July, 2010

Contents

• Delaware Chancery Rules on Attempt to "Freeze Out" 15% Shareholder
• Two Taxpayer Victories Demonstrate Winning Facts for FLPs
• Could your Non-Competes be Challenged as "Fraudulent Transfers?"
• Back-to-back Defined Value Cases Deliver Double Punch to IRS
• Valuing Goodwill in Divorce: Communication and Consistency are Critical

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Christopher vanRoden
on winning the gift card at our booth at the MSBA conference!

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Michael J. Young,
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(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.

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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.

Delaware Chancery Rules on Attempt to "Freeze Out" 15% Shareholder

In re Sunbelt Beverage Corp., 2010 WL 92519 (Del. Ch.) (Unpub.)
Jan. 5, 2010

The Delaware Chancery Court found the majority owners of a large, privately owned alcohol distributor (Sunbelt) authorized a merger to "freeze out" a 15% minority shareholder by using a process that was "anything but fair." A fairness opinion, obtained a week prior to the merger, was an "afterthought…pure window-dressing" to justify the majority's objective.

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Two Taxpayer Victories Demonstrate Winning Facts for FLPs

As textbook examples of how to form, fund, and operate a family limited partnership (FLP)—sufficient to value various assets (including publicly traded securities, real estate, and restricted holdings) at substantial discounts for federal estate tax purposes—the Murphy and Black cases make excellent reading for attorneys and financial advisors alike.

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Could your Non-Competes be Challenged as "Fraudulent Transfers?"

IGF Insurance Co. v. Continental Casualty Co., 2009 WL 4016608 (S.D. Ind.); and IGF Insurance Co. v. Continental Casualty Co., 2009 WL 3415139 (S.D. Ind.)
Oct. 19, 2009

In the first of these cases, the federal district court considered whether a wealthy Indiana businessman and his family used non-competition agreements to divert nearly $32 million from the sale of their company to subsidiaries. The second opinion decided a Daubert challenge for the expert who valued the non-competes.

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Back-to-back Defined Value Cases Deliver Double Punch to IRS

First came Estate of Christiansen v. Commissioner, 2009 WL 3789908 (C.A.8)(Nov.13, 2009), in which the Eighth Circuit upheld an estate's formula disclaimer of assets. Next, the Tax Court strongly affirmed the use of defined value clauses in Estate of Petter v. Commissioner, 2009 WL 4598137(U.S. Tax Ct.)(Dec. 7, 2009). This "one-two" punch may have knocked out the IRS's strong public policy arguments against these types of structured gifts, representing an important recent development in estate and tax planning.

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Valuing Goodwill in Divorce: Communication and Consistency are Critical

Two recent divorce decisions demonstrate how important communication among the client, counsel, and financial expert(s) can be in any given case, especially when the primary asset is a professional practice. Calculating a credible goodwill value requires the expert to have adequate disclosures, accurate data, and a complete understanding of appropriate methodologies.

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