVA, CFE
Senior Manager
(410) 403-1521
Over 15 years of experience; focuses on business valuations, valuations for financial reporting, litigation support and economic damage calculations. Serves as expert witness in valuation and litigation cases.

Valuations Insights, March, 2010

Top Five Must-Haves for Tax Valuation Reports

Hiring an expert for a tax valuation? Is the expert you've hired following best practices? At the recent NACVA/IBA 2009 Consultants' Conference in Boston, the Honorable David Laro (U.S. Tax Court) joined fellow panelists Howard Lewis, currently the IBA's executive director and former National Program Manager for the IRS Engineering and Valuation programs; and Mike Eggers, principal of American Business Appraisers (San Diego), to come up with the following checklist for "best practices" in tax-related valuation reports:

1. Transparency.

Valuation reports must be logical, rational, and clear, with transparent analysis by the lead appraiser of the company, the data, the factors supporting the conclusion, and the underlying rationale. If you don't understand a valuation report, chances are the judge won't either, and that makes it hard for the judge to reach a decision that will withstand review on appeal.

2. Credibility.

In other words, the report is believable, reliable, experienced, well prepared, sincere, and performed using peer-reviewed methods. The strengths and weaknesses of the good expert's valuation report should be self-evident, with clearly stated rationale for why areas or methods might have been ignored or omitted, for lack of data or lack of applicability. Though the lawyer's role is advocacy for a position, the role of the expert is the same as that of the judge—to arrive at the truth. Anything else will diminish the credibility of your expert.

3. Intellectual honesty.

In case it wasn't clear from the above, your expert's opinion must be free of bias and advocacy, independently arrived at, and transparent. What about sitting at the attorney table? Are you passing notes with your expert during the opposing witnesses' testimony? Your expert may be offering guidance regarding what questions to ask the witness on cross-examination, but the practice can blur the line between independence and advocacy. "When I see that happening in the courtroom I put an end to it," Judge Laro said. The same caution applies when an attorney comments on drafts or otherwise assists in developing an expert's opinion. Allow your expert to be credible, ethical, and independent.

4. Complete.

Rule 26 of the Federal Rules of Civil Procedure limits expert evidence to the content that is actually written or displayed in the report. Everything your expert says on the stand needs to be in their report.

5. Credentialed.

This point speaks for itself.

Back to top