Quarter 1, 2009

Contents

• Divorce Court Analyzes Built-In Capital Gains in Net Asset Valuation


• IRS Deems Another FLP as 'Indirect Gift'


• Valuing Goodwill of Large Contingency-Fee Law Firm

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Welcome

Welcome to Valuation Insights — a complimentary service presented quarterly to our friends in the legal and consulting professions. We hope that you will find the topics, articles, and court case abstracts relevant, timely and informative.

SC&H Group is one of the fastest growing CPA and management consultant firms in the country. We have been named to the Inside Public Accounting Best of the Best list of America’s Top CPA firms for ten years, and were recently named one of the Top 100 Firms by Accounting Today.

With office locations in Maryland, Virginia, and Georgia, SC&H has a national client base ranging from emerging businesses to Fortune 500 companies. The firm’s service offerings include business valuation, litigation support, comprehensive accounting, tax and business advisory services, and state and local tax services.

Please contact us if you would like additional information on any of these topics or to discuss ways we may be of assistance to you in your client matters.

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

Nathan E. DiNatale, CPA/ABV, CVA, CFE
Senior Manager
(410) 403-1521
Over 14 years of experience; focuses on business valuations, financial reporting valuation issues, litigation support and economic damage calculations. Serves as expert witness in valuation and litigation cases.

Divorce Court Analyzes Built-In Capital Gains in Net Asset Valuation

Fickle v. Fickle, 2008 WL 3843846 (Tenn. Ct. App.)
August 19, 2008

In the estate and gift tax arena, last year’s decision in Jelke v. Commissioner (11th Cir.) established a 100% discount for built-in capital gains when appraising holding company assets at fair market value. Without citing Jelke or related precedent, the Tennessee Court of Appeals considered the same issue in the context of divorce—in particular, whether it should account for built-in capital gains and other tax considerations when valuing a closely held real estate holding company.

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IRS Deems Another FLP as 'Indirect Gift'

Gross v. Comm'r, 2008 WL 4388277 (U.S. Tax Ct.)
September 29, 2008

Most attorneys understand how important it is that financial experts maintain objectivity and support their conclusions with sound application of valuation standards and methodology. They also realize the weaknesses that might open up in the other side should an opposing expert fail to remain independent and/or analytically sound. This new Daubert decision from the U.S. District Court (Rhode Island) serves as fair warning for what happens when an the expert’s damages opinion lacks credibility on both counts.

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Valuing Goodwill of Large Contingency-Fee Law Firm

Von Hohn v. Von Hohn, 2008 WL 2814830 (Texas)
July 23, 2008

The husband was a partner in a prominent law firm that specialized in plaintiffs’ litigation, included seminal cases against the tobacco industry and patent infringement claims against large financial institutions.  The firm’s partnership agreement provided that upon a partner’s death, retirement, withdrawal, or expulsion, he would be entitled to his capital account and his undivided profit accounts along with any unpaid draw. Key: the agreement was silent in the event of divorce. 

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